1
G.R. No. L-24294 May 3, 1974
DONALD BAER, Commander U.S. Naval Base, Subic Bay,
Olongapo, Zambales, petitioner, vs.
HON. TITO V. TIZON, as Presiding Judge of the Court of First
Instance of Bataan, and EDGARDO GENER, respondents.
FERNANDO, J.:p
There is nothing novel about the question raised in this certiorari
proceeding against the then Judge Tito V. Tizon, filed by petitioner
Donald Baer, then Commander of the United States Naval Base,
Subic Bay, Olongapo, Zambales, seeking to nullify the orders of
respondent Judge denying his motion to dismiss a complaint filed
against him by the private respondent, Edgardo Gener, on the ground
of sovereign immunity of a foreign power, his contention being that
it was in effect a suit against the United States, which had not given
its consent. The answer given is supplied by a number of cases
coming from this Tribunal starting from a 1945 decision, Raquiza v.
Bradford1 to Johnson v. Turner,2 promulgated in 1954. The doctrine
of immunity from suit is of undoubted applicability in this
jurisdiction. It cannot be otherwise, for under the 1935 Constitution,
as now, it is expressly made clear that the Philippines "adopts the
generally accepted principles of international law as part of the law
of the Nation."3 As will subsequently be shown, there was a failure
on the part of the lower court to accord deference and respect to such
a basic doctrine, a failure compounded by its refusal to take note of
the absence of any legal right on the part of petitioner. Hence,
certiorari is the proper remedy.
The facts are not in dispute. On November 17, 1964, respondent
Edgardo Gener, as plaintiff, filed a complaint for injunction with the
Court of First Instance of Bataan against petitioner, Donald Baer,
Commander of the United States Naval Base in Olongapo. It was
docketed as Civil Case No. 2984 of the Court of First Instance of
Bataan. He alleged that he was engaged in the business of logging in
an area situated in Barrio Mabayo, Municipality of Morong, Bataan
and that the American Naval Base authorities stopped his logging
operations. He prayed for a writ of preliminary injunction restraining
petitioner from interfering with his logging operations. A restraining
order was issued by respondent Judge on November 23,
1964.4 Counsel for petitioner, upon instructions of the American
Ambassador to the Philippines, entered their appearance for the
purpose of contesting the jurisdiction of respondent Judge on the
ground that the suit was one against a foreign sovereign without its
consent.5 Then, on December 12, 1964, petitioner filed a motion to
dismiss, wherein such ground was reiterated. It was therein pointed
out that he is the chief or head of an agency or instrumentality of the
United States of America, with the subject matter of the action being
official acts done by him for and in behalf of the United States of
America. It was added that in directing the cessation of logging
operations by respondent Gener within the Naval Base, petitioner
was entirely within the scope of his authority and official duty, the
maintenance of the security of the Naval Base and of the installations
therein being the first concern and most important duty of the
Commander of the Base.6 There was, on December 14, 1964, an
opposition and reply to petitioner's motion to dismiss by respondent
Gener, relying on the principle that "a private citizen claiming title
and right of possession of certain property may, to recover
possession of said property, sue as individuals, officers and agents of
the Government, who are said to be illegally withholding the same
from him, though in doing so, said officers and agents claim that they
are acting for the Government." That was his basis for sustaining the
jurisdiction of respondent Judge.7 Petitioner, thereafter, on January
12, 1965, made a written offer of documentary evidence, including
certified copies of telegrams of the Forestry Director to Forestry
personnel in Balanga, Bataan dated January 8, and January 11, 1965,
directing immediate investigation of illegal timber cutting in Bataan
and calling attention to the fact that the records of the office show no
new renewal of timber license or temporary extension permits.8 The
above notwithstanding, respondent Judge, on January 12, 1965,
issued an order granting respondent Gener's application for the
issuance of a writ of preliminary injunction and denying petitioner's
motion to dismiss the opposition to the application for a writ of
preliminary injunction.9
A motion for reconsideration having proved futile, this petition for
certiorari was filed with this Court. The prayer was for the
nullification and setting aside of the writ of preliminary injunction
issued by respondent Judge in the aforesaid Civil Case No. 2984 of
the Court of First Instance of Bataan. A resolution of March 17, 1965
was issued by this Court requiring respondents to file an answer and
upon petitioner's posting a bond of P5,000.00 enjoining them from
enforcing such writ of preliminary injunction. The answer was duly
forthcoming. It sought to meet the judicial question raised by the
legal proposition that a private citizen claiming title and right of
possession of a certain property may, to recover the same, sue as
individuals officers and agents of the government alleged to be
illegally withholding such property even if there is an assertion on
their part that they are acting for the government. Support for such a
view is found in the American Supreme Court decisions of United
States v. Lee10 and Land v. Dollar.11Thus the issue is squarely
joined whether or not the doctrine of immunity from suit without
consent is applicable. Thereafter, extensive memoranda were filed
both by petitioner and respondents. In addition, there was a
manifestation and memorandum of the Republic of the Philippines
as amicus curiae where, after a citation of American Supreme Court
decisions going back to Schooner Exchange v. M'faddon,12 an 1812
decision, to United States v. Belmont,13 decided in 1937, the plea
was made that the petition for certiorari be granted..
A careful study of the crucial issue posed in this dispute yields the
conclusion, as already announced, that petitioner should prevail.
1. The invocation of the doctrine of immunity from suit of a foreign
state without its consent is appropriate. More specifically, insofar as
alien armed forces is concerned, the starting point is Raquiza v.
Bradford, a 1945 decision.14In dismissing a habeas corpus petition
for the release of petitioners confined by American army authorities,
Justice Hilado, speaking for the Court, cited from Coleman v.
Tennessee,15 where it was explicitly declared: "It is well settled that
a foreign army, permitted to march through a friendly country or to
be stationed in it, by permission of its government or sovereign, is
exempt from the civil and criminal jurisdiction of the place."16 Two
years later, in Tubb and Tedrow v. Griess,17 this Court relied on the
ruling in Raquiza v. Bradford and cited in support thereof excerpts
from the works of the following authoritative writers: Vattel,
Wheaton, Hall, Lawrence, Oppenhein, Westlake, Hyde, and McNair
and Lauterpacht.18 Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement,
the treaty provisions should control on such matter, the assumption
being that there was a manifestation of the submission to jurisdiction
on the part of the foreign power whenever appropriate.19More to the
point is Syquia v. Almeda Lopez,20 where plaintiffs as lessors sued
the Commanding General of the United States Army in the
Philippines, seeking the restoration to them of the apartment
buildings they owned leased to United States armed forces stationed
in the Manila area. A motion to dismiss on the ground of
non-suability was filed and upheld by respondent Judge. The matter
was taken to this Court in a mandamus proceeding. It failed. It was
the ruling that respondent Judge acted correctly considering that the
"action must be considered as one against the U.S.
Government."21 The opinion of Justice Montemayor continued: "It
is clear that the courts of the Philippines including the Municipal

Court of Manila have no jurisdiction over the present case for
unlawful detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government
has not given its consent to the filing of this suit which is essentially
against her, though not in name. Moreover, this is not only a case of
a citizen filing a suit against his own Government without the latter's
consent but it is of a citizen filing an action against a foreign
government without said government's consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The
principles of law behind this rule are so elementary and of such
general acceptance that we deem it unnecessary to cite authorities in
support thereof."22 Then came Marvel Building Corporation v.
Philippine War Damage Commission,23 where respondent, a United
States agency established to compensate damages suffered by the
Philippines during World War II was held as falling within the above
doctrine as the suit against it "would eventually be a charge against
or financial liability of the United States Government because ..., the
Commission has no funds of its own for the purpose of paying
money judgments."24 The Syquiaruling was again explicitly relied
upon in Marquez Lim v. Nelson,25 involving a complaint for the
recovery of a motor launch, plus damages, the special defense
interposed being "that the vessel belonged to the United States
Government, that the defendants merely acted as agents of said
Government, and that the United States Government is therefore the
real party in interest."26 So it was in Philippine Alien Property
Administration v. Castelo,27 where it was held that a suit against the
Alien Property Custodian and the Attorney General of the United
States involving vested property under the Trading with the Enemy
Act is in substance a suit against the United States. To the same
effect is Parreno v. McGranery,28 as the following excerpt from the
opinion of Justice Tuason clearly shows: "It is a widely accepted
principle of international law, which is made a part of the law of the
land (Article II, Section 3 of the Constitution), that a foreign state
may not be brought to suit before the courts of another state or its
own courts without its consent."29 Finally, there is Johnson v.
Turner,30 an appeal by the defendant, then Commanding General,
Philippine Command (Air Force, with office at Clark Field) from a
decision ordering the return to plaintiff of the confiscated military
payment certificates known as scrip money. In reversing the lower
court decision, this Tribunal, through Justice Montemayor, relied
on Syquia v. Almeda Lopez,31 explaining why it could not be
sustained.
The solidity of the stand of petitioner is therefore evident. What was
sought by private respondent and what was granted by respondent
Judge amounted to an interference with the performance of the duties
of petitioner in the base area in accordance with the powers
possessed by him under the Philippine-American Military Bases
Agreement. This point was made clear in these words: "Assuming,
for purposes of argument, that the Philippine Government, through
the Bureau of Forestry, possesses the "authority to issue a Timber
License to cut logs" inside a military base, the Bases Agreement
subjects the exercise of rights under a timber license issued by the
Philippine Government to the exercise by the United States of its
rights, power and authority of control within the bases; and the
findings of the Mutual Defense Board, an agency of both the
Philippine and United States Governments, that "continued logging
operation by Mr. Gener within the boundaries of the U.S. Naval Base
would not be consistent with the security and operation of the Base,"
is conclusive upon the respondent Judge. .. The doctrine of state
immunity is not limited to cases which would result in a pecuniary
charge against the sovereign or would require the doing of an
affirmative act by it. Prevention of a sovereign from doing an
affirmative act pertaining directly and immediately to the most
important public function of any government - the defense of the
state — is equally as untenable as requiring it to do an affirmative
act."32 That such an appraisal is not opposed to the interpretation of
2
the relevant treaty provision by our government is made clear in the
aforesaid manifestation and memorandum as amicus curiae, wherein
it joined petitioner for the grant of the remedy prayed for.
2. There should be no misinterpretation of the scope of the decision
reached by this Court. Petitioner, as the Commander of the United
States Naval Base in Olongapo, does not possess diplomatic
immunity. He may therefore be proceeded against in his personal
capacity, or when the action taken by him cannot be imputed to the
government which he represents. Thus, after the Military Bases
Agreement, in Miquiabas v. Commanding General33and Dizon v.
The Commanding General of the Philippine-Ryukus
Command,34 both of them being habeas corpus petitions, there was
no question as to the submission to jurisdiction of the respondents.
As a matter of fact, in Miquiabas v. Commanding General,35 the
immediate release of the petitioner was ordered, it being apparent
that the general court martial appointed by respondent Commanding
General was without jurisdiction to try petitioner. Thereafter, in the
cited cases of Syquia, Marquez Lim, and Johnson, the parties
proceeded against were American army commanding officers
stationed in the Philippines. The insuperable obstacle to the
jurisdiction of respondent Judge is that a foreign sovereign without
its consent is haled into court in connection with acts performed by it
pursuant to treaty provisions and thus impressed with a governmental
character.
3. The infirmity of the actuation of respondent Judge becomes even
more glaring when it is considered that private respondent had ceased
to have any right of entering within the base area. This is made clear
in the petition in these words: "In 1962, respondent Gener was issued
by the Bureau of Forestry an ordinary timber license to cut logs in
Barrio Mabayo, Morong, Bataan. The license was renewed on July
10, 1963. In 1963, he commenced logging operation inside the
United States Naval Base, Subic Bay, but in November 1963 he was
apprehended and stopped by the Base authorities from logging inside
the Base. The renewal of his license expired on July 30, 1964, and to
date his license has not been renewed by the Bureau of Forestry. .. In
July 1964, the Mutual Defense Board, a joint Philippines-United
States agency established pursuant to an exchange of diplomatic
notes between the Secretary of Foreign Affairs and the United States
Ambassador to provide "direct liaison and consultation between
appropriate Philippine and United States authorities on military
matters of mutual concern,' advised the Secretary of Foreign Affairs
in writing that: "The enclosed map shows that the area in which Mr.
Gener was logging definitely falls within the boundaries of the base.
This map also depicts certain contiguous and overlapping areas
whose functional usage would be interfered with by the logging
operations.'"36 Nowhere in the answer of respondents, nor in their
memorandum, was this point met. It remained unrefuted.
WHEREFORE, the writ of certiorari prayed for is granted, nullifying
and setting aside the writ of preliminary injunction issued by
respondent Judge in Civil Case No. 2984 of the Court of First
Instance of Bataan. The injunction issued by this Court on March 18,
1965 enjoining the enforcement of the aforesaid writ of preliminary
injunction of respondent Judge is hereby made permanent. Costs
against private respondent Edgardo Gener.
G.R. Nos. 97468-70 September 2, 1993
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER
represented by its Chief, DR. FLOR J.
LACANILAO, petitioner, vs.
DANILO ACOSTA in his capacity as Labor Arbiter of the
National Labor Relations Commission, Regional Arbitration,

Branch VI, CORAZON CANTO, DAN BALIAO, ELIZABETH
SUPETRAN, CARMELITA FERRER, CATHRYN
CONTRADOR, and DORIC VELOSO, respondents.
VITUG, J.:
This is an original petition for certiorari and prohibition, with a
prayer for the issuance of a restraining order, to set aside the order of
respondent labor arbiter, dated 20 September 1990, denying herein
petitioner's motion to dismiss the cases subject matter of the petition
for lack of jurisdiction.
Two labor cases, docketed as RAB Case No. VI- 0156-86 and RAB
case No. VI - 0214-86, were filed by the herein private respondents
against the petitioner, Southeast Asian Fisheries Development Center
(SEAFDEC), before the National Labor Relations Commission
(NLRC), Regional Arbitration Branch, Iloilo City. In these cases, the
private respondents claim having been wrongfully terminated from
their employment by the petitioner.
On 22 August 1990, the petitioner, contending to be an international
inter-government organization, composed of various Southeast Asian
countries, filed a Motion to Dismiss, challenging the jurisdiction of
the public respondent in taking cognizance of the above cases.
On 20 September 1990, the public respondent issued the assailed
order denying the Motion to Dismiss. In due course, a Motion for
Reconsideration was interposed but the same, in an order, dated 07
January 1991, was likewise denied.
Hence, the instant petition. This Court, on 20 March 1991, issued the
temporary restraining order prayed for.
The private respondents, as well as respondent labor arbiter, allege
that the petitioner is not immune from suit and assuming that if,
indeed, it is an international organization, it has, however, impliedly,
if not expressly, waived its immunity by belatedly raising the issue of
jurisdiction.
The Solicitor General, on his part, filed a Manifestation and Motion,
which the Court granted, praying that he be excused from filing his
comment for respondent Labor Arbiter, he not being in agreement
with the latter's position on this matter.
On 30 March 1992, this Court dismissed the instant petition in a
resolution which reads:
. . . — Considering the allegations, issues and arguments adduced in
the petition for certiorari as well as the separate comments thereon of
the public and private respondents, and the consolidated reply thereto
of the petitioner, the Court RESOLVED to dismiss the petition for
failure to sufficiently show that the questioned judgment is tainted
with grave abuse of discretion. The temporary restraining order
issued on March 20, 1991 is hereby LIFTED effective immediately.
In time, the petitioner moved for a reconsideration, arguing that the
ground for its seeking the allowance of the petition is the labor
arbiter's lack of jurisdiction over the dispute.
The court is now asked to rule upon the motion for reconsideration.
We rule for the petitioner.
It is beyond question that petitioner SEAFDEC is an international
agency enjoying diplomatic immunity. This, we have already held
in Southeast Asian Fisheries Development Center-Aquaculture
Department vs. National Labor Relations Commission, G.R. No.
86773, 206 SCRA 283/1992; see also Lacanilao v. de Leon, G.R. No.
3
76532, 147 SCRA, 286/1987/, where we
said —
Petitioner Southeast Asian Fisheries Development
Center-Aquaculture Department (SEAFDEC-AQD) is an
international agency beyond the jurisdiction of public respondent
NLRC.
It was established by the Governments of Burma, Kingdom of
Cambodia, Republic of Indonesia, Japan, Kingdom of Laos,
Malaysia, Republic of the Philippines, Republic of Singapore,
Kingdom of Thailand and Republic of Vietnam . . . .
The Republic of the Philippines became a signatory to the Agreement
establishing SEAFDEC on January 16, 1968. Its purpose is as
follows:
The purpose of the Center is to contribute to the promotion of the
fisheries development in Southeast Asia by mutual co-operation
among the member governments of the Center, hereinafter called the
'Members', and through collaboration with international
organizations and governments external to the Center.
(Agreement Establishing the SEAFDEC, Art. 1; . . .).
SEAFDEC-AQD was organized during the Sixth Council Meeting of
SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of
the principal departments of SEAFDEC. . . . to be established in
Iloilo for the promotion of research in aquaculture. Paragraph 1,
Article 6 of the Agreement establishing mandates:
1. The Council shall be the supreme organ of the Center and all
powers of the Center shall be vested in the Council.
Being an intergovernmental organization, SEAFDEC including its
Departments (AQD), enjoys functional independence and freedom
from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap
stated in their book, Public International Law (p. 83,1956 ed.):
Permanent international commissions and administrative bodies have
been created by the agreement of a considerable number of States for
a variety of international purposes, economic or social and mainly
non-political. Among the notable instances are the International
Labor Organization, the International Institute of Agriculture, the
International Danube Commission. In so far as they are autonomous
and beyond the control of any one State, they have a distinct juridical
personality independent of the municipal law of the State where they
are situated. As such, according to one leading authority they must be
deemed to possess a species of international personality of their own.
(Salonga and Yap, Public International Law, 83 [1956 ed.]
Pursuant to its being a signatory to the Agreement, the Republic of
the Philippines agreed to be represented by one Director in governing
SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par.
1,. . .), and that its national laws and regulations shall apply only
insofar as its contributions to SEAFDEC of "an agreed amount of
money, movable and immovable property and services necessary for
the establishment and operation of the Center" are concerned (Art.
11, ibid). It expressly waived the application of the Philippine laws
on the disbursement of funds of petitioner SEAFDEC-AQD (Section
2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts
have no jurisdiction over SEAFDEC-AQD in Opinion No. 139,
Series of 1984 —
4. One of the basic immunities of an international organization is
immunity from local jurisdiction, i.e., that it is immune from the

legal writs and processes issued by the tribunals of the country where
it is found. (See Jenks, Id., pp. 37-44). The obvious reason for this is
that the subjection of such an organization to the authority of the
local courts would afford a convenient medium thru which the host
government may interfere in their operations or even influence or
control its policies and decisions of the organization; besides, such
objection to local jurisdiction would impair the capacity of such body
to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by
the National Labor Relations Commission of Mr. Madamba's
reinstatement cases would amount to interference by the Philippine
Government in the management decisions of the SEARCA governing
board; even worse, it could compromise the desired impartiality of
the organization since it will have to suit its actuations to the
requirements of Philippine law, which may not necessarily coincide
with the interests of the other member-states. It is precisely to
forestall these possibilities that in cases where the extent of the
immunity is specified in the enabling instruments of international
organizations (jurisdictional immunity, is specified in the enabling
instruments of international organizations), jurisdictional immunity
from the host country is invariably among the first accorded.
(See Jenks, Id.; See Bowett. The Law of International Institutions. pp.
284-285).
At its Sixth Meeting held at Kuala Lumpur, Malaysia, on 3 to 7 July
1973, the SEAFDEC Council approved the formal establishment of
its Aquaculture Department in the province of Iloilo, Philippines, to
promote research in Aquaculture as so expressed in the "Whereas"
Clauses of Presidential Decree No. 292 issued on 13 September
1973 1. Furthermore, Section 2 of the same decree had provided for
the autonomous character of SEAFDEC, thus:
. . . .All funds received by the Department shall be receipted and
disbursed in accordance with the Agreement establishing the
Southeast Asian Fisheries Development Center and pertinent
resolutions duly approved by the SEAFDEC Council.
As aptly pointed out by Associate Justice Isagani Cruz of this
Court—
Certain administrative bodies created by agreement among states
may be vested with international personality when two conditions
concur, to wit:, that their purposes are mainly non-political and that
they are autonomous, i.e., not subject to the control of any state. 2
Anent the issue of waiver of immunity, suffice it to say at the
moment that the petitioner has timely raised the issue of jurisdiction.
While the petitioner did not question the public respondent's lack of
jurisdiction at the early stages of the proceedings, it, nevertheless, did
so before it rested its case and certainly well before the proceedings
thereat had terminated.
WHEREFORE, our resolution, dated 30 March 1992, dismissing the
petition for certiorari, is hereby reconsidered, and another is entered
(a) granting due course to the petition; (b) setting aside the order,
dated 20 September 1990, of the public respondent; and (c) enjoining
the public respondent from further proceeding with RAB Case No.
VI-0156-86 and RAB Case No. VI-0214-86. No costs.
SO ORDERED.
[G.R. No. 122191. October 8, 1998]
SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF
APPEALS, MILAGROS P. MORADA and HON. RODOLFO A.
ORTIZ, in his capacity as Presiding Judge of Branch 89,
Regional Trial Court of Quezon City, respondents.
4
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court
seeks to annul and set aside the Resolution[1] dated September 27,
1995 and the Decision[2] dated April 10, 1996 of the Court of
Appeals[3] in CA-G.R. SP No. 36533,[4] and the Orders[5] dated
August 29, 1994[6] and February 2, 1995[7] that were issued by the
trial court in Civil Case No. Q-93-18394.[8]
The pertinent antecedent facts which gave rise to the instant petition,
as stated in the questioned Decision[9], are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff
went to a disco dance with fellow crew members Thamer
Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it
was almost morning when they returned to their hotels, they agreed
to have breakfast together at the room of Thamer. When they were in
te (sic) room, Allah left on some pretext. Shortly after he did,
Thamer attempted to rape plaintiff. Fortunately, a roomboy and
several security personnel heard her cries for help and rescued
her. Later, the Indonesian police came and arrested Thamer and
Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA
officials interrogated her about the Jakarta incident. They then
requested her to go back to Jakarta to help arrange the release of
Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad
and base manager Baharini negotiated with the police for the
immediate release of the detained crew members but did not succeed
because plaintiff refused to cooperate. She was afraid that she might
be tricked into something she did not want because of her inability to
understand the local dialect. She also declined to sign a blank paper
and a document written in the local dialect. Eventually, SAUDIA
allowed plaintiff to return to Jeddah but barred her from the Jakarta
flights.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put
in service by defendant SAUDI (sic). In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report
to Jeddah once again and see Miniewy on June 27, 1993 for further

investigation. Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told
her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to
the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing and listening to the
music in violation of Islamic laws; and (3) socializing with the male
crew, in contravention of Islamic tradition.[10]
Facing conviction, private respondent sought the help of her
employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help
her while her case is on appeal. Meanwhile, to pay for her upkeep,
she worked on the domestic flight of SAUDIA, while Thamer and
Allah continued to serve in the international flights.[11]
Because she was wrongfully convicted, the Prince of Makkah
dismissed the case against her and allowed her to leave Saudi
Arabia. Shortly before her return to Manila,[12] she was terminated
from the service by SAUDIA, without her being informed of the
cause.
On November 23, 1993, Morada filed a Complaint[13] for damages
against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its country
manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss[14] which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against Saudia; (2) that defendant
Al-Balawi is not a real party in interest; (3) that the claim or demand
set forth in the Complaint has been waived, abandoned or otherwise
extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to
Dismiss)[15] Saudia filed a reply[16] thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint[17] wherein
Al-Balawi was dropped as party defendant. On August 11, 1994,
Saudia filed its Manifestation and Motion to Dismiss Amended
Complaint[18].
The trial court issued an Order[19] dated August 29, 1994 denying
the Motion to Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge[20] denying the Motion to
Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration[21] of the Order dated August 29, 1994. It alleged
that the trial court has no jurisdiction to hear and try the case on the
basis of Article 21 of the Civil Code, since the proper law applicable
is the law of the Kingdom of Saudi Arabia. On October 14, 1994,
Morada filed her Opposition[22] (To Defendants Motion for
Reconsideration).
5
In the Reply[23] filed with the trial court on October 24, 1994,
SAUDIA alleged that since its Motion for Reconsideration raised
lack of jurisdiction as its cause of action, the Omnibus Motion Rule
does not apply, even if that ground is raised for the first time on
appeal. Additionally, SAUDIA alleged that the Philippines does not
have any substantial interest in the prosecution of the instant case,
and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order[24] dated
February 2, 1995, denying SAUDIAs Motion for
Reconsideration. The pertinent portion of the assailed Order reads as
follows:
Acting on the Motion for Reconsideration of defendant Saudi
Arabian Airlines filed, thru counsel, on September 20, 1994, and the
Opposition thereto of the plaintiff filed, thru counsel, on October 14,
1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a
perusal of the plaintiffs Amended Complaint, which is one for the
recovery of actual, moral and exemplary damages plus attorneys fees,
upon the basis of the applicable Philippine law, Article 21 of the
New Civil Code of the Philippines, is, clearly, within the jurisdiction
of this Court as regards the subject matter, and there being nothing
new of substance which might cause the reversal or modification of
the order sought to be reconsidered, the motion for reconsideration of
the defendant, is DENIED.
SO ORDERED.[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition
for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order[26] with
the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with
Temporary Restraining Order[27] dated February 23, 1995,
prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now
assailed, the appellate court denied SAUDIAs Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18, 1995,
to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is
hereby DENIED, after considering the Answer, with Prayer to Deny
Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
Rejoinder, it appearing that herein petitioner is not clearly entitled
thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et.
Al., 100335, April 7, 1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the
instant Petition[29] for Review with Prayer for Temporary
Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent
Court of Appeals rendered the Decision[30] dated April 10, 1996,
now also assailed. It ruled that the Philippines is an appropriate
forum considering that the Amended Complaints basis for recovery
of damages is Article 21 of the Civil Code, and thus, clearly within
the jurisdiction of respondent Court. It further held that certiorari is
not the proper remedy in a denial of a Motion to Dismiss, inasmuch
as the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for
Review with Prayer for Temporary Restraining Order[31] dated
April 30, 1996, given due course by this Court. After both parties

submitted their Memoranda,[32] the instant case is now deemed
submitted for decision.
Petitioner SAUDIA raised the following issues:
I be served with summons and other court processes at Travel Wide
The trial court has no jurisdiction to hear and try Civil Case No.
Q-93-18394 based on Article 21 of the New Civil Code since the
proper law applicable is the law of the Kingdom of Saudi Arabia
inasmuch as this case involves what is known in private international
law as a conflicts problem. Otherwise, the Republic of the
Philippines will sit in judgment of the acts done by another sovereign
state which is abhorred.
II.
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of leave
of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioners April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order Within Ten (10) Days From Notice
Thereof. Further, the Revised Rules of Court should be construed
with liberality pursuant to Section 2, Rule 1 thereof.
III.
Petitioner received on April 22, 1996 the April 10, 1996 decision in
CA-G.R. SP NO. 36533 entitled Saudi Arabian Airlines v. Hon.
Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental
Petition For Review With Prayer For A Temporary Restraining
Order on May 7, 1996 at 10:29 a.m. or within the 15-day
reglementary period as provided for under Section 1, Rule 45 of the
Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO.
36533 has not yet become final and executory and this Honorable
Court can take cognizance of this case.[33]
From the foregoing factual and procedural antecedents, the following
issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON
CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE
NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI
ARABIAN AIRLINES.
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
RULING THAT IN THE CASE PHILIPPINE LAW SHOULD
GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that
must be settled at the outset. It maintains that private respondents
claim for alleged abuse of rights occurred in the Kingdom of Saudi
Arabia. It alleges that the existence of a foreign element qualifies the
instant case for the application of the law of the Kingdom of Saudi
Arabia, by virtue of the lex loci delicti commissi rule.[34]
On the other hand, private respondent contends that since her
Amended Complaint is based on Articles 19[35] and 21[36] of the
Civil Code, then the instant case is properly a matter of domestic
law.[37]
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia.
6
As stated by private respondent in her Amended Complaint[38] dated
June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a
foreign airlines corporation doing business in the Philippines. It may
Associated Sales (Phils.), Inc., 3rd Floor, Cougar Building, 114
Valero St., Salcedo Village, Makati, Metro Manila.
xxxxxxxxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put
in service by defendant SAUDIA. In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah,
Saudi Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to
report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take that flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her passport and
told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff
to the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing, and listening to the
music in violation of Islamic laws; (3) socializing with the male crew,
in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff
sought the help of the Philippine Embassy in Jeddah. The latter
helped her pursue an appeal from the decision of the court. To pay
for her upkeep, she worked on the domestic flights of defendant

SAUDIA while, ironically, Thamer and Allah freely served the
international flights.[39]
Where the factual antecedents satisfactorily establish the existence of
a foreign element, we agree with petitioner that the problem herein
could present a conflicts case.
A factual situation that cuts across territorial lines and is affected by
the diverse laws of two or more states is said to contain a foreign
element. The presence of a foreign element is inevitable since social
and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception.[40]
The forms in which this foreign element may appear are
many.[41] The foreign element may simply consist in the fact that
one of the parties to a contract is an alien or has a foreign domicile,
or that a contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may
assume a complex form.[42]
In the instant case, the foreign element consisted in the fact that
private respondent Morada is a resident Philippine national, and that
petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner Saudia as a flight
stewardess, events did transpire during her many occasions of travel
across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation
to arise.
We thus find private respondents assertion that the case is purely
domestic, imprecise. A conflicts problem presents itself here, and the
question of jurisdiction[43]confronts the court a quo.
After a careful study of the private respondents Amended
Complaint,[44] and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil
Code.
On one hand, Article 19 of the New Civil Code provides;
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of
Appeals,[45] this Court held that:
The aforecited provisions on human relations were intended to
expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21
gives flesh to its provisions. Thus, we agree with private respondents
assertion that violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.
Based on the allegations[46] in the Amended Complaint, read in the
light of the Rules of Court on jurisdiction[47] we find that the
Regional Trial Court (RTC) of Quezon City possesses jurisdiction
over the subject matter of the suit.[48] Its authority to try and hear
the case is provided for under Section 1 of Republic Act No. 7691, to
wit:
7
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known
as the Judiciary Reorganization Act of 1980, is hereby amended to
read as follows:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall
exercise exclusive jurisdiction:
xxxxxxxxx
(8) In all other cases in which demand, exclusive of interest, damages
of whatever kind, attorneys fees, litigation expenses, and costs or the
value of the property in controversy exceeds One hundred thousand
pesos (P100,000.00) or, in such other cases in Metro Manila, where
the demand, exclusive of the above-mentioned items exceeds Two
hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxxxxxxxx
And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe
venue, Quezon City, is appropriate:
SEC. 2 Venue in Courts of First Instance. [Now Regional Trial
Court]
(a) x x x x x x x x x
(b) Personal actions. All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiff resides, at the election of
the plaintiff.
Pragmatic considerations, including the convenience of the parties,
also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite
obvious. Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum, vex,
harass, or oppress the defendant, e.g. by inflicting upon him needless
expense or disturbance. But unless the balance is strongly in favor of
the defendant, the plaintiffs choice of forum should rarely be
disturbed.[49]
Weighing the relative claims of the parties, the court a quo found it
best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the
Kingdom of Saudi Arabia where she no longer maintains substantial
connections.That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private respondent)
should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons
of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntary
submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several
motions[50] praying for the dismissal of Moradas Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit
from the motions filed, is that SAUDIA prayed for other reliefs under
the premises.Undeniably, petitioner SAUDIA has effectively
submitted to the trial courts jurisdiction by praying for the dismissal
of the Amended Complaint on grounds other than lack of
jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]

We observe that the motion to dismiss filed on April 14, 1962, aside
from disputing the lower courts jurisdiction over defendants person,
prayed for dismissal of the complaint on the ground that plaintiffs
cause of action has prescribed. By interposing such second ground in
its motion to dismiss, Ker and Co., Ltd. availed of an affirmative
defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea
of defendant Ker & Co., Ltd., it necessarily had to acquire
jurisdiction upon the latters person, who, being the proponent of the
affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the
court.
Similarly, the case of De Midgely vs. Ferandos, held that:
When the appearance is by motion for the purpose of objecting to the
jurisdiction of the court over the person, it must be for the sole and
separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of
the court over his person, he thereby submits himself to the
jurisdiction of the court. A special appearance by motion made for
the purpose of objecting to the jurisdiction of the court over the
person will be held to be a general appearance, if the party in said
motion should, for example, ask for a dismissal of the action upon
the further ground that the court had no jurisdiction over the subject
matter.[52]
Clearly, petitioner had submitted to the jurisdiction of the Regional
Trial Court of Quezon City. Thus, we find that the trial court has
jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law
problems seek to answer two important questions: (1) What legal
system should control a given situation where some of the significant
facts occurred in two or more states; and (2) to what extent should
the chosen legal system regulate the situation.[53]
Several theories have been propounded in order to identify the legal
system that should ultimately control. Although ideally, all
choice-of-law theories should intrinsically advance both notions of
justice and predictability, they do not always do so. The forum is
then faced with the problem of deciding which of these two
important values should be stressed.[54]
Before a choice can be made, it is necessary for us to determine
under what category a certain set of facts or rules fall. This process is
known as characterization, or the doctrine of qualification. It is the
process of deciding whether or not the facts relate to the kind of
question specified in a conflicts rule.[55] The purpose
ofcharacterization is to enable the forum to select the proper law.[56]
Our starting point of analysis here is not a legal relation, but a factual
situation, event, or operative fact.[57] An essential element of
conflict rules is the indication of a test or connecting factor or point
of contact. Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting
factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of
wrongdoing.[58]
Note that one or more circumstances may be present to serve as the
possible test for the determination of the applicable law.[59] These
test factors or points of contact or connecting factors could be any of
the following:
(1) The nationality of a person, his domicile, his residence, his place
of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
8
(3) the situs of a thing, that is, the place where a thing is, or is
deemed to be situated. In particular, the lex situs is decisive when
real rights are involved;
(4) the place where an act has been done, the locus actus, such as the
place where a contract has been made, a marriage celebrated, a will
signed or a tort committed. The lex loci actus is particularly
important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the
place of performance of contractual duties, or the place where a
power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should
govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are
instituted or done. The lex forithe law of the forumis particularly
important because, as we have seen earlier, matters of procedure not
going to the substance of the claim involved are governed by it; and
because the lex fori applies whenever the content of the otherwise
applicable foreign law is excluded from application in a given case
for the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically
all legal relationships of the ship and of its master or owner as
such. It also covers contractual relationships particularly contracts of
affreightment.[60] (Underscoring ours.)
After a careful study of the pleadings on record, including allegations
in the Amended Complaint deemed submitted for purposes of the
motion to dismiss, we are convinced that there is reasonable basis for
private respondents assertion that although she was already working
in Manila, petitioner brought her to Jeddah on the pretense that she
would merely testify in an investigation of the charges she made
against the two SAUDIA crew members for the attack on her person
while they were in Jakarta. As it turned out, she was the one made to
face trial for very serious charges, including adultery and violation of
Islamic laws and tradition.
There is likewise logical basis on record for the claim that the
handing over or turning over of the person of private respondent to
Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioners purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering
of private respondent. Petitioner thereby allegedly facilitated the
arrest, detention and prosecution of private respondent under the
guise of petitioners authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found
by the Prince of Makkah, the alleged conviction and imprisonment of
private respondent was wrongful. But these capped the injury or
harm allegedly inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide compensation or
redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving
torts, the connecting factor or point of contact could be the place or
places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the
Philippines could be said as a situs of the tort (the place where the
alleged tortious conduct took place). This is because it is in the
Philippines where petitioner allegedly deceived private respondent, a
Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its rights
and in the performance of its duties, act with justice, give her her due
and observe honesty and good faith. Instead, petitioner failed to
protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment.For in our

view what is important here is the place where the over-all harm or
the fatality of the alleged injury to the person, reputation, social
standing and human rights of complainant, had lodged, according to
the plaintiff below (herein private respondent). All told, it is not
without basis to identify the Philippines as the situs of the alleged
tort.
Moreover, with the widespread criticism of the traditional rule of lex
loci delicti commissi, modern theories and rules on tort
liability[61] have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories on
tort liability, we find here an occasion to apply the State of the most
significant relationship rule, which in our view should be appropriate
to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury occurred;
(b) the place where the conduct causing the injury occurred; (c) the
domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if
any, between the parties is centered.[62]
As already discussed, there is basis for the claim that over-all injury
occurred and lodged in the Philippines. There is likewise no question
that private respondent is a resident Filipina national, working with
petitioner, a resident foreign corporation engaged here in the business
of international air carriage. Thus, the relationship between the
parties was centered here, although it should be stressed that this suit
is not based on mere labor law violations. From the record, the claim
that the Philippines has the most significant contact with the matter
in this dispute,[63] raised by private respondent as plaintiff below
against defendant (herein petitioner), in our view, has been properly
established.
Prescinding from this premise that the Philippines is the situs of the
tort complaint of and the place having the most interest in the
problem, we find, by way of recapitulation, that the Philippine law on
tort liability should have paramount application to and control in the
resolution of the legal issues arising out of this case. Further, we hold
that the respondent Regional Trial Court has jurisdiction over the
parties and the subject matter of the complaint; the appropriate venue
is in Quezon City, which could properly apply Philippine
law. Moreover, we find untenable petitioners insistence that [s]ince
private respondent instituted this suit, she has the burden of pleading
and proving the applicable Saudi law on the matter.[64] As aptly said
by private respondent, she has no obligation to plead and prove the
law of the Kingdom of Saudi Arabia since her cause of action is
based on Articles 19 and 21 of the Civil Code of the Philippines. In
her Amended Complaint and subsequent pleadings she never alleged
that Saudi law should govern this case.[65] And as correctly held by
the respondent appellate court, considering that it was the petitioner
who was invoking the applicability of the law of Saudi Arabia, thus
the burden was on it [petitioner] to plead and to establish what the
law of Saudi Arabia is.[66]
Lastly, no error could be imputed to the respondent appellate court in
upholding the trial courts denial of defendants (herein petitioners)
motion to dismiss the case. Not only was jurisdiction in order and
venue properly laid, but appeal after trial was obviously available,
and the expeditious trial itself indicated by the nature of the case at
hand. Indubitably, the Philippines is the state intimately concerned
with the ultimate outcome of the case below not just for the benefit
of all the litigants, but also for the vindication of the countrys system
of law and justice in a transnational setting. With these guidelines in
mind, the trial court must proceed to try and adjudge the case in the
light of relevant Philippine law, with due consideration of the foreign
9
element or elements involved. Nothing said herein, of course, should
be construed as prejudging the results of the case in any manner
whatsoever.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED. Civil Case No. Q-93-18394 entitled Milagros P.
Morada vs. Saudi Arabia Airlines is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further
proceedings. SO ORDERED.
HASEGAWA V KITAMURA
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court assailing the April 18, 2001 Decision[1] of the
Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution[2] denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co.,
Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,[3] entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.[4] The agreement provides
that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.[5] Nippon then assigned respondent to
work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's
consultancy contract with the Philippine Government.[6]
When the STAR Project was near completion, the Department of
Public Works and Highways (DPWH) engaged the consultancy
services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.[7] Respondent was named as the
project manager in the contract's Appendix 3.1.[8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's
general manager for its International Division, informed respondent
that the company had no more intention of automatically renewing
his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000,
just in time for the ICA's expiry.[9]
Threatened with impending unemployment, respondent, through his
lawyer, requested a negotiation conference and demanded that he be
assigned to the BBRI project. Nippon insisted that respondents
contract was for a fixed term that had already expired, and refused to
negotiate for the renewal of the ICA.[10]
As he was not able to generate a positive response from the
petitioners, respondent consequently initiated on June 1, 2000 Civil
Case No. 00-0264 for specific performance and damages with
the Regional Trial Court of Lipa City.[11]
For their part, petitioners, contending that the ICA had been
perfected in Japan and executed by and between Japanese nationals,

moved to dismiss the complaint for lack of jurisdiction. They
asserted that the claim for improper pre-termination of
respondent's ICA could only be heard and ventilated in the proper
courts of Japan following the principles of lex loci
celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's
request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.[13]
On June 29, 2000, the RTC, invoking our ruling in Insular
Government v. Frank[14] that matters connected with the
performance of contracts are regulated by the law prevailing at the
place of performance,[15] denied the motion to dismiss.[16] The trial
court subsequently denied petitioners' motion for
reconsideration,[17] prompting them to file with the appellate court,
on August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205].[18] On August 23, 2000, the
CA resolved to dismiss the petition on procedural groundsfor lack of
statement of material dates and for insufficient verification and
certification against forum shopping.[19] An Entry of Judgment was
later issued by the appellate court on September 20, 2000.[20]
Aggrieved by this development, petitioners filed with the CA,
on September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating therein
the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP
No. 60827.[21]
Ruling on the merits of the second petition, the appellate court
rendered the assailed April 18, 2001 Decision[22] finding no grave
abuse of discretion in the trial court's denial of the motion to dismiss.
The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue. The
CA thus declared that the trial court was correct in applying instead
the principle of lex loci solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by
the CA in the assailed July 25, 2001 Resolution.[24]
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review
on Certiorari[25] imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT
SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS
ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE
LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
10
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN OVERLOOKING THE NEED TO REVIEW OUR
ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S]
IN PRIVATE INTERNATIONAL LAWS.[26]
The pivotal question that this Court is called upon to resolve is
whether the subject matter jurisdiction of Philippine courts in civil
cases for specific performance and damages involving contracts
executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the state of the
most significant relationship rule, or forum non conveniens.
However, before ruling on this issue, we must first dispose of the
procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in
CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising
the same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice.[27] The same holds
true in the CA's dismissal of the said case due to defects in the formal
requirement of verification[28] and in the other requirement in Rule
46 of the Rules of Court on the statement of the material
dates.[29] The dismissal being without prejudice, petitioners can
re-file the petition, or file a second petition attaching thereto the
appropriate verification and certificationas they, in fact didand
stating therein the material dates, within the prescribed period[30] in
Section 4, Rule 65 of the said Rules.[31]
The dismissal of a case without prejudice signifies the absence of a
decision on the merits and leaves the parties free to litigate the matter
in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the
merits does not bar another action involving the same parties, on the
same subject matter and theory.[32]
Necessarily, because the said dismissal is without prejudice and has
no res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the
first had already been dismissed on procedural
grounds,[33] petitioners are no longer required by the Rules to
indicate in their certification of non-forum shopping in the instant
petition for review of the second certiorari petition, the status of the
aforesaid first petition before the CA. In any case, an omission in the
certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is
not a fatal defect. It will not warrant the dismissal and nullification of
the entire proceedings, considering that the evils sought to be
prevented by the said certificate are no longer present.[34]

The Court also finds no merit in respondent's contention that
petitioner Hasegawa is only authorized to verify and certify, on
behalf of Nippon, the certiorari petition filed with the CA and not the
instant petition. True, the Authorization[35] dated September 4, 2000,
which is attached to the second certiorari petition and which is also
attached to the instant petition for review, is limited in scopeits
wordings indicate that Hasegawa is given the authority to sign for
and act on behalf of the company only in the petition filed with the
appellate court, and that authority cannot extend to the instant
petition for review.[36] In a plethora of cases, however, this Court
has liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment of
the requirements have been made.[37] Given that petitioners herein
sufficiently explained their misgivings on this point and appended to
their Reply[38] an updated Authorization[39] for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the
same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed out,
and to which we agree, Hasegawa is truly not authorized to act on
behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001
Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a
few cases, we have ruled that corporate powers are exercised by the
board of directors; thus, no person, not even its officers, can bind
the corporation, in the absence of authority from the
board.[40] Considering that Hasegawa verified and certified the
petition only on his behalf and not on behalf of the other petitioner,
the petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.[41] Substantial compliance will not suffice in a matter
that demands strict observance of the Rules.[42] While technical
rules of procedure are designed not to frustrate the ends of justice,
nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court
dockets.[43]
Further, the Court has observed that petitioners incorrectly filed a
Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying
a motion to dismiss is interlocutory,
and cannot be the subject of the extraordinary petition for certiorari o
r mandamus. The appropriate recourse is to file an answer and to
interpose as defenses the objections raised in the motion, to proceed
to trial, and, in case of an adverse decision, to elevate the entire case
by appeal in due course.[44] While there are recognized exceptions
to this rule,[45] petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum,
petitioners question its jurisdiction to hear and resolve the civil case
for specific performance and damages filed by the respondent.
The ICA subject of the litigation was entered into and perfected
in Tokyo, Japan, by Japanese nationals, and written wholly in the
Japanese language. Thus, petitioners posit that local courts have no
substantial relationship to the parties[46] following the [state of the]
most significant relationship rule in Private International Law.[47]
11
The Court notes that petitioners adopted an additional but different
theory when they elevated the case to the appellate court. In the
Motion to Dismiss[48] filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely
argued that the applicable law which will determine the validity or
invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.[49] While not
abandoning this stance in their petition before the appellate court,
petitioners on certiorari significantly invoked the defense of forum
non conveniens.[50] On petition for review before this Court,
petitioners dropped their other arguments, maintained the forum non
conveniens defense, and introduced their new argument that the
applicable principle is the [state of the] most significant relationship
rule.[51]
Be that as it may, this Court is not inclined to deny this petition
merely on the basis of the change in theory, as explained
in Philippine Ports Authority v. City of Iloilo.[52] We only pointed
out petitioners' inconstancy in their arguments to emphasize their
incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation
be initiated? (2) Which law will the court apply? and (3) Where can
the resulting judgment be enforced?[53]
Analytically, jurisdiction and choice of law are two distinct
concepts.[54] Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to
exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law. While jurisdiction and the choice of
the lex fori will often coincide, the minimum contacts for one do not
always provide the necessary significant contacts for the
other.[55] The question of whether the law of a state can be applied
to a transaction is different from the question of whether the courts of
that state have jurisdiction to enter a judgment.[56]
In this case, only the first phase is at issuejurisdiction. Jurisdiction,
however, has various aspects. For a court to validly exercise its
power to adjudicate a controversy, it must have jurisdiction over the
plaintiff or the petitioner, over the defendant or the respondent, over
the subject matter, over the issues of the case and, in cases involving
property, over the res or the thing which is the subject of the
litigation.[57] In assailing the trial court's jurisdiction herein,
petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is
conferred by the sovereign authority which establishes and organizes
the court. It is given only by law and in the manner prescribed by
law.[58] It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the
claims asserted therein.[59] To succeed in its motion for the
dismissal of an action for lack of jurisdiction over the subject matter
of the claim,[60] the movant must show that the court or tribunal
cannot act on the matter submitted to it because no law grants it the
power to adjudicate the claims.[61]

In the instant case, petitioners, in their motion to dismiss, do not
claim that the trial court is not properly vested by law with
jurisdiction to hear the subject controversy for, indeed, Civil Case No.
00-0264 for specific performance and damages is one not capable of
pecuniary estimation and is properly cognizable by the RTC of Lipa
City.[62] What they rather raise as grounds to question subject matter
jurisdiction are the principles of lex loci celebrationis and lex
contractus,and the state of the most significant relationship rule.
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the law of the place of the
ceremony[63] or the law of the place where a contract is
made.[64] The doctrine of lex contractus or lex loci contractus means
the law of the place where a contract is executed or to be
performed.[65] It controls the nature, construction, and validity of the
contract[66] and it may pertain to the law voluntarily agreed upon by
the parties or the law intended by them either expressly or
implicitly.[67] Under the state of the most significant relationship
rule, to ascertain what state law to apply to a dispute, the court
should determine which state has the most substantial connection to
the occurrence and the parties. In a case involving a contract, the
court should consider where the contract was made, was negotiated,
was to be performed, and the domicile, place of business, or place of
incorporation of the parties.[68] This rule takes into account several
contacts and evaluates them according to their relative importance
with respect to the particular issue to be resolved.[69]
Since these three principles in conflict of laws make reference to the
law applicable to a dispute, they are rules proper for the second phase,
the choice of law.[70]They determine which state's law is to be
applied in resolving the substantive issues of a conflicts
problem.[71] Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also not
yet called for.
Further, petitioners' premature invocation of choice-of-law rules is
exposed by the fact that they have not yet pointed out any conflict
between the laws of Japanand ours. Before determining which law
should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules.[72] Also, when
the law of a foreign country is invoked to provide the proper rules for
the solution of a case, the existence of such law must be pleaded and
proved.[73]
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are
three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over the case and
apply the internal law of the forum; or (3) assume jurisdiction over
the case and take into account or apply the law of some other State or
States.[74] The courts power to hear cases and controversies is
derived from the Constitution and the laws. While it may choose to
recognize laws of foreign nations, the court is not limited by foreign
sovereign law short of treaties or other formal agreements, even in
matters regarding rights provided by foreign sovereigns.[75]
Neither can the other ground raised, forum non conveniens,[76] be
used to deprive the trial court of its jurisdiction herein. First, it is not
12
a proper basis for a motion to dismiss because Section 1, Rule 16 of
the Rules of Court does not include it as a ground.[77] Second,
whether a suit should be entertained or dismissed on the basis of the
said doctrine depends largely upon the facts of the particular case and
is addressed to the sound discretion of the trial court.[78] In this case,
the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual
determination; hence, this conflicts principle is more properly
considered a matter of defense.[79]
Accordingly, since the RTC is vested by law with the power to
entertain and hear the civil case filed by respondent and the grounds
raised by petitioners to assail that jurisdiction are inappropriate, the
trial and appellate courts correctly denied the petitioners motion to
dismiss.
WHEREFORE, premises considered, the petition for review
on certiorari is DENIED. SO ORDERED.
G.R. No. 112573 February 9, 1995
NORTHWEST ORIENT AIRLINES, INC. petitioner, vs.
COURT OF APPEALS and C.F. SHARP & COMPANY
INC., respondents.
PADILLA, JR., J.:
This petition for review on certiorari seeks to set aside the decision of
the Court of Appeals affirming the dismissal of the petitioner's
complaint to enforce the judgment of a Japanese court. The principal
issue here is whether a Japanese court can acquire jurisdiction over a
Philippine corporation doing business in Japan by serving summons
through diplomatic channels on the Philippine corporation at its
principal office in Manila after prior attempts to serve summons in
Japan had failed.
Petitioner Northwest Orient Airlines, Inc.
(hereinafter NORTHWEST), a corporation organized under the laws
of the State of Minnesota, U.S.A., sought to enforce in Civil Case No.
83-17637 of the Regional Trial Court (RTC), Branch 54, Manila, a
judgment rendered in its favor by a Japanese court against private
respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a
corporation incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10
November 1993, 1 the following are the factual and procedural
antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F.
Sharp & Company, through its Japan branch, entered into an
International Passenger Sales Agency Agreement, whereby the
former authorized the latter to sell its air transportation tickets.
Unable to remit the proceeds of the ticket sales made by defendant on
behalf of the plaintiff under the said agreement, plaintiff on March 25,
1980 sued defendant in Tokyo, Japan, for collection of the
unremitted proceeds of the ticket sales, with claim for damages.

On April 11, 1980, a writ of summons was issued by the 36th Civil
Department, Tokyo District Court of Japan against defendant at its
office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho,
Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the
summons was unsuccessful because the bailiff was advised by a
person in the office that Mr. Dinozo, the person believed to be
authorized to receive court processes was in Manila and would be
back on April 24, 1980.
On April 24, 1980, bailiff returned to the defendant's office to serve
the summons. Mr. Dinozo refused to accept the same claiming that
he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the
Tokyo District Court decided to have the complaint and the writs of
summons served at the head office of the defendant in Manila. On
July 11, 1980, the Director of the Tokyo District Court requested the
Supreme Court of Japan to serve the summons through diplomatic
channels upon the defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff
Rolando Balingit the writ of summons (p. 276, Records). Despite
receipt of the same, defendant failed to appear at the scheduled
hearing. Thus, the Tokyo Court proceeded to hear the plaintiff's
complaint and on [January 29, 1981], rendered judgment ordering the
defendant to pay the plaintiff the sum of 83,158,195 Yen and
damages for delay at the rate of 6% per annum from August 28, 1980
up to and until payment is completed (pp. 12-14, Records).
On March 24, 1981, defendant received from Deputy Sheriff Balingit
copy of the judgment. Defendant not having appealed the judgment,
the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May
20, 1983, a suit for enforcement of the judgment was filed by
plaintiff before the Regional Trial Court of Manila Branch 54.2
On July 16, 1983, defendant filed its answer averring that the
judgment of the Japanese Court sought to be enforced is null and
void and unenforceable in this jurisdiction having been rendered
without due and proper notice to the defendant and/or with collusion
or fraud and/or upon a clear mistake of law and fact (pp. 41-45,
Rec.).
Unable to settle the case amicably, the case was tried on the merits.
After the plaintiff rested its case, defendant on April 21, 1989, filed a
Motion for Judgment on a Demurrer to Evidence based on two
grounds:
(1) the foreign judgment sought to be enforced is null and void for
want of jurisdiction and (2) the said judgment is contrary to
Philippine law and public policy and rendered without due process of
law. Plaintiff filed its opposition after which the court a quo rendered
the now assailed decision dated June 21, 1989 granting the demurrer
motion and dismissing the complaint (Decision, pp. 376-378,
Records). In granting the demurrer motion, the trial court held that:
The foreign judgment in the Japanese Court sought in this action is
null and void for want of jurisdiction over the person of the
defendant considering that this is an action in personam; the Japanese
Court did not acquire jurisdiction over the person of the defendant
because jurisprudence requires that the defendant be served with
summons in Japan in order for the Japanese Court to acquire
jurisdiction over it, the process of the Court in Japan sent to the
Philippines which is outside Japanese jurisdiction cannot confer
jurisdiction over the defendant in the case before the Japanese Court
of the case at bar. Boudard versus Tait 67 Phil. 170. The plaintiff
contends that the Japanese Court acquired jurisdiction because the
defendant is a resident of Japan, having four (4) branches doing
business therein and in fact had a permit from the Japanese
13
government to conduct business in Japan (citing the exhibits
presented by the plaintiff); if this is so then service of summons
should have been made upon the defendant in Japan in any of these
alleged four branches; as admitted by the plaintiff the service of the
summons issued by the Japanese Court was made in the Philippines
thru a Philippine Sheriff. This Court agrees that if the defendant in a
foreign court is a resident in the court of that foreign court such court
could acquire jurisdiction over the person of the defendant but it
must be served upon the defendant in the territorial jurisdiction of the
foreign court. Such is not the case here because the defendant was
served with summons in the Philippines and not in Japan.
Unable to accept the said decision, plaintiff on July 11, 1989 moved
for reconsideration of the decision, filing at the same time a
conditional Notice of Appeal, asking the court to treat the said notice
of appeal "as in effect after and upon issuance of the court's denial of
the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a Reply
dated August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court disregarded the Motion for
Reconsideration and gave due course to the plaintiff's Notice of
Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It
agreed with the latter in its reliance upon Boudard vs.Tait 4 wherein
it was held that "the process of the court has no extraterritorial effect
and no jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state." To support its
position, the Court of Appeals further stated:
In an action strictly in personam, such as the instant case, personal
service of summons within the forum is required for the court to
acquire jurisdiction over the defendant (Magdalena Estate Inc. vs.
Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal
or substituted service of summons on the defendant not
extraterritorial service is necessary (Dial Corp vs. Soriano, 161
SCRA 739).
But while plaintiff-appellant concedes that the collection suit filed is
an action in personam, it is its theory that a distinction must be made
between an action in personam against a resident defendant and an
action in personam against a non-resident defendant. Jurisdiction is
acquired over a non-resident defendant only if he is served personally
within the jurisdiction of the court and over a resident defendant if by
personal, substituted or constructive service conformably to statutory
authorization. Plaintiff-appellant argues that since the
defendant-appellee maintains branches in Japan it is considered a
resident defendant. Corollarily, personal, substituted or constructive
service of summons when made in compliance with the procedural
rules is sufficient to give the court jurisdiction to render judgment in
personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully be
served outside the territorial limits of the jurisdiction of the court
from which it issues (Carter vs. Carter; 41 S.E. 2d 532, 201) and this
is regardless of the residence or citizenship of the party thus served
(Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292,
Am. Case 1912 D680). There must be actual service within the
proper territorial limits on defendant or someone authorized to accept
service for him. Thus, a defendant, whether a resident or not in the
forum where the action is filed, must be served with summons within
that forum.
But even assuming a distinction between a resident defendant and
non-resident defendant were to be adopted, such distinction applies

only to natural persons and not in the corporations. This finds support
in the concept that "a corporation has no home or residence in the
sense in which those terms are applied to natural persons" (Claude
Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited
by the defendant-appellee in its brief:
Residence is said to be an attribute of a natural person, and can be
predicated on an artificial being only by more or less imperfect
analogy. Strictly speaking, therefore, a corporation can have no local
residence or habitation. It has been said that a corporation is a mere
ideal existence, subsisting only in contemplation of law — an
invisible being which can have, in fact, no locality and can occupy no
space, and therefore cannot have a dwelling place. (18 Am. Jur. 2d, p.
693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v.
Hartfold F. Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character of a
corporation is to be determined by the place of its origin where its
charter was granted and not by the location of its business activities
(Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101), A
corporation is a "resident" and an inhabitant of the state in which it is
incorporated and no other (36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly organized under
the Philippine laws. Clearly, its residence is the Philippines, the place
of its incorporation, and not Japan. While defendant-appellee
maintains branches in Japan, this will not make it a resident of Japan.
A corporation does not become a resident of another by engaging in
business there even though licensed by that state and in terms given
all the rights and privileges of a domestic corporation (Galveston H.
& S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. 401).
On this premise, defendant appellee is a non-resident corporation. As
such, court processes must be served upon it at a place within the
state in which the action is brought and not elsewhere (St. Clair vs.
Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354).5
It then concluded that the service of summons effected in Manila or
beyond the territorial boundaries of Japan was null and did not confer
jurisdiction upon the Tokyo District Court over the person of SHARP;
hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST
elevated the case to this Court contending that the respondent court
erred in holding that SHARP was not a resident of Japan and that
summons on SHARP could only be validly served within that
country.
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. It is also
proper to presume the regularity of the proceedings and the giving of
due notice therein.6
Under Section 50, Rule 39 of the Rules of Court, a judgment in an
action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a right
as between the parties and their successors-in-interest by a
subsequent title. The judgment may, however, be assailed by
evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under Section
3 of Rule 131, a court, whether of the Philippines or elsewhere,
enjoys the presumption that it was acting in the lawful exercise of
jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden
of overcoming the presumption of its validity.7Being the party
challenging the judgment rendered by the Japanese court, SHARP
had the duty to demonstrate the invalidity of such judgment. In an
attempt to discharge that burden, it contends that the extraterritorial
14
service of summons effected at its home office in the Philippines was
not only ineffectual but also void, and the Japanese Court did not,
therefore acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those
relating to the service of process upon a defendant are governed by
the lex fori or the internal law of the forum.8 In this case, it is the
procedural law of Japan where the judgment was rendered that
determines the validity of the extraterritorial service of process on
SHARP. As to what this law is is a question of fact, not of law. It
may not be taken judicial notice of and must be pleaded and proved
like any other fact.9 Sections 24 and 25, Rule 132 of the Rules of
Court provide that it may be evidenced by an official publication or
by a duly attested or authenticated copy thereof. It was then
incumbent upon SHARP to present evidence as to what that Japanese
procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of summons and
the decision thereafter rendered by the Japanese court must stand.
Alternatively in the light of the absence of proof regarding Japanese
law, the presumption of identity or similarity or the so-called
processual presumption 10 may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the
Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule 14 of
the Rules of Court provides that if the defendant is a foreign
corporation doing business in the Philippines, service may be made:
(1) on its resident agent designated in accordance with law for that
purpose, or, (2) if there is no such resident agent, on the government
official designated by law to that effect; or (3) on any of its officers
or agents within the Philippines.
If the foreign corporation has designated an agent to receive
summons, the designation is exclusive, and service of summons is
without force and gives the court no jurisdiction unless made upon
him. 11
Where the corporation has no such agent, service shall be made on
the government official designated by law, to wit: (a) the Insurance
Commissioner in the case of a foreign insurance company; (b) the
Superintendent of Banks, in the case of a foreign banking corporation;
and (c) the Securities and Exchange Commission, in the case of other
foreign corporations duly licensed to do business in the Philippines.
Whenever service of process is so made, the government office or
official served shall transmit by mail a copy of the summons or other
legal proccess to the corporation at its home or principal office. The
sending of such copy is a necessary part of the service. 12
SHARP contends that the laws authorizing service of process upon
the Securities and Exchange Commission, the Superintendent of
Banks, and the Insurance Commissioner, as the case may be,
presuppose a situation wherein the foreign corporation doing
business in the country no longer has any branches or offices within
the Philippines. Such contention is belied by the pertinent provisions
of the said laws. Thus, Section 128 of the Corporation Code 13 and
Section 190 of the Insurance Code 14 clearly contemplate two
situations: (1) if the corporation had left the Philippines or had
ceased to transact business therein, and (2) if the corporation has no
designated agent. Section 17 of the General Banking Act 15 does not
even speak a corporation which had ceased to transact business in the
Philippines.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan. This
silence could only mean, or least create an impression, that it had
none. Hence, service on the designated government official or on any
of SHARP's officers or agents in Japan could be availed of. The

respondent, however, insists that only service of any of its officers or
employees in its branches in Japan could be resorted to. We do not
agree. As found by the respondent court, two attempts at service
were made at SHARP's Yokohama branch. Both were unsuccessful.
On the first attempt, Mr. Dinozo, who was believed to be the person
authorized to accept court process, was in Manila. On the second, Mr.
Dinozo was present, but to accept the summons because, according
to him, he was no longer an employee of SHARP. While it may be
true that service could have been made upon any of the officers or
agents of SHARP at its three other branches in Japan, the availability
of such a recourse would not preclude service upon the proper
government official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court
which ordered that summons for SHARP be served at its head office
in the Philippine's after the two attempts of service had failed. 16 The
Tokyo District Court requested the Supreme Court of Japan to cause
the delivery of the summons and other legal documents to the
Philippines. Acting on that request, the Supreme Court of Japan sent
the summons together with the other legal documents to the Ministry
of Foreign Affairs of Japan which, in turn, forwarded the same to the
Japanese Embassy in Manila . Thereafter, the court processes were
delivered to the Ministry (now Department) of Foreign Affairs of the
Philippines, then to the Executive Judge of the Court of First Instance
(now Regional Trial Court) of Manila, who forthwith ordered Deputy
Sheriff Rolando Balingit to serve the same on SHARP at its principal
office in Manila. This service is equivalent to service on the proper
government official under Section 14, Rule 14 of the Rules of Court,
in relation to Section 128 of the Corporation Code. Hence, SHARP's
contention that such manner of service is not valid under Philippine
laws holds no water.17
In deciding against the petitioner, the respondent court sustained the
trial court's reliance on Boudard vs. Tait 18where this Court held:
The fundamental rule is that jurisdiction in personam over
nonresidents, so as to sustain a money judgment, must be based upon
personal service within the state which renders the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial effect, and no
jurisdiction is acquired over the person of the defendant by serving
him beyond the boundaries of the state. Nor has a judgment of a
court of a foreign country against a resident of this country having no
property in such foreign country based on process served here, any
effect here against either the defendant personally or his property
situated here.
Process issuing from the courts of one state or country cannot run
into another, and although a nonresident defendant may have been
personally served with such process in the state or country of his
domicile, it will not give such jurisdiction as to authorize a personal
judgment against him.
It further availed of the ruling in Magdalena Estate,
Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the
principle laid down by the Iowa Supreme Court in the 1911 case
of Raher vs. Raher. 21
The first three cases are, however, inapplicable. Boudard involved
the enforcement of a judgment of the civil division of the Court of
First Instance of Hanoi, French Indo-China. The trial court dismissed
the case because the Hanoi court never acquired jurisdiction over the
person of the defendant considering that "[t]he, evidence adduced at
the trial conclusively proves that neither the appellee [the defendant]
nor his agent or employees were ever in Hanoi, French Indo-China;
and that the deceased Marie Theodore Jerome Boudard had never, at
any time, been his employee." In Magdalena Estate, what was
15
declared invalid resulting in the failure of the court to acquire
jurisdiction over the person of the defendants in an action in
personam was the service of summons through publication against
non-appearing resident defendants. It was claimed that the latter
concealed themselves to avoid personal service of summons upon
them. In Dial, the defendants were foreign corporations which were
not, domiciled and licensed to engage in business in the Philippines
and which did not have officers or agents, places of business, or
properties here. On the other hand, in the instant case, SHARP was
doing business in Japan and was maintaining four branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of the past.
In that case, a divided Supreme Court of Iowa declared that the
principle that there can be no jurisdiction in a court of a territory to
render a personal judgment against anyone upon service made
outside its limits was applicable alike to cases of residents and
non-residents. The principle was put at rest by the United States
Supreme Court when it ruled in the 1940 case of Milliken
vs. Meyer 22 that domicile in the state is alone sufficient to bring an
absent defendant within the reach of the state's jurisdiction for
purposes of a personal judgment by means of appropriate substituted
service or personal service without the state. This principle is
embodied in section 18, Rule 14 of the Rules of Court which allows
service of summons on residents temporarily out of the Philippines to
be made out of the country. The rationale for this rule was explained
in Milliken as follows:
[T]he authority of a state over one of its citizens is not terminated by
the mere fact of his absence from the state. The state which accords
him privileges and affords protection to him and his property by
virtue of his domicile may also exact reciprocal duties. "Enjoyment
of the privileges of residence within the state, and the attendant right
to invoke the protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that citizenship
arise out of the relationship to the state which domicile creates. That
relationship is not dissolved by mere absence from the state. The
attendant duties, like the rights and privileges incident to domicile,
are not dependent on continuous presence in the state. One such
incident of domicile is amenability to suit within the state even
during sojourns without the state, where the state has provided and
employed a reasonable method for apprising such an absent party of
the proceedings against him. 23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can
have only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain
purposes, be regarded a resident in another state in which it has
offices and transacts business. This is the rule in our jurisdiction
and apropos thereto, it may be necessery to quote what we stated
in State Investment House, Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may be
considered "residents of the Philippine Islands" as that term is used
in Section 20 of the Insolvency Law . . . or residents of the state
under the laws of which they were respectively incorporated. The
answer cannot be found in the Insolvency Law itself, which contains
no definition of the term, resident, or any clear indication of its
meaning. There are however other statutes, albeit of subsequent
enactment and effectivity, from which enlightening notions of the
term may be derived.
The National Internal Revenue Code declares that the term "'resident
foreign corporation' applies to a foreign corporation engaged in trade
or business within the Philippines," as distinguished from a

"'non-resident foreign corporation' . . . (which is one) not engaged in
trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states
"that branches, subsidiaries, affiliation, extension offices or any other
units of corporation or juridical person organized under the laws of
any foreign country operating in the Philippines shall be considered
residents of the Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches
and agencies in the Philippines of foreign banks . . . (which are)
called Philippine branches," in the same category as "commercial
banks, savings associations, mortgage banks, development banks,
rural banks, stock savings and loan associations" (which have been
formed and organized under Philippine laws), making no distinction
between the former and the latter in so far as the terms "banking
institutions" and "bank" are used in the Act [Sec. 2], declaring on the
contrary that in "all matters not specifically covered by special
provisions applicable only to foreign banks, or their branches and
agencies in the Philippines, said foreign banks or their branches and
agencies lawfully doing business in the Philippines "shall be bound
by all laws, rules, and regulations applicable to domestic banking
corporations of the same class, except such laws, rules and
regulations as provided for the creation, formation, organization, or
dissolution of corporations or as fix the relation, liabilities,
responsibilities, or duties of members, stockholders or officers of
corporation. [Sec. 18].
This court itself has already had occasion to hold [Claude Neon
Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that
a foreign corporation licitly doing business in the Philippines, which
is a defendant in a civil suit, may not be considered
a non-resident within the scope of the legal provision authorizing
attachment against a defendant not residing in the Philippine Islands;
[Sec. 424, in relation to Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57,
Rules of 1964] in other words, a preliminary attachment may not be
applied for and granted solely on the asserted fact that the defendant
is a foreign corporation authorized to do business in the Philippines
— and is consequently and necessarily, "a party who resides out of
the Philippines." Parenthetically, if it may not be considered as a
party not residing in the Philippines, or as a party who resides out of
the country, then, logically, it must be considered a party who does
reside in the Philippines, who is a resident of the country. Be this as
it may, this Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to assimilate
foreign corporations, duly licensed to do business here, to the status
of domestic corporations. (Cf. Section 73, Act No. 1459, and
Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu
Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be
entirely out of line with this policy should we make a discrimination
against a foreign corporation, like the petitioner, and subject its
property to the harsh writ of seizure by attachment when it has
complied not only with every requirement of law made specially of
foreign corporations, but in addition with every requirement of law
made of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized to do
business in the Philippines "to the status of domestic corporations,
subsumes their being found and operating as corporations,
hence, residing, in the country.
The same principle is recognized in American law: that the residence
of a corporation, if it can be said to have a residence, is necessarily
where it exercises corporate functions . . .;" that it is considered as
dwelling "in the place where its business is done . . .," as being
"located where its franchises are exercised . . .," and as being
16
"present where it is engaged in the prosecution of the corporate
enterprise;" that a "foreign corporation licensed to do business in a
state is a resident of any country where it maintains an office or agent
for transaction of its usual and customary business for venue
purposes;" and that the "necessary element in its signification is
locality of existence." [Words and Phrases, Permanent Ed., vol. 37,
pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan
through its four duly registered branches at the time the collection
suit against it was filed, then in the light of the processual
presumption, SHARP may be deemed a resident of Japan, and, as
such, was amenable to the jurisdiction of the courts therein and may
be deemed to have assented to the said courts' lawful methods of
serving process. 27
Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual presumption
but also because of the presumption of regularity of performance of
official duty.
We find NORTHWEST's claim for attorney's fees, litigation
expenses, and exemplary damages to be without merit. We find no
evidence that would justify an award for attorney's fees and litigation
expenses under Article 2208 of the Civil Code of the Philippines.
Nor is an award for exemplary damages warranted. Under Article
2234 of the Civil Code, before the court may consider the question of
whether or not exemplary damages should be awarded, the plaintiff
must show that he is entitled to moral, temperate, or compensatory
damaged. There being no such proof presented by NORTHWEST,
no exemplary damages may be adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the
challenged decision is AFFIRMED insofar as it denied
NORTHWEST's claims for attorneys fees, litigation expenses, and
exemplary damages but REVERSED insofar as in sustained the trial
court's dismissal of NORTHWEST's complaint in Civil Case No.
83-17637 of Branch 54 of the Regional Trial Court of Manila, and
another in its stead is hereby rendered ORDERING private
respondent C.F. SHARP L COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment
subject of said case, with interest thereon at the legal rate from the
filing of the complaint therein until the said foreign judgment is fully
satisfied. Costs against the private respondent. SO ORDERED.
[G.R. No. 108538. January 22, 1996]
LOURDES A. VALMONTE and ALFREDO D.
VALMONTE, petitioners, vs. THE HONORABLE COURT OF
APPEALS, THIRD DIVISION and ROSITA
DIMALANTA, respondents.
MENDOZA, J.:
Petitioner Lourdes A. Valmonte is a foreign resident. The question is
whether in an action for partition filed against her and her husband,
who is also her attorney, summons intended for her may be served on
her husband, who has a law office in the Philippines. The Regional
Trial Court of Manila, Branch 48, said no and refused to declare
Lourdes A. Valmonte in default, but the Court of Appeals said yes.
Hence this petition for review on certiorari.
The facts of the case are as follows:
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are
husband and wife. They are both residents of 90222 Carkeek Drive

South Seattle, Washington, U.S.A. Petitioner Alfredo D. Valmonte,
who is a member of the Philippine bar, however, practices his
profession in the Philippines, commuting for this purpose between
his residence in the state of Washington and Manila, where he holds
office at S-304 Gedisco Centre, 1564 A. Mabini, Ermita, Manila.
On March 9, 1992, private respondent Rosita Dimalanta, who is the
sister of petitioner Lourdes A. Valmonte, filed a complaint for
partition of real property and accounting of rentals against petitioners
Lourdes A. Valmonte and Alfredo D. Valmonte before the Regional
Trial Court of Manila, Branch 48. The subject of the action is a
three-door apartment located in Paco, Manila.
In her Complaint, private respondent alleged:
The plaintiff is of legal age, a widow and is at present a resident of
14823 Conway Road, Chesterfield, Missouri, U.S.A., while the
defendants are spouses, of legal age and at present residents of 90222
Carkeek Drive, South Seattle, Washington, U.S.A., but, for purposes
of this complaint may be served with summons at Gedisco Center,
Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant
Alfredo D. Valmonte as defendant Lourdes Arreola Valmontes
spouse holds office and where he can be found.
Apparently, the foregoing averments were made on the basis of a
letter previously sent by petitioner Lourdes A. Valmonte to private
respondents counsel
in which, in regard to the partition of the property in question, she
referred private respondents counsel to her husband as the party to
whom all communications intended for her should be sent. The letter
reads:
July 4, 1991
Dear Atty. Balgos:
This is in response to your letter, dated 20 June 1991, which I
received on 3 July 1991. Please address all communications to my
lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and
fax numbers appear below.
c/o Prime Marine
Gedisco Center, Unit 304
1564 A. Mabini, Ermita
Metro Manila
Telephone: 521-1736
Fax: 21-2095
Service of summons was then made upon petitioner Alfredo D.
Valmonte, who at the time, was at his office in Manila. Petitioner
Alfredo D. Valmonte accepted the summons, insofar as he was
concerned, but refused to accept the summons for his wife, Lourdes
A. Valmonte, on the ground that he was not authorized to accept the
process on her behalf. Accordingly the process server left without
leaving a copy of the summons and complaint for petitioner Lourdes
A. Valmonte.
Petitioner Alfredo D. Valmonte thereafter filed his Answer with
Counterclaim. Petitioner Lourdes A. Valmonte, however, did not file
her Answer. For this reason private respondent moved to declare her
in default. Petitioner Alfredo D. Valmonte entered a special
appearance in behalf of his wife and opposed the private respondents
motion.
In its Order dated July 3, 1992, the trial court, denied private
respondents motion to declare petitioner Lourdes A. Valmonte in
17
default. A motion for reconsideration was similarly denied
on September 23, 1992. Whereupon, private respondent filed a
petition for certiorari, prohibition and mandamus with the Court of
Appeals.
On December 29, 1992, the Court of Appeals rendered a decision
granting the petition and declaring Lourdes A. Valmonte in default.
A copy of the appellate courts decision was received by petitioner
Alfredo D. Valmonte on January 15, 1993 at his Manila office and
on January 21, 1993 in Seattle, Washington. Hence, this petition.
The issue at bar is whether in light of the facts set forth above,
petitioner Lourdes A. Valmonte was validly served with summons.
In holding that she had been, the Court of Appeals stated:[1]
[I]n her above-quoted reply, Mrs. Valmonte clearly and
unequivocally directed the aforementioned counsel of Dimalanta to
address all communications (evidently referring to her controversy
with her sister Mrs. Dimalanta over the Paco property, now the
subject of the instant case) to her lawyer who happens also to be her
husband. Such directive was made without any qualification just as
was her choice/designation of her husband Atty. Valmonte as her
lawyer likewise made without any qualification or reservation. Any
disclaimer therefore on the part of Atty. Valmonte as to his being his
wifes attorney (at least with regard to the dispute vis-a-vis [sic] the
Paco property) would appear to be feeble or trifling, if not incredible.
This view is bolstered by Atty. Valmontes subsequent alleged special
appearance made on behalf of his wife. Whereas Mrs. Valmonte had
manifestly authorized her husband to serve as her lawyer relative to
her dispute with her sister over the Paco property and to receive all
communications regarding the same and subsequently to appear on
her behalf by way of a so-called special appearance, she would
nonetheless now insist that the same husband would nonetheless had
absolutely no authority to receive summons on her behalf. In effect,
she is asserting that representation by her lawyer (who is also her
husband) as far as the Paco property controversy is concerned,
should only be made by him when such representation would be
favorable to her but not otherwise. It would obviously be inequitable
for this Court to allow private respondent Lourdes A. Valmonte to
hold that her husband has the authority to represent her when an
advantage is to be obtained by her and to deny such authority when it
would turn out to be her disadvantage. If this be allowed, Our Rules
of Court, instead of being an instrument to promote justice would be
made use of to thwart or frustrate the same.
xxx xxx xxx
Turning to another point, it would not do for Us to overlook the fact
that the disputed summons was served not upon just an ordinary
lawyer of private respondent Lourdes A. Valmonte, but upon her
lawyer husband. But that is not all, the same lawyer/husband happens
to be also her co-defendant in the instant case which involves real
property which, according to her lawyer/husband/ co-defendant,
belongs to the conjugal partnership of the defendants (the spouses
Valmonte). It is highly inconceivable and certainly it would be
contrary to human nature for the lawyer/husband/co-defendant to
keep to himself the fact that they (the spouses Valmonte) had been
sued with regard to a property which he claims to be conjugal.
Parenthetically, there is nothing in the records of the case before Us
regarding any manifestation by private respondent Lourdes A.
Valmonte about her lack of knowledge about the case instituted
against her and her lawyer/husband/co-defendant by her sister Rosita.
PREMISES CONSIDERED, the instant petition for certiorari,
prohibition and mandamus is given due course. This Court hereby
Resolves to nullify the orders of the court a quo dated July 3,
1992 and September 23, 1992 and further declares private respondent

Lourdes Arreola Valmonte as having been properly served with
summons.
Petitioners assail the aforequoted decision, alleging that the Court of
Appeals erred (1) in refusing to apply the provisions of Rule 14, 17
of the Revised Rules of Court and applying instead Rule 14, 8 when
the fact is that petitioner Lourdes A. Valmonte is a nonresident
defendant; and (2) because even if Rule 14, 8 is the applicable
provision, there was no valid substituted service as there was no strict
compliance with the requirement by leaving a copy of the summons
and complaint with petitioner Alfredo D. Valmonte. Private
respondent, upon the other hand, asserts that petitioners are invoking
a technicality and that strict adherence to the rules would only result
in a useless ceremony.
We hold that there was no valid service of process on Lourdes A.
Valmonte.
To provide perspective, it will be helpful to determine first the nature
of the action filed against petitioners Lourdes A. Valmonte and
Alfredo D. Valmonte by private respondent, whether it is an action in
personam, in rem or quasi in rem. This is because the rules on service
of summons embodied in Rule 14 apply according to whether an
action is one or the other of these actions.
In an action in personam, personal service of summons or, if this is
not possible and he cannot be personally served, substituted service,
as provided in Rule 14, 7-8[2]is essential for the acquisition by the
court of jurisdiction over the person of a defendant who does not
voluntarily submit himself to the authority of the court.[3] If
defendant cannot be served with summons because he is temporarily
abroad, but otherwise he is a Philippine resident, service of summons
may, by leave of court, be made by publication.[4] Otherwise stated,
a resident defendant in an action in personam, who cannot be
personally served with summons, may be summoned either by means
of substituted service in accordance with Rule 14, 8 or by publication
as provided in 17 and 18 of the same Rule.[5]
In all of these cases, it should be noted, defendant must be a resident
of the Philippines, otherwise an action in personam cannot be
brought because jurisdiction over his person is essential to make a
binding decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction
over the person of the defendant is not essential for giving the court
jurisdiction so long as the court acquires jurisdiction over the res. If
the defendant is a nonresident and he is not found in the country,
summons may be served extraterritorially in accordance with Rule 14,
17, which provides:
17. Extraterritorial service. - When the defendant does not reside and
is not found in the Philippines and the action affects the personal
status of the plaintiff or relates to, or the subject of which is, property
within the Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded
consists, wholly or in part, in excluding the defendant from any
interest therein, or the property of the defendant has been attached
within the Philippines, service may, by leave of court, be effected out
of the Philippines by personal service as under Section 7; or by
publication in a newspaper of general circulation in such places and
for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the
court may deem sufficient. Any order granting such leave shall
specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.
In such cases, what gives the court jurisdiction in an action in rem or
quasi in rem is that it has jurisdiction over the res, i.e. the personal
18
status of the plaintiff who is domiciled in the Philippines or the
property litigated or attached. Service of summons in the manner
provided in 17 is not for the purpose of vesting it with jurisdiction
but for complying with the requirements of fair play or due process,
so that he will be informed of the pendency of the action against him
and the possibility that property in the Philippines belonging to him
or in which he has an interest may be subjected to a judgment in
favor of the plaintiff and he can thereby take steps to protect his
interest if he is so minded.[6]
Applying the foregoing rules to the case at bar, private respondents
action, which is for partition and accounting under Rule 69, is in the
nature of an action quasi in rem. Such an action is essentially for the
purpose of affecting the defendants interest in a specific property and
not to render a judgment against him. As explained in the leading
case of Banco Espaol Filipino v. Palanca :[7]
[An action quasi in rem is] an action which while not strictly
speaking an action in rem partakes of that nature and is substantially
such. . . . The action quasi in rem differs from the true action in
rem in the circumstance that in the former an individual is named as
defendant and the purpose of the proceeding is to subject his interest
therein to the obligation or lien burdening the property. All
proceedings having for their sole object the sale or other disposition
of the property of the defendant, whether by attachment, foreclosure,
or other form of remedy, are in a general way thus designated. The
judgment entered in these proceedings is conclusive only between
the parties.
As petitioner Lourdes A. Valmonte is a nonresident who is not found
in the Philippines, service of summons on her must be in accordance
with Rule 14, 17. Such service, to be effective outside the Philippines,
must be made either (1) by personal service; (2) by publication in a
newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order
of the court should be sent by registered mail to the last known
address of the defendant; or (3) in any other manner which the court
may deem sufficient.
Since in the case at bar, the service of summons upon petitioner
Lourdes A. Valmonte was not done by means of any of the first two
modes, the question is whether the service on her attorney, petitioner
Alfredo D. Valmonte, can be justified under the third mode, namely,
in any . . . manner the court may deem sufficient.
We hold it cannot. This mode of service, like the first two, must be
made outside the Philippines, such as through the Philippine
Embassy in the foreign country where the defendant
resides.[8] Moreover, there are several reasons why the service of
summons on Atty. Alfredo D. Valmonte cannot be considered a valid
service of summons on petitioner Lourdes A. Valmonte. In the first
place, service of summons on petitioner Alfredo D. Valmonte was
not made upon the order of the court as required by Rule 14, 17 and
certainly was not a mode deemed sufficient by the court which in fact
refused to consider the service to be valid and on that basis declare
petitioner Lourdes A. Valmonte in default for her failure to file an
answer.
In the second place, service in the attempted manner on petitioner
was not made upon prior leave of the trial court as required also in
Rule 14, 17. As provided in 19, such leave must be applied for by
motion in writing, supported by affidavit of the plaintiff or some
person on his behalf and setting forth the grounds for the application.
Finally, and most importantly, because there was no order granting
such leave, petitioner Lourdes A. Valmonte was not given ample
time to file her Answer which, according to the rules, shall be not
less than sixty (60) days after notice. It must be noted that the period
to file an Answer in an action against a resident defendant differs
 19

from the period given in an action filed against a nonresident Trial Court of Manila, Branch 48 are REINSTATED. SO
defendant who is not found in the Philippines. In the former, the ORDERED.
period is fifteen (15) days from service of summons, while in the
latter, it is at least sixty (60) days from notice.

Strict compliance with these requirements alone can assure [G.R. No. 128803. September 25, 1998]
observance of due process. That is why in one case,[9] although the
ASIAVEST LIMITED, petitioner, vs. THE COURT OF
Court considered publication in the Philippines of the summons
APPEALS AND ANTONIO HERAS, respondents.
(against the contention that it should be made in the foreign state
where defendant was residing) sufficient, nonetheless the service was DAVIDE, JR., J.:
considered insufficient because no copy of the summons was sent to
the last known correct address in the Philippines.

Private respondent cites the ruling in De Leon v. Hontanosas, 67 In issue is the enforceability in the Philippines of a foreign
SCRA 458,462-463 (1975), in which it was held that service of judgment. The antecedents are summarized in the 24 August 1990
summons upon the defendants husband was binding on her. But the Decision[1] of Branch 107 of the Regional Trial Court of Quezon
ruling in that case is justified because summons were served upon City in Civil Case No. Q-52452; thus:
defendants husband in their conjugal home in Cebu City and the wife
The plaintiff Asiavest Limited filed a complaint on December 3,
was only temporarily absent, having gone to Dumaguete City for a
1987 against the defendant Antonio Heras praying that said
vacation. The action was for collection of a sum of money. In
defendant be ordered to pay to the plaintiff the amounts awarded by
accordance with Rule 14, 8, substituted service could be made on any
the Hong Kong Court Judgment dated December 28, 1984 and
person of sufficient discretion in the dwelling place of the defendant,
amended on April 13, 1987, to wit:
and certainly defendants husband, who was there, was competent to
receive the summons on her behalf. In any event, it appears that 1) US$1,810,265.40 or its equivalent in Hong Kong currency at the
defendant in that case submitted to the jurisdiction of the court by time of payment with legal interest from December 28, 1984 until
instructing her husband to move for the dissolution of the writ of fully paid;
attachment issued in that case.
2) interest on the sum of US$1,500.00 at 9.875% per annum from
On the other hand, in the case of Gemperle v. Schenker,[10] it was October 31, 1984 to December 28, 1984; and
held that service on the wife of a nonresident defendant was found
sufficient because the defendant had appointed his wife as his 3) HK$905.00 at fixed cost in the action; and
attorney-in-fact. It was held that although defendant Paul Schenker
was a Swiss citizen and resident of Switzerland, service of summons 4) at least $80,000.00 representing attorneys fees, litigation expenses
upon his wife Helen Schenker who was in the Philippines was and cost, with interest thereon from the date of the judgment until
sufficient because she was her husbands representative and fully paid.
attorney-in-fact in a civil case, which he had earlier filed against
On March 3, 1988, the defendant filed a Motion to Dismiss. However,
William Gemperle. In fact Gemperles action was for damages arising
before the court could resolve the said motion, a fire which partially
from allegedly derogatory statements contained in the complaint filed
razed the Quezon City Hall Building on June 11, 1988 totally
in the first case. As this Court said, i]n other words, Mrs. Schenker
destroyed the office of this Court, together with all its records,
had authority to sue, and had actually sued, on behalf of her husband,
equipment and properties. On July 26, 1988, the plaintiff, through
so that she was, also, empowered to represent him in suits filed
counsel filed a Motion for Reconstitution of Case Records. The
against him, particularly in a case, like the one at bar, which is a
Court, after allowing the defendant to react thereto, granted the said
consequence of the action brought by her on his behalf.[11] Indeed,
Motion and admitted the annexes attached thereto as the
if instead of filing an independent action Gemperle filed
reconstituted records of this case per Order dated September 6,
a counterclaim in the action brought by Mr. Schenker against him,
1988. Thereafter, the Motion to Dismiss, the resolution of which had
there would have been no doubt that the trial court could have
been deferred, was denied by the Court in its Order of October 4,
acquired jurisdiction over Mr. Schenker through his agent and
1988.
attorney-in-fact, Mrs. Schenker.
On October 19, 1988, defendant filed his Answer. The case was then
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not
set for pre-trial conference. At the conference, the parties could not
appoint her husband as her attorney-in-fact. Although she wrote
arrive at any settlement. However, they agreed on the following
private respondent s attorney that all communications intended for
stipulations of facts:
her should be addressed to her husband who is also her lawyer at the
latters address in Manila, no power of attorney to receive summons 1) The defendant admits the existence of the judgment dated
for her can be inferred therefrom. In fact the letter was written seven December 28, 1984 as well as its amendment dated April 13, 1987,
months before the filing of this case below, and it appears that it was but not necessarily the authenticity or validity thereof;
written in connection with the negotiations between her and her sister,
respondent Rosita Dimalanta, concerning the partition of the property 2) The plaintiff is not doing business and is not licensed to do
in question. As is usual in negotiations of this kind, the exchange of business in the Philippines;
correspondence was carried on by counsel for the parties. But the
3) The residence of defendant, Antonio Heras, is New Manila,
authority given to petitioners husband in these negotiations certainly
Quezon City.
cannot be construed as also including an authority to represent her in
any litigation. For the foregoing reasons, we hold that there was no The only issue for this Court to determine is, whether or not the
valid service on petitioner Lourdes A. Valmonte in this case. judgment of the Hong Kong Court has been repelled by evidence of
want of jurisdiction, want of notice to the party, collusion, fraud or
WHEREFORE, the decision appealed from is REVERSED and the
clear mistake of law or fact, such as to overcome the presumption
orders dated July 3, 1992 and September 23, 1992 of the Regional
established in Section 50, Rule 39 of the Rules of Court in favor of
foreign judgments.

In view of the admission by the defendant of the existence of the
aforementioned judgment (Pls. See Stipulations of Facts in the Order
dated January 5, 1989 as amended by the Order of January 18, 1989),
as well as the legal presumption in favor of the plaintiff as provided
for in paragraph (b), Sec. 50, (Ibid.), the plaintiff presented only
documentary evidence to show rendition, existence, and
authentication of such judgment by the proper officials concerned
(Pls. See Exhibits A thru B, with their submarkings). In addition, the
plaintiff presented testimonial and documentary evidence to show its
entitlement to attorneys fees and other expenses of litigation.
On the other hand, the defendant presented two witnesses, namely,
Fortunata dela Vega and Russel Warren Lousich.
The gist of Ms. dela Vegas testimony is to the effect that no writ of
summons or copy of a statement of claim of Asiavest Limited was
ever served in the office of the Navegante Shipping Agency Limited
and/or for Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his residence in New
Manila, Quezon City. Her knowledge is based on the fact that she
was the personal secretary of Mr. Heras during his JD Transit days
up to the latter part of 1972 when he shifted or diversified to shipping
business in Hong Kong; that she was in-charge of all his letters and
correspondence, business commitments, undertakings, conferences
and appointments, until October 1984 when Mr. Heras left Hong
Kong for good; that she was also the Officer-in-Charge or Office
Manager of Navegante Shipping Agency LTD, a Hong Kong
registered and based company acting as ships agent, up to and until
the company closed shop sometime in the first quarter of 1985, when
shipping business collapsed worldwide; that the said company held
office at 34-35 Connaught Road, Central Hong Kong and later
transferred to Caxton House at Duddel Street, Hong Kong, until the
company closed shop in 1985; and that she was certain of such facts
because she held office at Caxton House up to the first quarter of
1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong,
and as a representative of the law office of the defendants counsel
who made a verification of the record of the case filed by the plaintiff
in Hong Kong against the defendant, as well as the procedure in
serving Court processes in Hong Kong.
In his affidavit (Exh. 2) which constitutes his direct testimony, the
said witness stated that:
The defendant was sued on the basis of his personal guarantee of the
obligations of Compania Hermanos de Navegacion S.A. There is no
record that a writ of summons was served on the person of the
defendant in Hong Kong, or that any such attempt at service was
made. Likewise, there is no record that a copy of the judgment of the
High Court was furnished or served on the defendant; anyway, it is
not a legal requirement to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor
(lawyer) of the claimant or plaintiff. In Hong Kong there are no
Court personnel who serve writs of summons and/or most other
processes.
b) If the writ of summons or claim (or complaint) is not contested,
the claimant or the plaintiff is not required to present proof of his
claim or complaint nor present evidence under oath of the claim in
order to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision
rendered by the Court in Hong Kong [to] make a recitation of the
facts or the law upon which the claim is based.
d) There is no necessity to furnish the defendant with a copy of the
Judgment or decision rendered against him.
20
e) In an action based on a guarantee, there is no established legal
requirement or obligation under Hong Kong laws that the creditor
must first bring proceedings against the principal debtor. The creditor
can immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was
commissioned by the law firm of the defendants counsel as an expert
witness and to verify the records of the Hong Kong case, he had been
acting as counsel for the defendant in a number of commercial
matters; that there was an application for service of summons upon
the defendant outside the jurisdiction of Hong Kong; that there was
an order of the Court authorizing service upon Heras outside of Hong
Kong, particularly in Manila or any other place in the Philippines (p.
9, TSN, 2/14/90); that there must be adequate proof of service of
summons, otherwise the Hong Kong Court will refuse to render
judgment (p. 10, ibid); that the mere fact that the Hong Kong Court
rendered judgment, it can be presumed that there was service of
summons; that in this case, it is not just a presumption because there
was an affidavit stating that service was effected in [sic] a particular
man here in Manila; that such affidavit was filed by one Jose R.
Fernandez of the firm Sycip Salazar on the 21st of December 1984,
and stated in essence that on Friday, the 23rd of November 1984 he
served the 4th defendant at No. 6 First Street, Quezon City by
leaving it at that address with Mr. Dionisio Lopez, the son-in-law of
the 4th defendant the copy of the writ and Mr. Lopez informed me
and I barely believed that he would bring the said writ to the
attention of the 4th defendant (pp. 11-12, ibid.); that upon filing of
that affidavit, the Court was asked and granted judgment against the
4th defendant; and that if the summons or claim is not contested, the
claimant of the plaintiff is not required to present proof of his claim
or complaint or present evidence under oath of the claim in order to
obtain judgment; and that such judgment can be enforced in the same
manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had
been duly proved, it is a presumptive evidence of a right as between
the parties; hence, the party impugning it had the burden to prove
want of jurisdiction over his person. HERAS failed to discharge that
burden. He did not testify to state categorically and under oath that
he never received summons. Even his own witness Lousich admitted
that HERAS was served with summons in his Quezon City
residence. As to De la Vegas testimony regarding non-service of
summons, the same was hearsay and had no probative value.
As to HERAS contention that the Hong Kong court judgment
violated the Constitution and the procedural laws of the Philippines
because it contained no statements of the facts and the law on which
it was based, the trial court ruled that since the issue related to
procedural matters, the law of the forum, i.e., Hong Kong laws,
should govern. As testified by the expert witness Lousich, such
legalities were not required under Hong Kong laws. The trial court
also debunked HERAS contention that the principle of excussion
under Article 2058 of the Civil Code of the Philippines was
violated. It declared that matters of substance are subject to the law
of the place where the transaction occurred; in this case, Hong Kong
laws must govern.
The trial court concluded that the Hong Kong court judgment should
be recognized and given effect in this jurisdiction for failure of
HERAS to overcome the legal presumption in favor of the foreign
judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to
pay to the plaintiff the following sums or their equivalents in
Philippine currency at the time of payment: US$1,810,265.40 plus
interest on the sum of US$1,500,000.00 at 9.875% per annum from
October 31, 1984 to December 28, 1984, and HK$905 as fixed cost,

with legal interests on the aggregate amount from December 28,
1984, and to pay attorneys fees in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought
an award of judicial costs and an increase in attorneys fees in the
amount of US$19,346.45 with interest until full payment of the said
obligations. On the other hand, HERAS no longer opposed the
motion and instead appealed the decision to the Court of Appeals,
which docketed the appeal as CA-G.R. CV No. 29513.
In its order[2] November 1990, the trial court granted ASIAVESTs
motion for reconsideration by increasing the award of attorneys fees
to US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
CURRENCY, AND TO PAY THE COSTS OF THIS SUIT,
provided that ASIAVEST would pay the corresponding filing fees
for the increase. ASIAVEST appealed the order requiring prior
payment of filing fees. However, it later withdrew its appeal and paid
the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its
decision[3] reversing the decision of the trial court and dismissing
ASIAVESTs complaint without prejudice. It underscored the fact
that a foreign judgment does not of itself have any extraterritorial
application. For it to be given effect, the foreign tribunal should have
acquired jurisdiction over the person and the subject matter. If such
tribunal has not acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of
remedy and procedure such as those relating to service of summons
upon the defendant are governed by the lex fori, which was, in this
case, the law of Hong Kong. Relative thereto, it gave weight to
Lousichs testimony that under the Hong Kong law, the substituted
service of summons upon HERAS effected in the Philippines by the
clerk of Sycip Salazar Hernandez & Gatmaitan firm would be valid
provided that it was done in accordance with Philippine laws. It then
stressed that where the action is in personam and the defendant is in
the Philippines, the summons should be personally served on the
defendant pursuant to Section 7, Rule 14 of the Rules of
Court.[4]Substituted service may only be availed of where the
defendant cannot be promptly served in person, the fact of
impossibility of personal service should be explained in the proof of
service.It also found as persuasive HERAS argument that instead of
directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan
law office, who was not authorized by the judge of the court issuing
the summons, ASIAVEST should have asked for leave of the local
courts to have the foreign summons served by the sheriff or other
court officer of the place where service was to be made, or for special
reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that notice sent outside
the state to a non-resident is unavailing to give jurisdiction in an
action against him personally for money recovery.Summons should
have been personally served on HERAS in Hong Kong, for, as
claimed by ASIAVEST, HERAS was physically present in Hong
Kong for nearly 14 years. Since there was not even an attempt to
serve summons on HERAS in Hong Kong, the Hong Kong Supreme
Court did not acquire jurisdiction over HERAS. Nonetheless, it did
not totally foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious
defense against [ASIAVESTs] claims or that [HERAS] ought to be
absolved of any liability, nevertheless, in view of the foregoing
discussion, there is a need to deviate from the findings of the lower
court in the interest of justice and fair play. This, however, is without
prejudice to whatever action [ASIAVEST] might deem proper in
order to enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was
necessary that evidence supporting the validity of the foreign
21
judgment be submitted, and that our courts are not bound to give
effect to foreign judgments which contravene our laws and the
principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court
of Appeals erred in ruling that
I.
IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT
EVIDENCE SUPPORTING THE VALIDITY OF THE
JUDGMENT;
II.
THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE
UNDER PHILIPPINE LAW;
III.
SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON
HERAS IN HONG KONG;
IV.
THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED
WITH LEAVE OF PHILIPPINE COURTS;
V.
THE FOREIGN JUDGMENT CONTRAVENES PHILIPPINE
LAWS, THE PRINCIPLES OF SOUND MORALITY, AND THE
PUBLIC POLICY OF THE PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of
Court,[5] which was the governing law at the time this case was
decided by the trial court and respondent Court of Appeals, a foreign
judgment against a person rendered by a court having jurisdiction to
pronounce the judgment is presumptive evidence of a right as
between the parties and their successors in interest by the subsequent
title. However, the judgment may be repelled by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence
provides that in the absence of proof to the contrary, a court, or judge
acting as such, whether in the Philippines or elsewhere, is presumed
to have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the
burden to repel it on grounds provided for in paragraph (b) of Section
50, Rule 39 of the Rules of Court is on the party challenging the
foreign judgment -- HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the
Hong Kong judgment. On the other hand, ASIAVEST presented
evidence to prove rendition, existence, and authentication of the
judgment by the proper officials. The judgment is thus presumed to
be valid and binding in the country from which it comes, until the
contrary is shown.[6]Consequently, the first ground relied upon by
ASIAVEST has merit. The presumption of validity accorded foreign
judgment would be rendered meaningless were the party seeking to
enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is that
the Hong Kong Supreme Court did not acquire jurisdiction over the
person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of
remedy and procedure such as those relating to the service of process
upon the defendant are governed by the lex fori or the law of the

forum,[7] i.e., the law of Hong Kong in this case. HERAS insisted
that according to his witness Mr. Lousich, who was presented as an
expert on Hong Kong laws, there was no valid service of summons
on him.
In his counter-affidavit,[8] which served as his direct testimony per
agreement of the parties,[9] Lousich declared that the record of the
Hong Kong case failed to show that a writ of summons was served
upon HERAS in Hong Kong or that any such attempt was
made. Neither did the record show that a copy of the judgment of the
court was served on HERAS. He stated further that under Hong
Kong laws (a) a writ of summons could be served by the solicitor of
the claimant or plaintiff; and (b) where the said writ or claim was not
contested, the claimant or plaintiff was not required to present proof
under oath in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich testified
that the Hong Kong court authorized service of summons on HERAS
outside of its jurisdiction, particularly in the Philippines. He admitted
also the existence of an affidavit of one Jose R. Fernandez of the
Sycip Salazar Hernandez & Gatmaitan law firm stating that he
(Fernandez) served summons on HERAS on 13 November 1984 at
No. 6, 1st St., Quezon City, by leaving a copy with HERASs
son-in-law Dionisio Lopez.[10] On redirect examination, Lousich
declared that such service of summons would be valid under Hong
Kong laws provided that it was in accordance with Philippine
laws.[11]
We note that there was no objection on the part of ASIAVEST on the
qualification of Mr. Lousich as an expert on the Hong Kong
law. Under Sections 24 and 25, Rule 132 of the New Rules of
Evidence, the record of public documents of a sovereign authority,
tribunal, official body, or public officer may be proved by (1) an
official publication thereof or (2) a copy attested by the officer
having the legal custody thereof, which must be accompanied, if the
record is not kept in the Philippines, with a certificate that such
officer has the custody. The certificate may be issued by a secretary
of the embassy or legation, consul general, consul, vice consul, or
consular agent, or any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. The attestation must state, in
substance, that the copy is a correct copy of the original, or a specific
part thereof, as the case may be, and must be under the official seal
of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to
prove a foreign law. An authority[12] on private international law
thus noted:
Although it is desirable that foreign law be proved in accordance
with the above rule, however, the Supreme Court held in the case
of Willamette Iron and Steel Works v. Muzzal,[13] that Section 41,
Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does
not exclude the presentation of other competent evidence to prove the
existence of a foreign law. In that case, the Supreme Court
considered the testimony under oath of an attorney-at-law of San
Francisco, California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the
existence of said law. Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et
al.,[14] upheld the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In that case, the
counsel for respondent testified that as an active member of the
California Bar since 1951, he is familiar with the revenue and
taxation laws of the State of California. When asked by the lower
court to state the pertinent California law as regards exemption of
intangible personal properties, the witness cited Article 4, Sec. 13851
22
(a) & (b) of the California Internal and Revenue Code as published in
Derrings California Code, a publication of Bancroft-Whitney Co.,
Inc. And as part of his testimony, a full quotation of the cited section
was offered in evidence by respondents. Likewise, in several
naturalization cases, it was held by the Court that evidence of the law
of a foreign country on reciprocity regarding the acquisition of
citizenship, although not meeting the prescribed rule of practice, may
be allowed and used as basis for favorable action, if, in the light of all
the circumstances, the Court is satisfied of the authenticity of the
written proof offered.[15] Thus, in a number of decisions, mere
authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent proof of that
law.[16]
There is, however, nothing in the testimony of Mr. Lousich that
touched on the specific law of Hong Kong in respect of service of
summons either in actions in rem or in personam, and where the
defendant is either a resident or nonresident of Hong Kong. In view
of the absence of proof of the Hong Kong law on this particular issue,
the presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the
Hong Kong law on the matter is similar to the Philippine law.[17]
As stated in Valmonte vs. Court of Appeals,[18] it will be helpful to
determine first whether the action is in personam, in rem, or quasi in
rem because the rules on service of summons under Rule 14 of the
Rules of Court of the Philippines apply according to the nature of the
action.
An action in personam is an action against a person on the basis of
his personal liability. An action in rem is an action against the thing
itself instead of against the person.[19] An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or lien
burdening the property.[20]
In an action in personam, jurisdiction over the person of the
defendant is necessary for the court to validly try and decide the
case. Jurisdiction over the person of a resident defendant who does
not voluntarily appear in court can be acquired by personal service of
summons as provided under Section 7, Rule 14 of the Rules of
Court. If he cannot be personally served with summons within a
reasonable time, substituted service may be made in accordance with
Section 8 of said Rule. If he is temporarily out of the country, any of
the following modes of service may be resorted to: (1) substituted
service set forth in Section 8;[21] (2) personal service outside the
country, with leave of court; (3) service by publication, also with
leave of court;[22] or (4) any other manner the court may deem
sufficient.[23]
However, in an action in personam wherein the defendant is
a non-resident who does not voluntarily submit himself to the
authority of the court, personal service of summons within the state is
essential to the acquisition of jurisdiction over her person.[24] This
method of service is possible if such defendant is physically present
in the country. If he is not found therein, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and
decide the case against him.[25] An exception was laid down
in Gemperle v. Schenker[26] wherein a non-resident was served with
summons through his wife, who was a resident of the Philippines and
who was his representative and attorney-in-fact in a prior civil case
filed by him; moreover, the second case was a mere offshoot of the
first case.
On the other hand, in a proceeding in rem or quasi in rem,
jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires
jurisdiction over the res. Nonetheless, summons must be served upon

the defendant not for the purpose of vesting the court with
jurisdiction but merely for satisfying the due process
requirements.[27] Thus, where the defendant is a non-resident who is
not found in the Philippines and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of
which is property in the Philippines in which the defendant has or
claims a lien or interest; (3) the action seeks the exclusion of the
defendant from any interest in the property located in the Philippines;
or (4) the property of the defendant has been attached in the
Philippines -- service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also
with leave of court; or (c) any other manner the court may deem
sufficient.[28]
In the case at bar, the action filed in Hong Kong against HERAS
was in personam, since it was based on his personal guarantee of the
obligation of the principal debtor. Before we can apply the foregoing
rules, we must determine first whether HERAS was a resident of
Hong Kong.
Fortunata de la Vega, HERASs personal secretary in Hong Kong
since 1972 until 1985,[29] testified that HERAS was the President
and part owner of a shipping company in Hong Kong during all those
times that she served as his secretary. He had in his employ a staff of
twelve.[30] He had business commitments, undertakings,
conferences, and appointments until October 1984 when [he] left
Hong Kong for good.[31] HERASs other witness, Russel Warren
Lousich, testified that he had acted as counsel for HERAS for a
number of commercial matters.[32] ASIAVEST then infers that
HERAS was a resident of Hong Kong because he maintained a
business there.
It must be noted that in his Motion to Dismiss,[33] as well as in his
Answer[34] to ASIAVESTs complaint for the enforcement of the
Hong Kong court judgment, HERAS maintained that the Hong Kong
court did not have jurisdiction over him because the fundamental rule
is that jurisdiction in personam over non-resident defendants, so as to
sustain a money judgment, must be based upon personal service of
summons within the state which renders the judgment.[35]
For its part, ASIAVEST, in its Opposition to the Motion to
Dismiss[36] contended: The question of Hong Kong courts want of
jurisdiction is therefore a triable issue if it is to be pleaded by the
defendant to repel the foreign judgment. Facts showing jurisdictional
lack (e.g. that the Hong Kong suit was in personam, that defendant
was not a resident of Hong Kong when the suit was filed or that he
did not voluntarily submit to the Hong Kong courts jurisdiction)
should be alleged and proved by the defendant.[37]
In his Reply (to the Opposition to Motion to Dismiss),[38] HERAS
argued that the lack of jurisdiction over his person was corroborated
by ASIAVESTs allegation in the complaint that he has his residence
at No. 6, 1st St., New Manila, Quezon City, Philippines. He then
concluded that such judicial admission amounted to evidence that he
was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with
stipulations of facts, among which was that the residence of
defendant, Antonio Heras, is New Manila, Quezon City.[39]
We note that the residence of HERAS insofar as the action for the
enforcement of the Hong Kong court judgment is concerned, was
never in issue. He never challenged the service of summons on him
through a security guard in his Quezon City residence and through a
lawyer in his office in that city. In his Motion to Dismiss, he did not
question the jurisdiction of the Philippine court over his person on
the ground of invalid service of summons. What was in issue was his
residence as far as the Hong Kong suit was concerned. We therefore
conclude that the stipulated fact that HERAS is a resident of New
23
Manila, Quezon City, Philippines refers to his residence at the time
jurisdiction over his person was being sought by the Hong Kong
court. With that stipulation of fact, ASIAVEST cannot now claim
that HERAS was a resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the
action against him was, indisputably, one in personam, summons
should have been personally served on him in Hong Kong. The
extraterritorial service in the Philippines was therefore invalid and
did not confer on the Hong Kong court jurisdiction over his person. It
follows that the Hong Kong court judgment cannot be given force
and effect here in the Philippines for having been rendered without
jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong,
he was no longer so in November 1984 when the extraterritorial
service of summons was attempted to be made on him. As declared
by his secretary, which statement was not disputed by ASIAVEST,
HERAS left Hong Kong in October 1984 for good.[40] His absence
in Hong Kong must have been the reason why summons was not
served on him therein; thus, ASIAVEST was constrained to apply for
leave to effect service in the Philippines, and upon obtaining a
favorable action on the matter, it commissioned the Sycip Salazar
Hernandez & Gatmaitan law firm to serve the summons here in the
Philippines.
In Brown v. Brown,[41] the defendant was previously a resident of
the Philippines. Several days after a criminal action for concubinage
was filed against him, he abandoned the Philippines. Later, a
proceeding quasi in rem was instituted against him. Summons in the
latter case was served on the defendants attorney-in-fact at the latters
address. The Court held that under the facts of the case, it could not
be said that the defendant was still a resident of the Philippines
because he ha[d] escaped to his country and [was] therefore an
absentee in the Philippines. As such, he should have been summoned
in the same manner as one who does not reside and is not found in
the Philippines.
Similarly, HERAS, who was also an absentee, should have been
served with summons in the same manner as a non-resident not
found in Hong Kong. Section 17, Rule 14 of the Rules of Court
providing for extraterritorial service will not apply because the suit
against him was in personam. Neither can we apply Section 18,
which allows extraterritorial service on a resident defendant who is
temporarily absent from the country, because even if HERAS be
considered as a resident of Hong Kong, the undisputed fact remains
that he left Hong Kong not only temporarily but for good.
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered
DENYING the petition in this case and AFFIRMING the assailed
judgment of the Court of Appeals in CA-G.R. CV No. 29513.
No costs. SO ORDERED.
[G.R. Nos. 121576-78. June 16, 2000]
BANCO DO BRASIL, petitioner, vs. THE COURT OF
APPEALS, HON. ARSENIO M. GONONG, and CESAR S.
URBINO, SR., respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision1 [Penned by Associate Justice Jainal D. Rasul and
concurred in by Associate Justices Segundino G. Chua and Consuelo
Ynares-Santiago, now Associate Justice of the Supreme Court, in

CA-G.R. S.P. Nos. 24669, 28387 & 29317, Rollo, pp. 33-47.] and
the Resolution2 [Id., pp. 49-53.] of the Court of Appeals3 [Former
Special Eighth Division.] dated July 19, 1993 and August 15, 1995,
respectively, which reinstated the entire Decision4 [Penned by Judge
Arsenio M. Gonong, Civil Case No. 89-51451, Records, Vol. 2, pp.
517-528.] dated February 18, 1991 of the Regional Trial Court of
Manila, Branch 8, holding, among others, petitioner Banco do Brasil
liable to private respondent Cesar Urbino, Sr. for damages amounting
to $300,000.00.5 [The Appellate Court erroneously declared in its
decision that the amount of P300,000.00 was awarded by the trial
court, Rollo, p. 36.]
At the outset, let us state that this case should have been consolidated
with the recently decided case of Vlason Enterprises Corporation v.
Court of Appeals and Duraproof Services, represented by its General
Manager, Cesar Urbino Sr.6 [G.R. Nos. 121662-64, July 6, 1999,
Third Division, penned by Associate Justice Artemio V. Panganiban
and concurred in by Associate Justices Jose C. Vitug, Fidel P.
Purisima, and Minerva P. Gonzaga-Reyes.], for these two (2) cases
involved the same material antecedents, though the main issue
proffered in the present petition vary with the Vlason case.
The material antecedents, as quoted from the Vlason7 [Decision in
G.R. Nos. 121662-64, pp. 3-13.] case, are:
Poro Point Shipping Services, then acting as the local agent of
Omega Sea Transport Company of Honduras & Panama, a
Panamanian Company (hereafter referred to as Omega), requested
permission for its vessel M/V Star Ace, which had engine trouble, to
unload its cargo and to store it at the Philippine Ports Authority (PPA)
compound in San Fernando, La Union while awaiting transhipment
to Hongkong. The request was approved by the Bureau of
Customs.8 [Records, Vol. 1, pp. 27-31.] Despite the approval, the
customs personnel boarded the vessel when it docked on January 7,
1989, on suspicion that it was the hijacked M/V Silver Med owned
by Med Line Philippines Co., and that its cargo would be smuggled
into the country.9 [Records, Vol. 1, p. 32.] The district customs
collector seized said vessel and its cargo pursuant to Section 2301,
Tariff and Customs Code. A notice of hearing of SFLU Seizure
Identification No. 3-89 was served on its consignee, Singkong
Trading Co. of Hongkong, and its shipper, Dusit International Co.,
Ltd. of Thailand.
While seizure proceedings were ongoing, La Union was hit by three
typhoons, and the vessel ran aground and was abandoned. On June 8,
1989, its authorized representative, Frank Cadacio, entered into
salvage agreement with private respondent to secure and repair the
vessel at the agreed consideration of $1 million and "fifty percent
(50%) [of] the cargo after all expenses, cost and taxes."10 [Records,
Vol. 1, pp. 36-39.]
Finding that no fraud was committed, the District Collector of
Customs, Aurelio M. Quiray, lifted the warrant of seizure on July
1989.11 [Decision dated July 17, 1989, in SFLU Seizure
Identification No. 3-89; Records, Vol. 1, pp. 54-68.] However, in a
Second Indorsement dated November 11, 1989, then Customs
Commissioner Salvador M. Mison declined to issue a clearance for
Quirays Decision; instead, he forfeited the vessel and its cargo in
accordance with Section 2530 of the Tariff and Customs
Code.12 [2nd Indorsement dated November 1989; Records, Vol. 1,
pp. 70-71.] Accordingly, acting District Collector of Customs John S.
Sy issued a Decision decreeing the forfeiture and the sale of the
cargo in favor of the government.13 [Decision dated November 17,
1989, Records, Vol. 1, pp. 74-86.]
To enforce its preferred salvors lien, herein Private Respondent
Duraproof Services filed with the Regional Trial Court of Manila a
Petition for Certiorari, Prohibition and Mandamus14 [Docketed as
24
Civil Case No. 89-51451 and raffled to Branch 8; Records, Vol. 1, pp.
1-26.] assailing the actions of Commissioner Mison and District
Collector Sy. Also impleaded as respondents were PPA
Representative Silverio Mangaoang and Med Line Philippines, Inc.
On January 10, 1989, private respondent amended its
Petition15 [Ibid., pp. 122-145.] to include former District Collector
Quiray; PPA Port Manager Adolfo Ll. Amor, Jr.; x Vlason
Enterprises as represented by its president, Vicente Angliongto;
Singkong Trading Company as represented by Atty. Eddie
Tamondong; Banco Du Brasil; Dusit International Co.; Thai-Nan
Enterprises Ltd., and Thai-United Trading Co., Ltd.16 [Amended
Petition, id., pp. 122 & 128-129.] x x x
Summonses for the amended Petition were served on Atty. Joseph
Capuyan for Med Line Philippines: Anglionto (through his secretary,
Betty Bebero), Atty. Tamondong and Commissioner
Mison.17 [Sheriffs Return, id., pp. 160-164 & 171.] Upon motion of
the private respondent, the trial court allowed summons by
publication to be served upon defendants who were not residents and
had no direct representative in the country.18 [Id., pp. 153-156.]
On January 29, 1990, private respondent moved to declare
respondents in default, but the trial court denied the motion in its
February 23, 1990 Order19 [Id., pp. 214-215.], because Mangaoang
and Amor had jointly filed a Motion to Dismiss, while Mison and
Med Line had moved separately for an extension to file a similar
motion.20 [Eventually, both separately filed their motions to
dismiss.] Later it rendered an Order dated July 2, 1990, giving due
course to the motions to dismiss filed by Mangaoang and Amor on
the ground of litis pendentia, and by the commissioner and district
collector of customs on the ground of lack of
jurisdiction.21 [Records, Vol. 1, pp. 325-326.] In another Order, the
trial court dismissed the action against Med Line Philippines on the
ground of litis pendentia.22 [Order dated September 10, 1990;
Records, Vol. 2, p. 359.]
On two other occasions, private respondent again moved to declare
the following in default: [Vlason], Quiray, Sy and Mison on March
26, 1990;23 [Records, Vol. 1, pp. 237-238.] and Banco [do] Bra[s]il,
Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and
Thai-United Trading Co., Ltd. on August 24, 1990.24 [Ibid., pp.
351-352.] There is no record, however, that the trial court acted upon
the motions. On September 18, 1990, [private respondent] filed
another Motion for leave to amend the petition,25 [Records, Vol. 2,
pp. 370-371.] alleging that its counsel failed to include "necessary
and/or indispensable parties": Omega represented by Cadacio; and
M/V Star Ace represented by Capt. Nahon Rada, relief captain.
Aside from impleading these additional respondents, private
respondent also alleged in the Second (actually, third) Amended
Petition26 [Motion for Leave to Admit Second Amended Petition
and Supplemental Petition, ibid., p. 370; Second Amended Petition
with Supplemental Petition, ibid., pp. 372-398.] that the owners of
the vessel intended to transfer and alienate their rights and interest
over the vessel and its cargo, to the detriment of the private
respondent.
The trial court granted leave to private respondent to amend its
Petition, but only to exclude the customs commissioner and the
district collector.27 [Order dated September 28, 1990, Records, Vol.
2, p. 407.] Instead, private respondent filed the "Second Amended
Petition with Supplemental Petition" against Singkong Trading
Company; and Omega and M/V Star Ace,28 [Records, Vol. 2, pp.
414-415.] to which Cadacio and Rada filed a Joint
Answer.29 [Ibid., pp. 425-288.]
Declared in default in an Order issued by the trial court on January
23, 1991, were the following: Singkong Trading Co., Commissioner

Mison, M/V Star Ace and Omega.30 [Id.,p. 506.] Private respondent
filed, and the trial court granted, an ex parte Motion to present
evidence against the defaulting respondents.31 [Order dated
December 10, 1990, id., p. 492.] Only private respondent, Atty.
Tamondong, Commissioner Mison, Omega and M/V Star Ace
appeared in the next pretrial hearing; thus, the trial court declared the
other respondents in default and allowed private respondent to
present evidence against them.32 [Order dated January 23, 1991,
Records, Vol. 2, p. 506. The records (pp. 493-495), however, show
that only Duraproof Service, Singkong Trading and M/V Star Ace
were served summons.] Cesar Urbino, general manager of private
respondent, testified and adduced evidence against the other
respondents, x x x.33 [RTC Decision, p. 7; Rollo, p. 92; penned by
Judge Arsenio M. Gonong.]
On December 29, 1990, private respondent and Rada, representing
Omega, entered into a Memorandum of Agreement stipulating that
Rada would write and notify Omega regarding the demand for
salvage fees of private respondent; and that if Rada did not receive
any instruction from his principal, he would assign the vessel in favor
of the salvor.34 [Memorandum of Agreement, id., pp. 511-512.]
On February 18, 1991, the trial court disposed as follows:
"WHEREFORE, IN VIEW OF THE FOREGOING, based on the
allegations, prayer and evidence adduced, both testimonial and
documentary, the Court is convinced, that, indeed,
defendants/respondents are liable to [private respondent] in the
amount as prayed for in the petition for which it renders judgment as
follows:
1. Respondent M/V Star Ace, represented by Capt. Nahum Rada,
[r]elief [c]aptain of the vessel and Omega Sea Transport Company,
Inc., represented by Frank Cadacio[,] is ordered to refrain from
alienating or [transferring] the vessel M/V Star Ace to any third
parties;
2. Singkong Trading Company to pay the following:
a. Taxes due the government;
b. Salvage fees on the vessel in the amount of $1,000,000.00 based
on xxx Lloyds Standard Form of Salvage Agreement;
c. Preservation, securing and guarding fees on the vessel in the
amount of $225,000.00;
d. Maintenance fees in the amount of P2,685,000.00;
e. Salaries of the crew from August 16, 1989 to December 1989 in
the amount of $43,000.00 and unpaid salaries from January 1990 up
to the present;
f. Attorneys fees in the amount of P656,000.00;
3. [Vlason] Enterprises to pay [private respondent] in the amount of
P3,000,000.00 for damages;
4. Banco [Du] Brasil to pay [private respondent] in the amount of
$300,000.00 in damages;35 [Italics supplied.] and finally,
5. Costs of [s]uit."
Subsequently, upon the motion of Omega, Singkong Trading Co.,
and private respondent, the trial court approved a Compromise
Agreement36 [Records, Vol. 2, pp. 535-538.] among the movants,
reducing by 20 percent the amounts adjudged. For their part,
respondents-movants agreed not to appeal the Decision.37 [Order
dated March 6, 1991, ibid., pp. 539-541. Private respondent entered
into two separate compromise agreements with Singkong Trading Co.
(id., pp. 535-536) and another with Omega (id., pp. 537-538). Both
25
agreements were dated March 4, 1991.] On March 8, 1991, private
respondent moved for the execution of judgment, claiming that the
trial court Decision had already become final and executory. The
Motion was granted and a Writ of Execution was issued. To satisfy
the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio
Camañgon were deputized on March 13, 1991 to levy and to sell on
execution the defendants vessel and personal property.
xxx
On March 18, 1991, the Bureau of Customs also filed an ex parte
Motion to recall the execution, and to quash the notice of levy and
the sale on execution. Despite this Motion, the auction sale was
conducted on March 21, 1991 by Sheriff Camañgon, with private
respondent submitting the winning bid. The trial court ordered the
deputy sheriffs to cease and desist from implementing the Writ of
Execution and from levying on the personal property of the
defendants. Nevertheless, Sheriff Camañgon issued the
corresponding Certificate of Sale on March 27, 1991.
On April 10, 1991, petitioner Banco do Brasil filed, by special
appearance, an Urgent Motion to Vacate Judgement and to Dismiss
Case38 [Rollo, pp. 67-73.] on the ground that the February 18, 1991
Decision of the trial court is void with respect to it for having been
rendered without validly acquiring jurisdiction over the person of
Banco do Brasil. Petitioner subsequently amended its
petition39 [Rollo, pp. 74-80.] to specifically aver that its special
appearance is solely for the purpose of questioning the Courts
exercise of personal jurisdiction.
On May 20, 1991, the trial court issued an Order40 [Rollo, pp.
81-82.] acting favorably on petitioners motion and set aside as
against petitioner the decision dated February 18, 1991 for having
been rendered without jurisdiction over Banco do Brasils person.
Private respondent sought reconsideration41 [Records, Vol. 3, pp.
103-105.] of the Order dated May 20, 1991. However, the trial court
in an Order42 [Rollo, p. 83.] dated June 21, 1991 denied said motion.
Meanwhile, a certiorari petition43 [Docketed as CA-G.R. SP No.
24669.] was filed by private respondent before public respondent
Court of Appeals seeking to nullify the cease and desist Order dated
April 5, 1991 issued by Judge Arsenio M. Gonong. Two (2) more
separate petitions for certiorari were subsequently filed by private
respondent. The second petition44 [Docketed as CA-G.R. SP No.
28387.] sought to nullify the Order45 [Penned by Judge Bernardo P.
Pardo, then Executive Judge, and now Associate Justice of the
Supreme Court.] dated June 26, 1992 setting aside the Deputy
Sheriffs return dated April 1, 1991 as well as the certificate of sale
issued by Deputy Sheriff Camañgon. The third petition46 [Docketed
as CA-G.R. SP No. 29317.] sought to nullify the Order dated
October 5, 1992 of the Court of Tax Appeals directing the
Commissioner of Customs to place Bureau of Customs and PNP
officers and guards to secure the M/V Star Ace and its cargoes, make
inventory of the goods stored in the premises as indicated to belong
to the private respondent. Likewise challenged was the Order dated
August 17, 1992 authorizing the sale of M/V Star Ace and its
cargoes.
These three (3) petitions were consolidated and on July 19, 1993, the
appellate court rendered its Decision47 [See Note 1, supra.] granting
private respondents petitions, thereby nullifying and setting aside the
disputed orders and effectively "giving way to
the entire [decision dated February 18, 1991 of the x x x Regional
Trial Court of Manila, Branch 8, in Civil Case No. 89-51451
which remains valid, final and executory, if not yet wholly
executed."48 [Rollo, p. 46.]
Private respondent Urbino, Vlason Enterprises and petitioner Banco
do Brasil filed separate motions for reconsideration. For its part,

petitioner Banco do Brasil sought reconsideration, insofar as its
liability for damages, on the ground that there was no valid service of
summons as service was on the wrong party the ambassador of Brazil.
Hence, it argued, the trial court did not acquire jurisdiction over
petitioner Banco do Brasil.49 [Rollo, pp. 107.] Nonetheless, the
appellate court denied the motions for reconsideration in its
Resolution50 [See Note 2, supra.] dated August 15, 1995.
Hence, the instant petition.
Petitioner Banco do Brasil takes exception to the appellate courts
declaration that the suit below is in rem, not in personam,51 [Rollo,
pp. 19-21.] thus, service of summons by publication was sufficient
for the court to acquire jurisdiction over the person of petitioner
Banco do Brasil, and thereby liable to private respondent Cesar
Urbino for damages claimed, amounting to $300,000.00. Petitioner
further challenges the finding that the February 18, 1991 decision of
the trial court was already final and thus, cannot be modified or
assailed.52 [Rollo, p. 22-23.]
Petitioner avers that the action filed against it is an action for
damages, as such it is an action in personam which requires personal
service of summons be made upon it for the court to acquire
jurisdiction over it. However, inasmuch as petitioner Banco do Brasil
is a non-resident foreign corporation, not engaged in business in the
Philippines, unless it has property located in the Philippines which
may be attached to convert the action into an action in rem, the court
cannot acquire jurisdiction over it in respect of an action in
personam.
The petition bears merit, thus the same should be as it is hereby
granted.
First. When the defendant is a nonresident and he is not found in the
country, summons may be served extraterritorially in accordance
with Rule 14, Section 1753 [Section 17. Extraterritorial service
When the defendant does not reside and is not found in the
Philippines and the action affects the personal status of the plaintiff
or relates to, or the subject of which, is property within the
Philippines, in which the defendant has or claims a lien or interest,
actual or contingent, or in which relief demanded consists, wholly or
in part, in excluding the defendant from any interest therein, or the
property of the defendant has been attached in the Philippines,
service may, by leave of court, be effected out of the Philippines by
personal service as under section 7; or by publication in a newspaper
of general circulation in such places and for such time as the court
may order, in which case a copy of the summons and order of the
court shall be sent by registered mail to the last known address of the
defendant, or in any other manner the court may deem sufficient.
Any order granting such leave shall specify a reasonable time, which
shall not be less than sixty (60) days after notice, within which the
defendant must answer.] of the Rules of Court. Under this provision,
there are only four (4) instances when extraterritorial service of
summons is proper, namely: "(1) when the action affects the personal
status of the plaintiffs; (2) when the action relates to, or the subject of
which is property, within the Philippines, in which the defendant
claims a lien or interest, actual or contingent; (3) when the relief
demanded in such action consists, wholly or in part, in excluding the
defendant from any interest in property located in the Philippines;
and (4) when the defendant non-residents property has been attached
within the Philippines."54 [Ibid., now Sec. 15 of the 1997 Rules of
Civil Procedure.] In these instances, service of summons may be
effected by (a) personal service out of the country, with leave of
court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.55 [Ibid..]
Clear from the foregoing, extrajudicial service of summons apply
only where the action is in rem, an action against the thing itself
26
instead of against the person, or in an action quasi in rem, where an
individual is named as defendant and the purpose of the proceeding
is to subject his interest therein to the obligation or loan burdening
the property. This is so inasmuch as, in in rem and quasi in
rem actions, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court
acquires jurisdiction over the res.56[Asiavest Limited v. Court of
Appeals, 296 SCRA 539, 552-554 [1998]; Valmonte v. Court of
Appeals, 252 SCRA 92, 99-102 [1996].]
However, where the action is in personam, one brought against a
person on the basis of his personal liability, jurisdiction over the
person of the defendant is necessary for the court to validly try and
decide the case. When the defendant is a non-resident, personal
service of summons within the state is essential to the acquisition of
jurisdiction over the person.57 [The Dial Corporation v. Soriano, 161
SCRA 737, 743 [1988] citing Boudard v. Tait, 67 Phil 170, 174
[1939].] This cannot be done, however, if the defendant is not
physically present in the country, and thus, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and
decide the case against him.58 [Asiavest Limited v. Court of
Appeals, supra. at 554.]
In the instant case, private respondents suit against petitioner is
premised on petitioners being one of the claimants of the subject
vessel M/V Star Ace.59 [Records, Vol. 1, pp. 128-129.] Thus, it can
be said that private respondent initially sought only to exclude
petitioner from claiming interest over the subject vessel M/V Star
Ace. However, private respondent testified during the presentation of
evidence that, for being a nuisance defendant, petitioner caused
irreparable damage to private respondent in the amount of
$300,000.00.60 [Records, Vol. 2, p. 567.] Therefore, while the action
is in rem, by claiming damages, the relief demanded went beyond
the res and sought a relief totally alien to the action.
It must be stressed that any relief granted in rem or quasi in
rem actions must be confined to the res, and the court cannot
lawfully render a personal judgment against the
defendant.61[Villareal v. Court of Appeals, 295 SCRA 511, 525
[1998].] Clearly, the publication of summons effected by private
respondent is invalid and ineffective for the trial court to acquire
jurisdiction over the person of petitioner, since by seeking to recover
damages from petitioner for the alleged commission of an injury to
his person or property62 [The Dial Corporation v. Soriano, supra. at
742 citing Hernandez v. Development Bank of the Phil., 71 SCRA
290, 292-293 [1976].] caused by petitioners being a nuisance
defendant, private respondents action became in personam. Bearing
in mind the in personam nature of the action, personal or, if not
possible, substituted service of summons on petitioner, and not
extraterritorial service, is necessary to confer jurisdiction over the
person of petitioner and validly hold it liable to private respondent
for damages. Thus, the trial court had no jurisdiction to award
damages amounting to $300,000.00 in favor of private respondent
and as against herein petitioner.
Second. We settled the issue of finality of the trial courts decision
dated February 18, 1991 in the Vlason case, wherein we stated that,
considering the admiralty case involved multiple defendants, "each
defendant had a different period within which to appeal, depending
on the date of receipt of decision."63 [Decision in G.R. Nos.
121662-64, p. 27.] Only upon the lapse of the reglementary period to
appeal, with no appeal perfected within such period, does the
decision become final and executory.64 [Ibid.]
In the case of petitioner, its Motion to Vacate Judgment and to
Dismiss Case was filed on April 10, 1991, only six (6) days after it
learned of the existence of the case upon being informed by the
Embassy of the Federative Republic of Brazil in the Philippines, on

April 4, 1991, of the February 18, 1991 decision.65 [Rollo, pp.
67-80.] Thus, in the absence of any evidence on the date of receipt of
decision, other than the alleged April 4, 1991 date when petitioner
learned of the decision, the February 18, 1991 decision of the trial
court cannot be said to have attained finality as regards the petitioner.
WHEREFORE, the subject petition is hereby GRANTED. The
Decision and the Resolution of the Court of Appeals dated July 19,
1993 and August 15, 1995, respectively, in CA-G.R. SP Nos. 24669,
28387 and 29317 are hereby REVERSED and SET ASIDE insofar as
they affect petitioner Banco do Brasil. The Order dated May 20,
1991 of the Regional Trial Court of Manila, Branch 8 in Civil Case
No. 89-51451 is REINSTATED. SO ORDERED.
[G.R. No. 150656. April 29, 2003]
MARGARITA ROMUALDEZ-LICAROS, petitioner, vs.
ABELARDO B. LICAROS, respondent.
CARPIO, J.:
This is a petition for review on certiorari[1] to annul the
Decision[2] dated 9 August 2001 of the Court of Appeals in CA-G.R.
SP No. 58487, as well as the Resolution dated 23 October 2001
denying the motion for reconsideration. The Court of Appeals
dismissed the petition to annul the following decisions[3] rendered
by Branch 143 of the Regional Trial Court of Makati:
(1) The Decision dated 27 December 1990[4] granting the
dissolution of the conjugal partnership of gains of the spouses
Abelardo B. Licaros and Margarita Romualdez-Licaros;
(2) The Decision dated 8 November 1991[5] declaring the marriage
between the same spouses null and void.
The Facts
The antecedent facts as found by the Court of Appeals are as follows:
x x x Abelardo Licaros (Abelardo, for short) and Margarita
Romualdez-Licaros (Margarita, hereafter) were lawfully married on
December 15, 1968. Out of this marital union were born Maria
Concepcion and Abelardo, Jr. Ironically, marital differences,
squabbles and irreconcilable conflicts transpired between the spouses,
such that sometime in 1979, they agreed to separate from bed and
board.
In 1982, Margarita left for the United States and there, to settle down
with her two (2) children. In the United States, on April 26, 1989,
Margarita applied for divorce before the Superior Court of California,
County of San Mateo (Annex 1, Rejoinder, pp. 164-165) where she
manifested that she does not desire counseling at that time (Quotation,
p. 166, Rollo). On August 6, 1990, Margarita was granted the decree
of divorce (Annex 2, Answer, p. 108, Rollo) together with a
distribution of properties between her and Abelardo (pp. 167-168,
Rollo).
Not long after, on August 17, 1990, Abelardo and Margarita
executed an Agreement of Separation of Properties (pp. 60-64,
Rollo). This was followed-up by a petition filed on August 21, 1990
before the Regional Trial Court of Makati for the dissolution of the
conjugal partnership of gains of the spouses and for the approval of
the agreement of separation of their properties.This was docketed as
Special Proceeding No. 2551. On December 27, 1990, a decision was
issued granting the petition and approving the separation of property
agreement.
27
For his part, on June 24, 1991, Abelardo commenced Civil Case No.
91-1757, for the declaration of nullity of his marriage with Margarita,
based on psychological incapacity under the New Family Code. As
Margarita was then residing at 96 Mulberry Lane, Atherton,
California, U.S.A., Abelardo initially moved that summons be served
through the International Express Courier Service. The court a
quo denied the motion. Instead, it ordered that summons be served by
publication in a newspaper of general circulation once a week for
three (3) consecutive weeks, at the same time furnishing respondent a
copy of the order, as well as the corresponding summons and a copy
of the petition at the given address in the United States through the
Department of Foreign Affairs, all at the expense of
Abelardo. Respondent was given sixty (60) days after publication to
file a responsive pleading.
On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted
his Officers Return quoted hereunder:
OFFICERS RETURN
THIS IS TO CERTIFY that on July 3, 1991, I have served a copy of
summons and complaint with annexes together with order dated June
28, 1991 issued by the Court in the above-entitled case upon
defendant Margarita Romualdez-Licaros c/o DFA. (sent by
Mail) thru Pat G. Martines receiving Clerk of Department of Foreign
Affairs a person authorized to receive this kind of process who
acknowledged the receipt thereof at ADB Bldg., Roxas Blvd., Pasay
City, Metro Manila. (p. 40, Rollo)
As required by law, the case was referred to Trial Prosecutor
Bruselas, Jr. to find out any possible collusion between the parties in
the case. Thereafter, with the negative report of collusion, Abelardo
was allowed to present his evidence ex-parte. On November 8, 1991,
the Decision (Annex A, Petition) was handed down in Civil Case
No. 91-1757 declaring the marriage between Abelardo and Margarita
null and void.
Almost nine (9) years later, on April 28, 2000, the petition at bench
was commenced when Margarita received a letter dated November
18, 1991 from a certain Atty. Angelo Q. Valencia informing her that
she no longer has the right to use the family name Licaros inasmuch
as her marriage to Abelardo had already been judicially dissolved by
the Regional Trial Court of Makati on November 8,
1991. Asseverating to have immediately made some verifications and
finding the information given to be true, petitioner commenced the
instant petition on the following grounds:
(A) THERE WAS EXTRINSIC FRAUD IN THE PREPARATION
AND FILING BY ABELARDO OF THE PETITION FOR
DISSOLUTION OF THE CONJUGAL PARTNERSHIP OF GAINS
AND ITS ANNEX, THE AGREEMENT OF SEPARATION OF
PROPERTIES.
(B) THE TRIAL COURT LACKED JURISDICTION TO HEAR
AND DECIDE THE PETITION FOR DECLARATION OF
NULLITY OF MARRIAGE.[6]
The Ruling of the Court of Appeals
The Court of Appeals debunked the claim of Margarita that there was
extrinsic fraud in the preparation and filing by Abelardo of
the Petition for Dissolution of Conjugal Partnership of Gains and its
annex, the Agreement of Separation of Properties. The Court of
Appeals stated:
x x x, the extrinsic fraud alluded to consists of Abelardo coercing
Margarita into signing the petition to dissolve their conjugal
partnership of gains together with the agreement of separation of
properties, by threatening to cut-off all financial and material support
of their children then still studying in the United States; that

petitioner had no hand directly or indirectly in the preparation of the
petition and agreement of separation of properties; that petitioner
never met the counsel for the petitioner, nor the notary public who
notarized the deed; and, petitioner never received any notice of the
pendency of the petition nor a copy of the decision.
Antithetically, a meticulous perusal of the controversial petition
(Annex B-1) and the agreement of separation of properties (pp. 60-64,
Rollo) readily shows that the same were signed by the petitioner on
the proper space after the prayer and on the portion for the
verification of the petition. The same is true with the agreement of
separation of properties. What is striking to note is that on August 6,
1990, Margarita appeared before Amado P. Cortez, Consul of the
Republic of the Philippines at the San Francisco, California, United
States Consulate Office, to affirm and acknowledge before said
official that she executed the agreement of separation of properties of
her own free will and deed, after being informed of the contents
thereof. And yet, there is no showing that Abelardo was with her at
the Philippine Consulate Office in confirming the separation of
property agreement. Moreover, on page 2 of the same agreement, it is
specifically stated that such property separation document shall be
subject to approval later on by the proper court of competent
jurisdiction. The clear import of this is that the agreement must have
to be submitted before the proper court for approval, which explains
and confirms petitioners signature on the petition filed in court.
In main, We see no indication nor showing of coercion or fraud from
these facts, which could very well be considered as extrinsic or
collateral fraud to justify a petition under Rule 47.From all
indications, the pretended coerced documents were rather freely and
voluntarily executed by the parties therein knowing fully well the
imports thereof. This conclusion finds more weight if We consider
the fact that the separation of property was fully implemented and
enforced, when apparently both parties correspondingly received the
properties respectively assigned to each of them under the said
document.[7]
The Court of Appeals also rejected Margaritas claim that the trial
court lacked jurisdiction to hear and decide the Petition for
Declaration of Nullity of Marriage for improper service of summons
on her. The case involves the marital status of the parties, which is an
action in rem or quasi in rem. The Court of Appeals ruled that in
such an action the purpose of service of summons is not to vest the
trial court with jurisdiction over the person of the defendant, but only
to comply with due process. The Court of Appeals concluded that
any irregularity in the service of summons involves due process
which does not destroy the trial courts jurisdiction over
the res which is the parties marital status. Neither does such
irregularity invalidate the judgment rendered in the case. Thus, the
Court of Appeals dismissed the petition for annulment of judgment,
stating that:
At bar, the case involves the personal (marital) status of the plaintiff
and the defendant. This status is the res over which the Philippine
court has acquired jurisdiction. This is also the kind of action which
the Supreme Court had ruled that service of summons may be served
extraterritorially under Section 15 (formerly Section 17) of Rule 14
and where such service of summons is not for the purpose of vesting
the trial court with jurisdiction over the person of the defendant but
only for the purpose of complying with the requirements of fair play
and due process. A fortiori, the court a quo had properly acquired
jurisdiction over the person of herein petitioner-defendant when
summons was served by publication and a copy of the summons, the
complaint with annexes, together with the Order of June 28, 1991,
was served to the defendant through the Department of Foreign
Affairs by registered mail and duly received by said office to top it
all. Such mode was upon instruction and lawful order of the court
28
and could even be treated as any other manner the court may deem
sufficient.[8]
Hence, the instant petition.
The Issues
The issues raised by Margarita are restated as follows:
I. Whether Margarita was validly served with summons in the case
for declaration of nullity of her marriage with Abelardo;
II. Whether there was extrinsic fraud in the preparation and filing by
Abelardo of the Petition for Dissolution of the Conjugal Partnership
of Gains and its annex, the Agreement of Separation of Properties.
The Courts Ruling
The petition is bereft of merit.
First Issue: Validity of the Service of Summons on Margarita
Margarita insists that the trial court never acquired jurisdiction over
her person in the petition for declaration of nullity of marriage since
she was never validly served with summons. Neither did she appear
in court to submit voluntarily to its jurisdiction.
On the other hand, Abelardo argues that jurisdiction over the person
of a non-resident defendant in an action in rem or quasi in rem is not
necessary. The trial and appellate courts made a clear factual finding
that there was proper summons by publication effected through the
Department of Foreign Affairs as directed by the trial court. Thus,
the trial court acquired jurisdiction to render the decision declaring
the marriage a nullity.
Summons is a writ by which the defendant is notified of the action
brought against him. Service of such writ is the means by which the
court acquires jurisdiction over his person.[9]
As a rule, when the defendant does not reside and is not found in the
Philippines, Philippine courts cannot try any case against him
because of the impossibility of acquiring jurisdiction over his person
unless he voluntarily appears in court. But when the case is one of
actions in rem or quasi in rem enumerated in Section 15,[10] Rule 14
of the Rules of Court, Philippine courts have jurisdiction to hear and
decide the case. In such instances, Philippine courts have jurisdiction
over the res, and jurisdiction over the person of the non-resident
defendant is not essential.[11]
Actions in personam[12] and actions in rem or quasi in rem differ in
that actions in personam are directed against specific persons and
seek personal judgments. On the other hand, actions in rem or quasi
in rem are directed against the thing or property or status of a person
and seek judgments with respect thereto as against the whole
world.[13]
At the time Abelardo filed the petition for nullity of the marriage in
1991, Margarita was residing in the United States. She left the
Philippines in 1982 together with her two children. The trial court
considered Margarita a non-resident defendant who is not found in
the Philippines. Since the petition affects the personal status of the
plaintiff, the trial court authorized extraterritorial service of summons
under Section 15, Rule 14 of the Rules of Court. The term personal
status includes family relations, particularly the relations between
husband and wife.[14]
Under Section 15 of Rule 14, a defendant who is a non-resident and
is not found in the country may be served with summons by
extraterritorial service in four instances: (1) when the action affects
the personal status of the plaintiff; (2) when the action relates to, or
the subject of which is property within the Philippines, in which the

defendant has or claims a lien or interest, actual or contingent; (3)
when the relief demanded consists, wholly or in part, in excluding
the defendant from any interest in property located in the Philippines;
or (4) when the property of the defendant has been attached within
the Philippines.
In these instances, extraterritorial service of summons may be
effected under any of three modes: (1) by personal service out of the
country, with leave of court; (2) by publication and sending a copy of
the summons and order of the court by registered mail to the
defendants last known address, also with leave of court; or (3) by any
other means the judge may consider sufficient.
Applying the foregoing rule, the trial court required extraterritorial
service of summons to be effected on Margarita in the following
manner:
x x x, service of Summons by way of publication in a newspaper of
general circulation once a week for three (3) consecutive weeks, at
the same time, furnishing respondent copy of this Order as well as
the corresponding Summons and copy of the petition at her given
address at No. 96 Mulberry Lane, Atherton, California, U.S.A., thru
the Department of Foreign Affairs, all at the expense of
petitioner.[15] (Emphasis ours)
The trial courts prescribed mode of extraterritorial service does not
fall under the first or second mode specified in Section 15 of Rule 14,
but under the third mode. This refers to any other means that the
judge may consider sufficient.
The Process Servers Return of 15 July 1991 shows that the summons
addressed to Margarita together with the complaint and its annexes
were sent by mail to the Department of Foreign Affairs with
acknowledgment of receipt. The Process Servers certificate of
service of summons is prima facie evidence of the facts as set out in
the certificate.[16] Before proceeding to declare the marriage
between Margarita and Abelardo null and void, the trial court stated
in its Decision dated 8 November 1991 that compliance with the
jurisdictional requirements hav(e) (sic) been duly established. We
hold that delivery to the Department of Foreign Affairs was sufficient
compliance with the rule. After all, this is exactly what the trial court
required and considered as sufficient to effect service of summons
under the third mode of extraterritorial service pursuant to Section 15
of Rule 14.
Second Issue: Validity of the Judgment Dissolving the
Conjugal Partnership of Gains
Margarita claims that Abelardo coerced her into signing the Petition
for Dissolution of the Conjugal Partnership of Gains (Petition) and its
annex, the Agreement of Separation of
Properties (Agreement). Abelardo allegedly threatened to cut off all
financial and material support to their children if Margarita did not
sign the documents.
The trial court did not find anything amiss in the Petition and
Agreement that Abelardo filed, and thus the trial court approved the
same. The Court of Appeals noted that a meticulous perusal of the
Petition and Agreement readily shows that Margarita signed the same
on the proper space after the prayer and on the portion for the
verification of the petition. The Court of Appeals observed further
that on 6 August 1990, Margarita appeared before Consul Amado
Cortez in the Philippine Consulate Office in San Francisco,
California, to affirm that she executed the Agreement of her own free
will. There was no showing that Abelardo was at that time with her at
the Philippine Consulate Office. Abelardo secured judicial approval
of the Agreement as specifically required in the Agreement.
29
The Court is bound by the factual findings of the trial and appellate
courts that the parties freely and voluntarily executed the documents
and that there is no showing of coercion or fraud. As a rule, in an
appeal by certiorari under Rule 45, the Court does not pass upon
questions of fact as the factual findings of the trial and appellate
courts are binding on the Court. The Court is not a trier of facts. The
Court will not examine the evidence introduced by the parties below
to determine if the trial and appellate courts correctly assessed and
evaluated the evidence on record.[17]
The due and regular execution of an instrument acknowledged before
an officer authorized to administer oaths cannot be overthrown by
bare allegations of coercion but only by clear and convincing
proof.[18] A person acknowledging an instrument before an officer
authorized to administer oaths acknowledges that he freely and
voluntarily executed the instrument, giving rise to a prima
facie presumption of such fact.
In the instant case, Margarita acknowledged the Agreement before
Consul Cortez. The certificate of acknowledgment signed by Consul
Cortez states that Margarita personally appeared before him and
acknowledged before me that SHE executed the same of her own
free will and deed.[19] Thus, there is a prima facie presumption that
Margarita freely and voluntarily executed the Agreement. Margarita
has failed to rebut this prima facie presumption with clear and
convincing proof of coercion on the part of Abelardo.
A document acknowledged before a notary public is prima
facie evidence of the due and regular execution of the
document.[20] A notarized document has in its favor the presumption
of regularity in its execution, and to contradict the same, there must
be evidence that is clear, convincing and more than merely
preponderant.[21]
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP
No. 58487 dismissing the petition to annul judgment is AFFIRMED.
SO ORDERED.
[G.R. No. 127692. March 10, 2004]
FORTUNATO GOMEZ and AURORA GOMEZ, petitioners, vs.
COURT OF APPEALS, ADOLFO TROCINO and MARIANO
TROCINO, respondents.
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court assailing the decision[1] of the Court of
Appeals dated September 30, 1996, in CA-G.R. SP No. 40067,
nullifying the decision and orders of
the Regional Trial Court of Cebu City (Branch 10) in Civil Case No.
CEB-11103, for want of jurisdiction.
Civil Case No. CEB-11103 is an action for specific performance
and/or rescission filed by herein petitioners, spouses Fortunato and
Aurora Gomez, against the heirs of Jesus J. Trocino, Sr., which
include herein respondents and their mother Caridad Trocino.[2]
Filed on December 16, 1991, the complaint alleges: Some time in
1975, the spouses Jesus and Caridad Trocino mortgaged two parcels
of land covered by TCT Nos. 10616 and 31856 to Dr. Clarence
Yujuico. The mortgage was subsequently foreclosed and the
properties sold at public auction on July 11, 1988, and before the
expiry of the redemption period, the spouses Trocino sold the
property to petitioners on December 12, 1989, who in turn, redeemed

the same from Dr. Yujuico. The spouses Trocino, however, refused
to convey ownership of the properties to petitioners, hence, the
complaint.
On January 10, 1992, the trial courts Process Server served summons
on respondents, in the manner described in his Return of Service, to
wit:
Respectfully returned to the Branch Clerk of Court, Regional Trial
Court of Cebu, Branch 10, the herein attached original summons
issued in the above-entitled case with the information that on January
8, 1992 summons and copies of the complaint were served to the
defendants Jacob, Jesus Jr., Adolfo, Mariano, Consolacion, Alice,
Racheal thru defendant Caridad Trocino at their given address at
Maria Cristina Extension (besides Sacred Heart School for Girls),
Cebu City, evidence by her signature found at the lower portion of
the original summons.[3]
WHEREFORE I, respectfully return the original summons duly
served to the court of origin.
Cebu City, Philippines, January 10, 1992.
(signed)
DELFIN D. BARNIDO
RTC Process Server
On January 27, 1992, the defendants, through their counsel Atty.
Expedito P. Bugarin, filed their Answer. Defendant Caridad A.
Trocino, respondents mother, verified said pleading.[4]
After trial on the merits, the RTC rendered its decision on March
1993, with the following disposition:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiffs and against the defendants.
The latter are hereby ordered to jointly and severally execute a Deed
of Sale in favor of the plaintiffs and to deliver the owners duplicate
copies of TCT Nos. 10616 and 31856, covering the properties sold,
to the plaintiffs within ten (10) days from the finality of the judgment,
after which plaintiffs shall pay in turn to the defendants the balance
of P2,000,000.00. Otherwise, the sale is rescinded and revoked and
the defendants are directed to return to the plaintiffs the amount
of P500,000.00, with interest of 12% per annum computed
from December 6, 1989, until the full amount is paid.
In addition thereto, defendants are to pay jointly and severally to the
plaintiffs, the amount of P50,000.00 as moral damages; P20,000.00
as exemplary damages; P40,000.00 by way of attorneys fees;
and P10,000.00 as litigation expenses.
SO ORDERED.[5]
Due to the defendants failure to deliver the owners duplicate of TCT
Nos. 10616 and 31856, the RTC issued an order on August 29,
1995 declaring said titles null and void, and ordering the Register of
Deeds of Cebu City to issue new titles in the name of herein
petitioners.[6]
Thereafter, or on March 13, 1996, respondents Adolfo and Mariano
Trocino filed with the Court of Appeals, a petition for the annulment
of the judgment rendered by the RTC-Cebu (Branch 10) in Civil
Case No. CEB-11103. Private respondents alleged that the trial
courts decision is null and void on the ground that it did not acquire
jurisdiction over their persons as they were not validly served with a
copy of the summons and the complaint. According to them, at the
time summons was served on them, Adolfo Trocino was already
in Ohio, U.S.A., and has been residing there for 25 years, while
30
Mariano Trocino was in Talibon, Bohol, and has been residing there
since 1986. They also refuted the receipt of the summons by Caridad
A. Trocino, and the representation made by Atty. Bugarin in their
behalf. Respondents also contended that they have a meritorious
defense.[7] Petitioners filed their Comment/Answer to the
petition.[8]
On September 30, 1996, the Court of Appeals issued the assailed
Decision granting the petition and annulling the decision of the
RTC-Cebu (Branch 10). The decretal portion of the decision reads:
WHEREFORE, the decision of
the Regional Trial Court of Cebu City, Branch 10, in Civil Case No.
CEB-11103 as well as all Orders issued to implement the same are
hereby ANNULLED AND SET ASIDE. The Register of Deeds of
Cebu City is hereby ENJOINED from cancelling Transfer
Certificates of Title Nos. 10616 and 31856. No pronouncement as to
costs.
SO ORDERED.[9]
Their motion for reconsideration having been denied by the Court of
Appeals, petitioners filed the present petition, setting forth the
following assignment of errors:
I. THE COURT OF APPEALS ERRED IN FINDING LACK OF
PRIOR KNOWLEDGE ON THE PART OF RESPONDENTS
TROCINO, REGARDING THE PROCEEDINGS BEFORE THE
RTC OF CEBU CITY AND IN NOT DISMISSING THE
PETITION FOR VIOLATION OF SUPREME COURT CIRCULAR
04-94.
II. THE COURT OF APPEALS ERRED IN DECLARING THE
NEED FOR PERSONAL AND/OR EXTRATERRITORIAL
SERVICE OF SUMMONS, DESPITE THE NATURE OF THE
CAUSE OF ACTION BEING ONE IN REM.
III. THE COURT OF APPEALS ERRED IN ANNULLING THE
JUDGMENT, CAUSING FURTHER USELESS LITIGATION
AND UNNECESSARY EXPENSE ON PETITIONERS AND
RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE
NOT SHOWN ANY VALID DEFENSE AS GROUND FOR
REVERSAL OF JUDGMENT OF THE RTC.
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS
JUDGMENT IS APPLICABLE IN FAVOR OF CARIDAD
TROCINO.[10]
Summons is a writ by which the defendant is notified of the action
brought against him. Service of such writ is the means by which the
court acquires jurisdiction over his person.[11] Any judgment
without such service in the absence of a valid waiver is null and
void.[12]
The resolution of the present petition hinges on the issue of whether
or not summons was effectively served on respondents. If in the
affirmative, the trial court had validly acquired jurisdiction over their
persons and therefore its judgment is valid.
To resolve whether there was valid service of summons on
respondents, the nature of the action filed against them must first be
determined. As the Court explained in Asiavest Limited vs. Court of
Appeals, it will be helpful to determine first whether the action is in
personam, in rem, or quasi in rem because the rules on service of
summons under Rule 14 of the Rules of Court of the Philippines
apply according to the nature of the action.[13]
In actions in personam, summons on the defendant must be served by
handing a copy thereof to the defendant in person, or, if he refuses to

receive it, by tendering it to him. This is specifically provided in
Section 7, Rule 14 of the Rules of Court,[14] which states:
SEC. 7. Personal service of summons.-- The summons shall be
served by handing a copy thereof to the defendant in person or, if he
refuses to receive it, by tendering it to him.
If efforts to find defendant personally makes prompt service
impossible, substituted service may be effected by leaving copies of
the summons at the defendant's dwelling house or residence with
some person of suitable age and discretion then residing therein, or
by leaving the copies at the defendant's office or regular place of
business with some competent person in charge thereof.[15] In
substituted service, it is mandated that the fact of impossibility of
personal service should be explained in the proof of service.[16]
When the defendant in an action in personam is a non-resident who
does not voluntarily submit himself to the authority of the court,
personal service of summons within the State is essential to the
acquisition of jurisdiction over his person. This cannot be done if the
defendant is not physically present in the country, and thus, the court
cannot acquire jurisdiction over his person and therefore cannot
validly try and decide the case against him.[17] An exception was
accorded in Gemperle vs. Schenkerwherein service of summons
through the non-residents wife, who was a resident of the Philippines,
was held valid, as the latter was his representative and
attorney-in-fact in a prior civil case filed by the non-resident, and the
second case was merely an offshoot of the first case.[18]
Meanwhile, in actions in rem or quasi in rem, jurisdiction over the
person of the defendant is not a prerequisite to confer jurisdiction on
the court provided that the court acquires jurisdiction over the res,
although summons must be served upon the defendant in order to
satisfy the due process requirements.[19] Thus, where the defendant
is a non-resident who is not found in the Philippines, and (1) the
action affects the personal status of the plaintiff; (2) the action relates
to, or the subject matter of which is property in the Philippines in
which the defendant has or claims a lien or interest; (3) the action
seeks the exclusion of the defendant from any interest in the property
located in the Philippines; or (4) the property of the defendant has
been attached in the Philippines, summons may be served
extraterritorially by (a) personal service out of the country, with
leave of court; (b) publication, also with leave of court; or (c) any
other manner the court may deem sufficient.[20]
In the present case, petitioners cause of action in Civil Case No.
CEB-11103 is anchored on the claim that the spouses Jesus and
Caridad Trocino reneged on their obligation to convey ownership of
the two parcels of land subject of their sale. Thus, petitioners pray in
their complaint that the spouses Trocino be ordered to execute the
appropriate deed of sale and that the titles be delivered to them
(petitioners); or in the alternative, that the sale be revoked and
rescinded; and spouses Trocino ordered to return to petitioners their
down payment in the amount of P500,000.00 plus interests. The
action instituted by petitioners affect the parties alone, not the whole
world.Hence, it is an action in personam, i.e., any judgment therein is
binding only upon the parties properly impleaded.[21]
Contrary to petitioners belief, the complaint they filed for specific
performance and/or rescission is not an action in rem. While it is a
real action because it affects title to or possession of the two parcels
of land covered by TCT Nos. 10616 and 31856, it does not
automatically follow that the action is already one in
rem. In Hernandez vs. Rural Bank of Lucena, Inc., the Court made
the following distinction:
In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract or the recovery of damages.
In a real action, the plaintiff seeks the recovery of real property, or,
31
as indicated in section 2(a) of Rule 4, a real action is an action
affecting title to real property or for the recovery of possession, or for
partition or condemnation of, or foreclosure of a mortgage on, real
property.
An action in personam is an action against a person on the basis of
his personal liability, while an action in rem is an action against the
thing itself, instead of against the person. Hence, a real action may at
the same time be an action in personam and not necessarily an action
in rem.[22]
The objective sought in petitioners complaint was to establish a claim
against respondents for their alleged refusal to convey to them the
title to the two parcels of land that they inherited from their father,
Jesus Trocino, who was one of the sellers of the properties to
petitioners. Hence, to repeat, Civil Case No. CEB-11103 is an
action in personam because it is an action against persons, namely,
herein respondents, on the basis of their personal liability. As such,
personal service of summons upon the defendants is essential in
order for the court to acquire of jurisdiction over their persons.[23]
A distinction, however, must be made with regard to service of
summons on respondents Adolfo Trocino and Mariano
Trocino. Adolfo Trocino, as records show, is already a resident
of Ohio, U.S.A. for 25 years. Being a non-resident, the court cannot
acquire jurisdiction over his person and validly try and decide the
case against him.
On the other hand, Mariano Trocino has been in Talibon, Bohol since
1986. To validly acquire jurisdiction over his person, summons must
be served on him personally, or through substituted service, upon
showing of impossibility of personal service. Such impossibility, and
why efforts exerted towards personal service failed, should be
explained in the proof of service. The pertinent facts and
circumstances attendant to the service of summons must be stated in
the proof of service or Officers Return.Failure to do so would
invalidate all subsequent proceedings on jurisdictional grounds.[24]
In the present case, the process server served the summons and
copies of the complaint on respondents Jacob, Jesus, Jr., Adolfo,
Mariano, Consolacion, Alice and Racheal,[25] through their mother,
Caridad Trocino.[26] The return did not contain any particulars as to
the impossibility of personal service on Mariano Trocino within a
reasonable time. Such improper service renders the same ineffective.
Due process of law requires personal service to support a personal
judgment, and, when the proceeding is strictly in personam brought
to determine the personal rights and obligations of the parties,
personal service within the state or a voluntary appearance in the
case is essential to the acquisition of jurisdiction so as to constitute
compliance with the constitutional requirement of due process.[27]
Moreover, inasmuch as the sheriffs return failed to state the facts and
circumstances showing the impossibility of personal service of
summons upon respondents within a reasonable time, petitioners
should have sought the issuance of an alias summons. Under Section
5, Rule 14 of the Rules of Court, alias summons may be issued when
the original summons is returned without being served on any or all
of the defendants.[28] Petitioners, however, did not do so, and they
should now bear the consequences of their lack of diligence.
The fact that Atty. Expedito Bugarin represented all the respondents
without any exception does not transform the ineffective service of
summons into a valid one. It does not constitute a valid waiver or
even a voluntary submission to the trial courts jurisdiction. There
was not even the slightest proof showing that respondents authorized
Atty. Bugarins appearance for and in their behalf. As found by the
Court of Appeals:

While Caridad Trocino may have engaged the services of Atty.
Bugarin, it did not necessarily mean that Atty. Bugarin also had the
authority to represent the defendant heirs. The records show that in
all the pleadings which required verification, only Caridad Trocino
signed the same. There was never a single instance where defendant
heirs signed the pleading. The fact that a pleading is signed by one
defendant does not necessarily mean that it is binding on a
co-defendant. Furthermore, Caridad Trocino represented herself as
the principal defendant in her Motion to Withdraw Appeal. (Rollo, p.
80)
Since the defendant heirs are co-defendants, the trial court should
have verified the extent of Atty. Bugarins authority when petitioners
failed to appear as early as the pre-trial stage, where the parties are
required to appear. The absence of the defendant heirs should have
prompted the trial court to inquire from the lawyer whether he was
also representing the other petitioners.As co-defendant and co-heirs
over the disputed properties, the defendant heirs had every right to be
present during the trial. Only Caridad Trocino appeared and testified
on her own behalf.All the defenses raised were her own, not the
defendant heirs.[29]
Consequently, the judgment sought to be executed against
respondents were rendered without jurisdiction as there was neither a
proper service of summons nor was there any waiver or voluntary
submission to the trial courts jurisdiction. Hence, the same is void,
with regard to private respondents except Caridad Trocino.
It must be pointed out that while it was the spouses Jesus and
Caridad Trocino who sold the properties to petitioners, their right to
proceed against Jesus Trocino when he died was passed on to his
heirs, which includes respondents and Caridad Trocino. Such
transmission of right occurred by operation of law, more particularly
by succession, which is a mode of acquisition by virtue of which the
property, rights and obligations to the extent of the value of the
inheritance of a person are transmitted.[30]When the process server
personally served the summons on Caridad Trocino, the trial court
validly acquired jurisdiction over her person alone. Hence, the trial
courts decision is valid and binding with regard to her, but only in
proportion to Caridad Trocinos share. As aptly stated by the Court of
Appeals:
This Courts decision is therefore applicable to all the defendant heirs
with the exception of defendant Caridad Trocino considering that it
was the latter who entered into the alleged sale without the consent of
her husband. She is therefore estopped from questioning her own
authority to enter into the questioned sale. Moreover, Caridad
Trocino was validly served with summons and was accorded due
process.[31]
WHEREFORE, the petition for review is DENIED. The decision of
the Court of Appeals in CA-G.R. SP No. 40067 is AFFIRMED.
Costs against petitioners. SO ORDERED.
ST. AVIATION V GRAND AIR INTERNATIONAL
SANDOVAL-GUTIERREZ, J.:
Challenged in the instant Petition for Review on Certiorari are the
Decision of the Court of Appeals dated July 30, 1999 and its
Resolution dated September 29, 1999 in CA-G.R. SP No. 51134
setting aside the Orders dated October 30, 1998 and December 16,
1998 of the Regional Trial Court (RTC), Branch 117, Pasay City in
Civil Case No. 98-1389.
32
St. Aviation Services Co., Pte., Ltd., petitioner, is a foreign
corporation based in Singapore. It is engaged in the manufacture,
repair, and maintenance of airplanes and aircrafts. Grand
International Airways, Inc., respondent, is a domestic corporation
engaged in airline operations.
Sometime in January 1996, petitioner and respondent executed an
Agreement for the Maintenance and Modification of Airbus A 300
B4-103 Aircraft Registration No. RP-C8882 (First Agreement).
Under this stipulation, petitioner agreed to undertake maintenance
and modification works on respondents aircraft. The parties agreed
on the mode and manner of payment by respondent of the contract
price, including interest in case of default. They also agreed that the
construction, validity and performance thereof shall be governed by
the laws of Singapore. They further agreed to submit any suit arising
from their agreement to the non-exclusive jurisdiction of
the Singapore courts.
At about the same time, or on January 12, 1996, the parties verbally
agreed that petitioner will repair and undertake maintenance works
on respondents other aircraft, Aircraft No. RP-C8881; and that the
works shall be based on a General Terms of Agreement (GTA). The
GTA terms are similar to those of their First Agreement.
Petitioner undertook the contracted works and thereafter promptly
delivered the aircrafts to respondent. During the period from March
1996 to October 1997, petitioner billed respondent in the total
amount of US$303,731.67 or S$452,560.18. But despite petitioners
repeated demands, respondent failed to pay, in violation of the terms
agreed upon.
On December 12, 1997, petitioner filed with the High Court of
the Republic of Singapore an action for the sum of S$452,560.18,
including interest and costs, against respondent, docketed as Suit No.
2101. Upon petitioners motion, the court issued a Writ of Summons
to be served extraterritorially or outside Singapore upon
respondent. The court sought the assistance of the sheriff
of Pasay City to effect service of the summons upon
respondent. However, despite receipt of summons, respondent failed
to answer the claim.
On February 17, 1998, on motion of petitioner, the Singapore High
Court rendered a judgment by default against respondent.
On August 4, 1998, petitioner filed with the RTC, Branch
117, Pasay City, a Petition for Enforcement of Judgment, docketed as
Civil Case No. 98-1389.
Respondent filed a Motion to Dismiss the Petition on two grounds: (1)
the Singapore High Court did not acquire jurisdiction over its person;
and (2) the foreign judgment sought to be enforced is void for having
been rendered in violation of its right to due process.
On October 30, 1998, the RTC denied respondents motion to dismiss,
holding that neither one of the two grounds (of Grand) is among the
grounds for a motion to dismiss under Rule 16 of the 1997 Rules of
Civil Procedure.
Respondent filed a motion for reconsideration but was denied by the
RTC in its Order dated December 16, 1998.
On February 15, 1999, respondent filed with the Court of Appeals a
Petition for Certiorari assailing the RTC Order denying its motion to
dismiss.Respondent alleged that the extraterritorial service of
summons on its office in the Philippines is defective and that
the Singapore court did not acquire jurisdiction over its person. Thus,
its judgment sought to be enforced is void. Petitioner, in its comment,
moved to dismiss the petition for being unmeritorious.

On July 30, 1999, the Court of Appeals issued its Decision granting
the petition and setting aside the Orders dated October 30,
1998 and December 16, 1998 of the RTC without prejudice to the
right of private respondent to initiate another proceeding before the
proper court to enforce its claim. It found:
In the case at bar, the complaint does not involve the personal status
of plaintiff, nor any property in which the defendant has a claim or
interest, or which the private respondent has attached but purely an
action for collection of debt. It is a personal action as well as an
action in personam, not an action in rem or quasi in rem. As a
personal action, the service of summons should be personal or
substituted, not extraterritorial, in order to confer jurisdiction on the
court.
Petitioner seasonably filed a motion for reconsideration but it was
denied on September 29, 1999.
Hence, the instant Petition for Review on Certiorari.
The issues to be resolved are: (1) whether the Singapore High Court
has acquired jurisdiction over the person of respondent by the service
of summons upon its office in the Philippines; and (2) whether the
judgment by default in Suit No. 2101 by the Singapore High Court is
enforceable in the Philippines.
Generally, in the absence of a special contract, no sovereign is bound
to give effect within its dominion to a judgment rendered by a
tribunal of another country; however, under the rules of comity,
utility and convenience, nations have established a usage among
civilized states by which final judgments of foreign courts of
competent jurisdiction are reciprocally respected and rendered
efficacious under certain conditions that may vary in different
countries.[1] Certainly, the Philippine legal system has long ago
accepted into its jurisprudence and procedural rules the viability of
an action for enforcement of foreign judgment, as well as the
requisites for such valid enforcement, as derived from internationally
accepted doctrines.[2]
The conditions for the recognition and enforcement of a foreign
judgment in our legal system are contained in Section 48, Rule 39 of
the 1997 Rules of Civil Procedure, as amended, thus:
SEC. 48. Effect of foreign judgments. The effect of a judgment or
final order of a tribunal of a foreign country, having jurisdiction to
render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a
specific thing, the judgment or final order is conclusive upon the title
to the thing; and
(b) In case of a judgment or final order against a
person, the judgment or final order is presumptive evidence of a right
as between the parties and their successors in interest by a
subsequent title;
In either case, the judgment or final order may be repelled by
evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
Under the above Rule, a foreign judgment or order against a person
is merely presumptive evidence of a right as between the parties. It
may be repelled, among others, by want of jurisdiction of the issuing
authority or by want of notice to the party against whom it is
enforced. The party attacking a foreign judgment has the burden of
overcoming the presumption of its validity.[3]
33
Respondent, in assailing the validity of the judgment sought to be
enforced, contends that the service of summons is void and that
the Singapore court did not acquire jurisdiction over it.
Generally, matters of remedy and procedure such as those relating to
the service of process upon a defendant are governed by
the lex fori or the internal law of the forum,[4] which in this case is
the law of Singapore. Here, petitioner moved for leave of court to
serve a copy of the Writ of Summons outside Singapore. In an Order
dated December 24, 1997, the Singapore High Court granted leave to
serve a copy of the Writ of Summons on the Defendant by a method
of service authorized by the law of the Philippines for service of any
originating process issued by the Philippines at ground floor, APMC
Building, 136 Amorsolo corner Gamboa Street, 1229 Makati City, or
elsewhere in the Philippines.[5] This service of summons
outside Singapore is in accordance with Order 11, r. 4(2) of the Rules
of Court 1996[6] of Singapore, which provides.
(2) Where in accordance with these Rules, an originating process is
to be served on a defendant in any country with respect to which
there does not subsist a Civil Procedure Convention providing for
service in that country of process of the High Court, the originating
process may be served
a) through the government of that country, where that government is
willing to effect service;
b) through a Singapore Consular authority in that country, except
where service through such an authority is contrary to the law of the
country; or
c) by a method of service authorized by the law of that country for
service of any originating process issued by that country.
In the Philippines, jurisdiction over a party is acquired by service of
summons by the sheriff,[7] his deputy or other proper court officer
either personally by handing a copy thereof to the defendant[8] or by
substituted service.[9] In this case, the Writ of Summons issued by
the Singapore High Court was served upon respondent at its office
located at Mercure Hotel (formerly Village Hotel), MIA Road, Pasay
City. The Sheriffs Return shows that it was received on May 2,
1998by Joyce T. Austria, Secretary of the General Manager of
respondent company.[10] But respondent completely ignored the
summons, hence, it was declared in default.
Considering that the Writ of Summons was served upon respondent
in accordance with our Rules, jurisdiction was acquired by the
Singapore High Court over its person. Clearly, the judgment of
default rendered by that court against respondent is valid.
WHEREFORE, we GRANT the petition. The challenged Decision
and Resolution of the Court of Appeals in CA-G.R. SP No. 51134
are SET ASIDE. The RTC, Branch 117, Pasay City is
hereby DIRECTED to hear Civil Case No. 98-1389 with dispatch.
SO ORDERED.
G.R. No. 156848 October 11, 2007
PIONEER INTERNATIONAL, LTD., petitioner, vs.
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding
Judge of Regional Trial Court, Branch 147, Makati City, and
ANTONIO D. TODARO, respondents.
CARPIO, J.:

This is a petition for review on certiorari1 of the Decision2 dated 27
September 2001 and of the Resolution3 dated 14 January 2003 of the
Court of Appeals (appellate court) in CA-G.R. SP No. 54062. The
Decision affirmed the Orders4 dated 4 January 19995 and 3 June
19996 of Branch 147 of the Regional Trial Court of Makati City
(trial court) in Civil Case No. 98-124. The trial court denied the
motion to dismiss filed by Pioneer International, Ltd. (PIL)7in its
special appearance.
The Facts
On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint
for sum of money and damages with preliminary attachment against
PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer Philippines
Holdings, Inc. (PPHI), John G. McDonald (McDonald), and Philip J.
Klepzig (Klepzig). PIL and its co-defendants were served copies of
the summons and of the complaint at PPHI and PCPI’s office in
Alabang, Muntinlupa, through Cecille L. De Leon (De Leon), who
was Klepzig’s Executive Assistant.
Todaro alleged that PIL is a corporation duly organized under
Australian laws, while PCPI and PPHI are corporations duly
organized under Philippine laws. PIL is engaged in the ready-mix
and concrete aggregates business and has established a presence
worldwide. PIL established PPHI as the holding company of the
stocks of its operating company in the Philippines, PCPI. McDonald
is the Chief Executive Officer of PIL’s Hong Kong office while
Klepzig is the President and Managing Director of PPHI and PCPI.
For his part, Todaro further alleged that he was the managing director
of Betonval Readyconcrete, Inc. (Betonval) from June 1975 up to his
resignation in February 1996.
Before Todaro filed his complaint, there were several meetings and
exchanges of letters between Todaro and the officers of Pioneer
Concrete (Hong Kong) Limited, Pioneer Concrete Group HK, PPHI,
and PIL. According to Todaro, PIL contacted him in May 1996 and
asked if he could join it in establishing a pre-mixed concrete plant
and in overseeing its operations in the Philippines. Todaro confirmed
his availability and expressed interest in joining PIL. Todaro met
with several of PIL’s representatives and even gave PIL the names of
three of his subordinates in Betonval whom he would like to join him
in PIL.
Todaro attached nine letters, marked as Annexes "A" to "I," to his
complaint. Annex "A"8 shows that on 15 July 1996, Todaro, under
the letterhead of Ital Tech Distributors, Inc., sent a letter to Max
Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited.
Todaro wrote that "[m]y aim is to run again a ready-mix concrete
company in the Philippines and not to be a part-time consultant.
Otherwise, I could have charged your company with a much higher
fee."
Annex "B"9 shows that on 4 September 1996, Lindsay, under the
letterhead of Pioneer Concrete (Hong Kong) Limited, responded by
fax to Todaro’s faxed letter to McDonald and proposed that Todaro
"join Pioneer on a retainer basis for 2 to 3 months on the
understanding that [Todaro] would become a permanent employee if
as we expect, our entry proceeds." The faxed letter to McDonald
referred to by Lindsay is not found in the rollo and was not attached
to Todaro’s complaint.
Annex "C"10 shows that on the same date as that of Annex "B,"
Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed
another letter to Lindsay of Pioneer Concrete (Hong Kong) Limited.
Todaro asked for a formal letter addressed to him about the proposed
retainer. Todaro requested that the letter contain a statement on his
remuneration package and on his permanent employment "with
PIONEER once it has established itself on a permanent basis in the
Philippines."
34
Annex "D"11 shows that Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to McDonald of PIL. Todaro
confirmed the following to McDonald:
1. That I am accepting the proposal of PIONEER INT’L. as a
consultant for three (3) months, starting October 1, 1996, with a
retainer fee of U.S. $15,000.00 per month;
2. That after three (3) months consultancy, I should be employed by
PIONEER INT’L., on a permanent basis, as its Managing Director or
CEO in the Philippines. Remuneration package will be mutually
agreed upon by PIONEER and the undersigned;
3. That Gino Martinel and the Sales Manager – Jun Ong, will be
hired as well, on a permanent basis, by PIONEER as soon as the
company is established. Salary, likewise, will be accepted by both
PIONEER and the respective parties.
Annex "E"12 is a faxed letter dated 18 November 1996 of McDonald,
under the letterhead of Pioneer Concrete Group HK, to Todaro of Ital
Tech Distributors, Inc. The first three paragraphs of McDonald’s
letter read:
Further to our recent meeting in Hong Kong, I am now able to
confirm my offer to engage you as a consultant to Pioneer
International Ltd. Should Pioneer proceed with an investment in the
Philippines, then Pioneer would offer you a position to manage the
premixed concrete operations.
Pioneer will probably be in a position to make a decision on
proceeding with an investment by mid January ‘97.
The basis for your consultancy would be:
Monthly fee USD 15,000 per month billed on monthly basis and
payable 15 days from billing date.
Additional pre-approved expenses to be reimbursed.
Driver and secretarial support-basis for reimbursement of this to be
agreed.
Arrangement to commence from 1st November ‘96, reflecting your
contributions so far and to continue until Pioneer makes a decision.
Annex "F"13 shows Todaro’s faxed reply, under the letterhead of Ital
Tech Distributors, Inc., to McDonald of Pioneer Concrete Group HK
dated 19 November 1996. Todaro confirmed McDonald’s package
concerning the consultancy and reiterated his desire to be the
manager of Pioneer’s Philippine business venture.
Annex "G"14 shows Todaro’s faxed reply, under the letterhead of
Ital Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997.
Todaro informed McDonald that he was willing to extend assistance
to the Pioneer representative from Queensland. The tenor of the letter
revealed that Todaro had not yet occupied his expected position.
Annex "H"15 shows Klepzig’s letter, under the letterhead of PPHI, to
Todaro dated 18 September 1997. Klepzig’s message reads:
It has not proven possible for this company to meet with your
expectations regarding the conditions of your providing Pioneer with
consultancy services. This, and your refusal to consider my terms of
offer of permanent employment, leave me no alternative but to
withdraw these offers of employment with this company.
As you provided services under your previous agreement with our
Pioneer Hong Kong office during the month of August, I will see that
they pay you at the previous rates until the end of August. They have
authorized me on behalf of Pioneer International Ltd. to formally

advise you that the agreement will cease from August 31stas per our
previous discussions.
Annex "I"16 shows the letter dated 20 October 1997 of K.M. Folwell
(Folwell), PIL’s Executive General Manager of Australia and Asia,
to Todaro. Folwell confirmed the contents of Klepzig’s 18 September
1997 letter. Folwell’s message reads:
Thank you for your letter to Dr. Schubert dated 29th September 1997
regarding the alleged breach of contract with you. Dr. Schubert has
asked me to investigate this matter.
I have discussed and examined the material regarding your
association with Pioneer over the period from mid 1996 through to
September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well
documented and have been appropriately rewarded. However, in
regard to your request and expectation to be given permanent
employment with Pioneer Philippines Holdings, Inc. I am informed
that negotiations to reach agreement on appropriate terms and
conditions have not been successful.
The employment conditions you specified in your letter to John
McDonald dated 11th September are well beyond our expectations.
Mr. Todaro, I regret that we do not wish to pursue our association
with you any further. Mr. Klepzig was authorized to terminate this
association and the letter he sent to you dated 18th September has my
support.
Thank you for your involvement with Pioneer. I wish you all the best
for the future. (Emphasis added)
PIL filed, by special appearance, a motion to dismiss Todaro’s
complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a
separate motion to dismiss.17 PIL asserted that the trial court has no
jurisdiction over PIL because PIL is a foreign corporation not doing
business in the Philippines. PIL also questioned the service of
summons on it. Assuming arguendo that Klepzig is PIL’s agent in the
Philippines, it was not Klepzig but De Leon who received the
summons for PIL. PIL further stated that the National Labor
Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that
assuming that the trial court has jurisdiction over the subject matter
of the action, the complaint should be dismissed on the ground
of forum non-conveniens. Finally, PIL maintained that the complaint
does not state a cause of action because there was no perfected
contract, and no personal judgment could be rendered by the trial
court against PIL because PIL is a foreign corporation not doing
business in the Philippines and there was improper service of
summons on PIL.
Todaro filed a Consolidated Opposition dated 26 August 1998 to
refute PIL’s assertions. PIL filed, still by special appearance, a Reply
on 2 October 1998.
The Ruling of the Trial Court
On 4 January 1999, the trial court issued an order18 which ruled in
favor of Todaro. The trial court denied the motions to dismiss filed
by PIL, PCPI, PPHI, and Klepzig.
The trial court stated that the merits of a motion to dismiss a
complaint for lack of cause of action are tested on the strength of the
allegation of facts in the complaint. The trial court found that the
allegations in the complaint sufficiently establish a cause of action.
The trial court declared that Todaro’s cause of action is based on an
alleged breach of a contractual obligation and an alleged violation of
Articles 19 and 21 of the Civil Code. Therefore, the cause of action
35
does not lie within the jurisdiction of the NLRC but with the trial
court.
The trial court also asserted its jurisdiction over PIL, holding that PIL
did business in the Philippines when it entered into a contract with
Todaro. Although PIL questions the service of summons on Klepzig,
whom PIL claims is not its agent, the trial court ruled that PIL failed
to adduce evidence to prove its contention. Finally, on the issue
of forum non-conveniens, the trial court found that it is more
convenient to hear and decide the case in the Philippines because
Todaro resides in the Philippines and the contract allegedly breached
involves employment in the Philippines.
PIL filed an urgent omnibus motion for the reconsideration of the
trial court’s 4 January 1999 order and for the deferment of filing its
answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus
motion. Todaro filed a consolidated opposition, to which PIL, PCPI,
PPHI, and Klepzig filed a joint reply. The trial court issued an
order19on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and
Klepzig. The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days
within which to file their respective answers.
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The Ruling of the Appellate Court
The appellate court denied PIL’s petition and affirmed the trial
court’s ruling in toto. The dispositive portion of the appellate court’s
decision reads:
WHEREFORE, premises considered, the present petition for
certiorari is hereby DENIED DUE COURSE and accordingly
DISMISSED. The assailed Orders dated January 4, 1999 and June 3,
1999 of the Regional Trial Court of Makati City, Branch 147, in
Civil Case No, 98-124 are hereby AFFIRMED in toto.
SO ORDERED.20
On 14 January 2003, the appellate court dismissed21 PIL’s motion
for reconsideration for lack of merit. The appellate court stated that
PIL’s motion raised no new substantial or weighty arguments that
could impel the appellate court from departing or overturning its
previous decision. PIL then filed a petition for review on certiorari
before this Court.
The Issues
PIL raised the following issues before this Court:
A. [The trial court] did not and cannot acquire jurisdiction over the
person of [PIL] considering that:
A.1. [PIL] is a foreign corporation "not doing business" in the
Philippines.
A.2. Moreover, the complaint does not contain appropriate
allegations of ultimate facts showing that [PIL] is doing or
transacting business in the Philippines.
A.3. Assuming arguendo that jurisdiction may be acquired over the
person of [PIL], [the trial court] still failed to acquire jurisdiction
since summons was improperly served on [PIL].
B. [Todaro] does not have a cause of action and the complaint fails to
state a cause of action. Jurisprudence is settled in that in resolving a
motion to dismiss, a court can consider all the pleadings filed in the
case, including annexes, motions and all evidence on record.
C. [The trial court] did not and cannot acquire jurisdiction over the
subject matter of the complaint since the allegations contained

therein indubitably show that [Todaro] bases his claims on an alleged
breach of an employment contract. Thus, exclusive jurisdiction is
vested with the [NLRC].
D. Pursuant to the principle of forum non-conveniens, [the trial court]
committed grave abuse of discretion when it took cognizance of the
case.22
The Ruling of the Court
The petition has partial merit. We affirm with modification the
rulings of the trial and appellate courts. Apart from the issue on
service of summons, the rulings of the trial and appellate courts on
the issues raised by PIL are correct.
Cause of Action
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a
cause of action is the act or omission by which a party violates a right
of another.
The general rule is that the allegations in a complaint are sufficient to
constitute a cause of action against the defendants if, admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of
damages.23
In the present case, the summary of Todaro’s allegations states that
PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in
PIL’s Philippine office. Todaro’s allegations are thus sufficient to
establish a cause of action. We quote with approval the trial court’s
ruling on this matter:
On the issue of lack of cause of action – It is well-settled that the
merits of a motion to dismiss a complaint for lack of cause of action
is tested on the strength of the allegations of fact contained in the
complaint and no other (De Jesus, et al. vs. Belarmino, et al., 95 Phil.
366 [1954]). This Court finds that the allegations of the complaint,
specifically paragraphs 13-33 thereof, paragraphs 30-33 alleging as
follows:
"30. All of the acts set forth in the foregoing have been done with the
knowledge, consent and/or approval of the defendants who acted in
concert and/or in conspiracy with one another.
31. Under the circumstances, there is a valid contract entered into
between [Todaro] and the Pioneer Group, whereby, among others,
the Pioneer Group would employ [Todaro], on a permanent basis, to
manage and operate the ready-mix concrete operations, if the Pioneer
Group decides to invest in the Philippines.
32. The Pioneer Group has decided to invest in the Philippines. The
refusal of the defendants to comply with the Pioneer Group’s
undertaking to employ [Todaro] to manage their Philippine
ready-mix operations, on a permanent basis, is a direct breach of an
obligation under a valid and perfected contract.
33. Alternatively, assuming without conceding, that there was no
contractual obligation on the part of the Pioneer Group to employ
[Todaro] on a permanent basis, in their Philippine operations, the
Pioneer Group and the other defendants did not act with justice, give
[Todaro] his due and observe honesty and good faith and/or they
36
have willfully caused injury to [Todaro] in a manner that is contrary
to morals, good customs, and public policy, as mandated under Arts.
19 and 21 of the New Civil Code."
sufficiently establish a cause of action for breach of contract and/or
violation of Articles 19 and 21 of the New Civil Code. Whether or
not these allegations are true is immaterial for the court cannot
inquire into the truth thereof, the test being whether, given the
allegations of fact in the complaint, a valid judgment could be
rendered in accordance with the prayer in the complaint.24
It should be emphasized that the presence of a cause of action rests
on the sufficiency, and not on the veracity, of the allegations in the
complaint. The veracity of the allegations will have to be examined
during the trial on the merits. In resolving a motion to dismiss based
on lack of cause of action, the trial court is limited to the four corners
of the complaint and its annexes. It is not yet necessary for the trial
court to examine the truthfulness of the allegations in the complaint.
Such examination is proper during the trial on the merits.
Forum Non-Conveniens
The doctrine of forum non-conveniens requires an examination of the
truthfulness of the allegations in the complaint. Section 1, Rule 16 of
the 1997 Rules of Civil Procedure does not
mention forum non-conveniens as a ground for filing a motion to
dismiss. The propriety of dismissing a case based on forum
non-conveniens requires a factual determination; hence, it is more
properly considered a matter of defense. While it is within the
discretion of the trial court to abstain from assuming jurisdiction on
this ground, the trial court should do so only after vital facts are
established to determine whether special circumstances require the
court’s desistance.25
Jurisdiction over PIL
PIL questions the trial court’s exercise of jurisdiction over it on two
levels. First, that PIL is a foreign corporation not doing business in
the Philippines and because of this, the service of summons on PIL
did not follow the mandated procedure. Second, that Todaro’s claims
are based on an alleged breach of an employment contract so Todaro
should have filed his complaint before the NLRC and not before the
trial court.
Transacting Business in the Philippines and
Service of Summons
The first level has two sub-issues: PIL’s transaction of business in
the Philippines and the service of summons on PIL. Section 12, Rule
14 of the 1997 Rules of Civil Procedure provides the manner by
which summons may be served upon a foreign juridical entity which
has transacted business in the Philippines. Thus:
Service upon foreign private juridical entity. — When the defendant
is a foreign juridical entity which has transacted business in the
Philippines, service may be made on its resident agent designated in
accordance with law for that purpose, or, if there be no such agent,
on the government official designated by law to that effect, or any of
its officers or agents within the Philippines.
As to the first sub-issue, PIL insists that its sole act of "transacting"
or "doing business" in the Philippines consisted of its investment in
PPHI. Under Philippine law, PIL’s mere investment in PPHI does not
constitute "doing business." However, we affirm the lower courts’
ruling and declare that, based on the allegations in Todaro’s
complaint, PIL was doing business in the Philippines when it
negotiated Todaro’s employment with PPHI. Section 3(d) of
Republic Act No. 7042, Foreign Investments Act of 1991, states:

The phrase "doing business" shall include soliciting orders, service
contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a
period or periods totaling one hundred eighty [180] days or more;
participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings
or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of commercial gain or of
the purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or
officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account;
(Emphases added)
PIL’s alleged acts in actively negotiating to employ Todaro to run its
pre-mixed concrete operations in the Philippines, which acts are
hypothetically admitted in PIL’s motion to dismiss, are not mere acts
of a passive investor in a domestic corporation. Such are managerial
and operational acts in directing and establishing commercial
operations in the Philippines. The annexes that Todaro attached to his
complaint give us an idea on the extent of PIL’s involvement in the
negotiations regarding Todaro’s employment. In Annex "E,"
McDonald of Pioneer Concrete Group HK confirmed his offer to
engage Todaro as a consultant of PIL. In Annex "F," Todaro
accepted the consultancy. In Annex "H," Klepzig of PPHI stated that
PIL authorized him to tell Todaro about the cessation of his
consultancy. Finally, in Annex "I," Folwell of PIL wrote to Todaro to
confirm that "Pioneer" no longer wishes to be associated with Todaro
and that Klepzig is authorized to terminate this association. Folwell
further referred to a Dr. Schubert and to Pioneer Hong Kong. These
confirmations and references tell us that, in this instance, the various
officers and companies under the Pioneer brand name do not work
independently of each other. It cannot be denied that PIL had
knowledge of and even authorized the non-implementation of
Todaro’s alleged permanent employment. In fact, in the letters to
Todaro, the word "Pioneer" was used to refer not just to PIL alone
but also to all corporations negotiating with Todaro under the Pioneer
name.
As further proof of the interconnection of the various Pioneer
corporations with regard to their negotiations with Todaro,
McDonald of Pioneer Concrete Group HK confirmed Todaro’s
engagement as consultant of PIL (Annex "E") while Folwell of PIL
stated that Todaro rendered consultancy services to Pioneer HK
(Annex "I"). In this sense, the various Pioneer corporations were not
acting as separate corporations. The behavior of the various Pioneer
corporations shoots down their defense that the corporations have
separate and distinct personalities, managements, and operations. The
various Pioneer corporations were all working in concert to negotiate
an employment contract between Todaro and PPHI, a domestic
corporation.
Finally, the phrase "doing business in the Philippines" in the former
version of Section 12, Rule 14 now reads "has transacted business in
the Philippines." The scope is thus broader in that it is enough for the
application of the Rule that the foreign private juridical entity "has
transacted business in the Philippines."26
As to the second sub-issue, the purpose of summons is not only to
acquire jurisdiction over the person of the defendant, but also to give
notice to the defendant that an action has been commenced against it
37
and to afford it an opportunity to be heard on the claim made against
it. The requirements of the rule on summons must be strictly
followed; otherwise, the trial court will not acquire jurisdiction over
the defendant.
When summons is to be served on a natural person, service of
summons should be made in person on the defendant.27 Substituted
service is resorted to only upon the concurrence of two requisites: (1)
when the defendant cannot be served personally within a reasonable
time and (2) when there is impossibility of prompt service as shown
by the statement in the proof of service in the efforts made to find the
defendant personally and that such efforts failed.28
The statutory requirements of substituted service must be followed
strictly, faithfully, and fully, and any substituted service other than
by the statute is considered ineffective. Substituted service is in
derogation of the usual method of service. It is a method
extraordinary in character and may be used only as prescribed and in
the circumstances authorized by the statute.29 The need for strict
compliance with the requirements of the rule on summons is also
exemplified in the exclusive enumeration of the agents of a domestic
private juridical entity who are authorized to receive summons.
At present, Section 11 of Rule 14 provides that when the defendant is
a domestic private juridical entity, service may be made on the
"president, managing partner, general manager, corporate secretary,
treasurer, or in-house counsel." The previous version of Section 11
allowed for the service of summons on the "president, manager,
secretary, cashier, agent, or any of its directors." The present Section
11 qualified "manager" to "general manager" and "secretary" to
"corporate secretary." The present Section 11 also removed "cashier,
agent, or any of its directors" from the exclusive enumeration.
When summons is served on a foreign juridical entity, there are three
prescribed ways: (1) service on its resident agent designated in
accordance with law for that purpose, (2) service on the government
official designated by law to receive summons if the corporation does
not have a resident agent, and (3) service on any of the corporation’s
officers or agents within the Philippines.30
In the present case, service of summons on PIL failed to follow any
of the prescribed processes. PIL had no resident agent in the
Philippines. Summons was not served on the Securities and
Exchange Commission (SEC), the designated government
agency,31 since PIL is not registered with the SEC. Summons for
PIL was served on De Leon, Klepzig’s Executive Assistant. Klepzig
is PIL’s "agent within the Philippines" because PIL authorized
Klepzig to notify Todaro of the cessation of his consultancy
(Annexes "H" and "I").32 The authority given by PIL to Klepzig to
notify Todaro implies that Klepzig was likewise authorized to
receive Todaro’s response to PIL’s notice. Todaro responded to
PIL’s notice by filing a complaint before the trial court.
However, summons was not served personally on Klepzig as agent of
PIL. Instead, summons was served on De Leon, Klepzig’s Executive
Assistant. In this instance, De Leon was not PIL’s agent but a mere
employee of Klepzig. In effect, the sheriff33 resorted to substituted
service. For symmetry, we apply the rule on substituted service of
summons on a natural person and we find that no reason was given to
justify the service of PIL’s summons on De Leon.
Thus, we rule that PIL transacted business in the Philippines and
Klepzig was its agent within the Philippines. However, there was
improper service of summons on PIL since summons was not served
personally on Klepzig.
NLRC Jurisdiction

As to the second level, Todaro prays for payment of damages due
him because of PIL’s non-implementation of Todaro’s alleged
employment agreement with PPHI. The appellate court stated its
ruling on this matter, thus:
It could not be denied that there was no existing contract yet to speak
of between PIONEER INTL. and [Todaro]. Since there was an
absence of an employment contract between the two parties, this
Court is of the opinion and so holds that no employer-employee
relationship actually exists. Record reveals that all that was agreed
upon by [Todaro] and the Pioneer Concrete, acting in behalf of
PIONEER INTL., was the confirmation of the offer to engage the
services of the former as consultant of PIONEER INTL. (Rollo, p.
132). The failure on the part of PIONEER INTL. to abide by the said
agreement, which was duly confirmed by PIONEER INTL., brought
about a breach of an obligation on a valid and perfected agreement.
There being no employer-employee relationship established between
[PIL] and [Todaro], it could be said that the instant case falls within
the jurisdiction of the regular courts of justice as the money claim of
[Todaro] did not arise out of or in connection with [an]
employer-employee relationship.34
Todaro’s employment in the Philippines would not be with PIL but
with PPHI as stated in the 20 October 1997 letter of Folwell.
Assuming the existence of the employment agreement, the
employer-employee relationship would be between PPHI and Todaro,
not between PIL and Todaro. PIL’s liability for the
non-implementation of the alleged employment agreement is a civil
dispute properly belonging to the regular courts. Todaro’s causes of
action as stated in his complaint are, in addition to breach of contract,
based on "violation of Articles 19 and 21 of the New Civil Code" for
the "clear and evident bad faith and malice"35 on the part of
defendants. The NLRC’s jurisdiction is limited to those enumerated
under Article 217 of the Labor Code.36
WHEREFORE, the petition is PARTIALLY GRANTED. The
Decision dated 27 September 2001 and the Resolution dated 14
January 2003 of the appellate court are AFFIRMED with
the MODIFICATION that there was improper service of summons
on Pioneer International, Ltd. The case is remanded to the trial court
for proper service of summons and trial. No costs.
SO ORDERED.
G.R. No. 168747 October 19, 2007
VICTORIA REGNER, Petitioner, vs.
CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU
COUNTRY CLUB, Inc., Respondents.
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari seeks to reverse the
Decision1 dated 6 May 2005 of the Court of Appeals in CA-G.R. CV
No. 71028 entitled, "Victoria Regner v. Cynthia Logarta, Teresa R.
Tormis and Cebu Country Club, Inc.," which affirmed the Order
dated 9 November 2000 of the Regional Trial Court (RTC) of Cebu,
granting herein respondents’ motion to dismiss Civil Case No. CEB
23927. The Order dated 9 November 2000 of the RTC dismissed
herein petitioner’s complaint for declaration of nullity of a deed of
donation, for failure to serve summons on Cynthia Logarta, an
indispensable party therein.
Civil Case No. CEB. 23927 arose from the following factual
antecedents:
38
Luis Regner (Luis) had three daughters with his first wife, Anicita C.
Regner, namely, Cynthia Logarta (Cynthia) and Teresa Tormis
(Teresa), the respondents herein, and Melinda Regner-Borja
(Melinda).
Herein petitioner Victoria Regner (Victoria) is the second wife of
Luis.
During the lifetime of Luis, he acquired several properties, among
which is a share at Cebu Country Club Inc., evidenced by Proprietary
Ownership Certificate No. 0272. On 15 May 1998, Luis executed a
Deed2 of Donation in favor of respondents Cynthia and Teresa
covering Proprietary Ownership Certificate No. 0272 of the Cebu
Country Club, Inc.
Luis passed away on 11 February 1999.
On 15 June 1999, Victoria filed a Complaint3 for Declaration of
Nullity of the Deed of Donation with Prayer for Issuance of a Writ of
Preliminary Injunction and Temporary Restraining Order against
Cynthia and Teresa with the RTC, docketed as Civil Case No. CEB.
23927. Victoria alleged in her complaint that: on 17 March 1997,
Luis made a written declaration wherein he stated that due to his
illness and forgetfulness, he would not sign any document without
the knowledge of his lawyer, Atty. Francis Zosa; on 15 May 1998,
when Luis was already very ill and no longer of sound and disposing
mind, Cynthia and Teresa , conspiring and confederating with each
other, fraudulently made or caused to be fraudulently made a Deed of
Donation whereby they made it appear that Luis donated to them
Proprietary Ownership Certificate No. 0272; since Luis no longer
had the ability to write or affix his signature, Melinda, acting under
the influence of her sisters, Cynthia and Teresa, fraudulently
manipulated the hand of Luis so that he could affix his thumbmark
on the assailed Deed of Donation; on 8 February 1998, or three days
before the death of Luis, and when he was already in comatose
condition at the Cebu Doctors’ Hospital, Melinda, Teresa, and
Cynthia caused the preparation of an affidavit to the effect that Luis
affirmed the Deed of Donation he allegedly executed earlier by
lifting his hand to affix his thumbmark on the said affidavit.
Sheriff Melchor A. Solon served the summonses on Cynthia and
Teresa at the Borja Family Clinic in Tagbilaran City wherein
Melinda worked as a doctor, but Melinda refused to receive the
summonses for her sisters and informed the sheriff that their lawyer,
Atty. Francis Zosa, would be the one to receive the same.
Upon her arrival in the Philippines, on 1 June 2000, Teresa was
personally served the summons at Room 304, Regency Crest
Condominium, Banilad, Cebu City. She filed her Answer4 with
counterclaim with the RTC on 6 June 2000.
Subsequently, on 12 September 2002, Teresa filed a motion to
dismiss Civil Case No. CEB 23927 because of petitioner’s failure to
prosecute her action for an unreasonable length of time.
Petitioner opposed5 the motion and filed her own motion to set the
case for pre-trial, to which Teresa filed her rejoinder on the ground
that their sister, Cynthia, an indispensable party, had not yet been
served a summons. Thus, Teresa prayed for the dismissal of
petitioner’s complaint, as the case would not proceed without
Cynthia’s presence.
On 9 November 2000, the RTC issued an Order6 granting respondent
Teresa’s motion to dismiss, pertinent portions of which read:
Considering that the donees in the Deed of Donation are Cynthia R.
Logarta and Teresa R. Tormis, they are therefore an (sic)
indispensable party (sic). In the case of Quisumbing vs. Court of
Appeals, 189 SCRA 325, indispensable parties are those with such an

interest in the controversy that a final decree would necessarily affect
their rights so that the court could not proceed without their presence
Wherefore, in view of the foregoing, the instant case is hereby
dismissed without prejudice.
A motion for reconsideration was filed by petitioner, but the same
was denied in an Order dated 14 February 2001.
Aggrieved, petitioner appealed to the Court of Appeals. On 6 May
2005, the Court of Appeals rendered a Decision denying the appeal
and affirming in toto the order of dismissal of the complaint by the
RTC and the denial of the motion for reconsideration thereof. The
Court of Appeals ratiocinated that petitioner’s failure to move for an
extraterritorial service of summons constitutes failure to prosecute
for an unreasonable length of time, thus:
[T]he plaintiff-appellant [Victoria Regner] should have moved for
the extraterritorial service of summons for both defendants-appellees
Teresa R. Tormis and Cynthia R. Logarta as they were not residing
and were not found in the Philippines when plaintiff-appellant
[Victoria Regner] filed this case below. Although
defendant-appellant Teresa Tormis was personally served with
summons on June 1, 2000 when she came to the Philippines but the
same was only effected after a long wait or after the lapse of almost
one year from the date the complaint was filed on June 15, 1999. To
allow this practice would be to make the continuation of like
proceedings before the courts dependent on when the defendants
would be personally served with summons by the time they would
come to the Philippines, which would only unnecessarily delay the
proceedings and clog the court dockets as well. The afore-cited rule
was precisely crafted to meet situations similar to the present case to
avoid unnecessary delays.
It has to be emphasized that it is incumbent upon the plaintiff
[Victoria Regner] to move with leave of court for the extraterritorial
service of summons. Taking into account the considerable time that
had elapsed from the filing of the complaint on June 15, 1999 until
defendant-appellee Teresa R. Tormis, through counsel, filed a motion
to dismiss on September 12, 2000, or approximately fifteen (15)
months, without any act on the part of plaintiff-appellant [Victoria
Regner] to move for extraterritorial service of summons upon the
person of defendant-appellee Cynthia Logarta renders
plaintiff-appellant’s [Victoria Regner] complaint dismissible for
failure to prosecute her action for unreasonable length of time under
Section 3, Rule 17, Revised Rules of Court, x x x.7
Hence, this appeal via petition8 for review on certiorari filed by
petitioner raising the following assignment of errors:
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
DELAY IN SERVING SUMMONS ON ONE OF THE
DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE
NOTWITHSTANDING THAT THE REST OF THE
CO-DEFENDANTS WERE DULY SERVED WITH SUMMONSES
THE COURT OF APPEALS ERRED IN NOT CONSIDERING
THAT THE ANSWER FILED BY ONE INDIVIDUAL
DEFENDANT REDOUNDS TO THE BENEFIT OF THE OTHER
DEFENDANT WHO HAS NOT BEEN SERVED WITH
SUMMONS, THE NATURE OF ACTION BEING ADMITTEDLY
COMMON AMONG ALL DEFENDANTS.9
From the foregoing, this Court identifies the issues to be resolved in
this petition as: (1) Whether a co-donee is an indispensable party in
an action to declare the nullity of the deed of donation, and (2)
whether delay in the service of summons upon one of the defendants
constitutes failure to prosecute that would warrant dismissal of the
complaint.
39
A Court must acquire jurisdiction over the persons of indispensable
parties before it can validly pronounce judgments personal to the
parties. Courts acquire jurisdiction over a party plaintiff upon the
filing of the complaint. On the other hand, jurisdiction over the
person of a party defendant is assured upon the service of summons
in the manner required by law or otherwise by his voluntary
appearance. As a rule, if a defendant has not been summoned, the
court acquires no jurisdiction over his person, and a personal
judgment rendered against such defendant is null and void.10 A
decision that is null and void for want of jurisdiction on the part of
the trial court is not a decision in the contemplation of law and, hence,
it can never become final and executory.11
Rule 3, Section 7 of the Rules of Court, defines indispensable parties
as parties-in-interest without whom there can be no final
determination of an action. As such, they must be joined either as
plaintiffs or as defendants. The general rule with reference to the
making of parties in a civil action requires, of course, the joinder of
all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence
being a sine qua non for the exercise of judicial power.12 It is
precisely "when an indispensable party is not before the court [that]
the action should be dismissed."13 The absence of an indispensable
party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as
to those present.14
As we ruled in Alberto v. Mananghala15 :
In an action for recovery of property against a person who purchased
it from another who in turn acquired it from others by the same
means or by donation or otherwise, the predecessors of defendants
are indispensable parties if the transfers, if not voided, may bind
plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In the latter case, this
Court held:
In order to bring this suit duly to a close, it is imperative to determine
the only question raised in connection with the pending appeal, to wit,
whether all the persons who intervened in the matter of the transfers
and donation herein referred to, are or are not necessary parties to
this suit, since it is asked in the complaint that the said transfers and
donation be declared null and void – an indispensable declaration for
the purpose, in a proper case, of concluding the plaintiff to be the
sole owner of the house in dispute.
If such a declaration of annulment can directly affect the persons
who made and who were concerned in the said transfers, nothing
could be more proper and just than to hear them in the litigation, as
parties interested in maintaining the validity of those transactions,
and therefore, whatever be the nature of the judgment rendered,
Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente
Miranda, and Rafael Sierra, besides the said minors, must be
included in the case as defendants." (Garcia vs. Reyes, 17 Phil.,
130-131.)
It takes no great degree of legal sophistication to realize that Cynthia
and Teresa are indispensable parties to Civil Case No. CEB 23927.
Cynthia and Teresa allegedly derived their rights to the subject
property by way of donation from their father Luis. The central thrust
of the petitioner’s complaint in Civil Case No. CEB 23927 was that
Luis could not have donated Proprietary Ownership Certificate No.
0272 to his daughters Cynthia and Teresa, as Luis was already very
ill and no longer of sound and disposing mind at the time of donation
on 15 May 1997. Accordingly, the prayer in petitioner’s complaint
was for the trial court to declare null and void the Deed of Donation
and to restrain the Cebu Country Club, Inc. from transferring title
and ownership of Proprietary Ownership Certificate No. 0272 to
Cynthia and Teresa.

Thus, based on the Deed of Donation, Teresa and Cynthia are
co-owners of Proprietary Membership Certificate No. 0272 of Cebu
Country Club, Inc. The country club membership certificate is
undivided and it is impossible to pinpoint which specific portion of
the property belongs to either Teresa or Cynthia. Indeed, both Teresa
and Cynthia are indispensable parties in Civil Case No. CEB 23927.
An indispensable party has been defined as follows:
An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be
made, in his absence, without injuring or affecting that interest, a
party who has not only an interest in the subject matter of the
controversy, but also has an interest of such nature that a final decree
cannot be made without affecting his interest or leaving the
controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence
there cannot be a determination between the parties already before
the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before
it may properly go forward.
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the
other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also,
a person is not an indispensable party if his presence would merely
permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is
not a sufficient reason to declare a person to be an indispensable
party that his presence will avoid multiple litigation.16
In Servicewide Specialists, Incorporated v. Court of Appeals,17 this
Court held that no final determination of a case could be made if an
indispensable party is not legally present therein:
An indispensable party is one whose interest will be affected by the
court’s action in the litigation, and without whom no final
determination of the case can be had. The party’s interest in the
subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties that his legal presence as a party to
the proceeding is an absolute necessity. In his absence there cannot
be a resolution of the dispute of the parties before the court which is
effective, complete, or equitable.
The rationale for treating all the co-owners of a property as
indispensable parties in a suit involving the co-owned property is
explained in Arcelona v. Court of Appeals18 :
As held by the Supreme Court, were the courts to permit an action in
ejectment to be maintained by a person having merely an undivided
interest in any given tract of land, a judgment in favor of the
defendants would not be conclusive as against the other co-owners
not parties to the suit, and thus the defendant in possession of the
property might be harassed by as many succeeding actions of
ejectment, as there might be co-owners of the title asserted against
him. The purpose of this provision was to prevent multiplicity of
suits by requiring the person asserting a right against the defendant to
include with him, either as co-plaintiffs or as co-defendants, all
persons standing in the same position, so that the whole matter in
dispute may be determined once and for all in one litigation.
Applying the foregoing definitions and principles to the present case,
this Court finds that any decision in Civil Case No. CEB 23927
cannot bind Cynthia, and the Court cannot nullify the donation of the
property she now co-owns with Teresa, even if limited only to the
portion belonging to Teresa, to whom summons was properly served,
since ownership of the property is still pro indiviso. Obviously,
40
Cynthia is an indispensable party in Civil Case No. CEB 23927
without whom the lower court is barred from making a final
adjudication as to the validity of the entire donation. Without the
presence of indispensable parties to a suit or proceeding, a judgment
therein cannot attain finality.19
Being an indispensable party in Civil Case No. CEB 23927, the trial
court must also acquire jurisdiction over Cynthia’s person through
the proper service of summons.
Based on the foregoing disquisitions, the issue of whether the answer
filed by Teresa should benefit Cynthia who was not served summons
need not be discussed.
As to determine whether Cynthia was properly served a summons, it
will be helpful to determine first the nature of the action filed against
Cynthia and Teresa by petitioner Victoria, whether it is an action in
personam, in rem or quasi in rem. This is because the rules on service
of summons embodied in Rule 14 apply according to whether an
action is one or the other of these actions.
In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract or the recovery of
damages.20 In contrast, in a real action, the plaintiff seeks the
recovery of real property; or, as indicated in Section 2(a), Rule 4 of
the then Rules of Court, a real action is an action affecting title to
real property or for the recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property. An
action in personam is an action against a person on the basis of his
personal liability, while an action in rem is an action against the thing
itself, instead of against the person.21
In an action in personam, personal service of summons or, if this is
not possible and he cannot be personally served, substituted service,
as provided in Section 7, Rule 14 of the Rules of Court,22 is essential
for the acquisition by the court of jurisdiction over the person of a
defendant who does not voluntarily submit himself to the authority of
the court.23 If defendant cannot be served a summons because he is
temporarily abroad, but is otherwise a Philippine resident, service of
summons may, by leave of court, be made by
publication.24 Otherwise stated, a resident defendant in an action in
personam, who cannot be personally served a summons, may be
summoned either by means of substituted service in accordance with
Section 7, Rule 14 of the Rules of Court, or by publication as
provided in Sections 15 and 16 of the same Rule.
In all of these cases, it should be noted, defendant must be a resident
of the Philippines; otherwise an action in personam cannot be
brought because jurisdiction over his person is essential to make a
binding decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction
over the person of the defendant is not essential for giving the court
jurisdiction so long as the court acquires jurisdiction over the res. If
the defendant is a nonresident and he is not found in the country,
summons may be served extraterritorially in accordance with Section
15, Rule 14 of the Rules of Court, which provides:
Section 15. Extraterritorial service. - When the defendant does not
reside and is not found in the Philippines, and the action affects the
personal status of the plaintiff or relates to, or the subject of which is,
property within the Philippines, in which the defendant has or claims
a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant
from any interest therein, or the property of the defendant has been
attached within the Philippines, service may, by leave of court, be
effected out of the Philippines by personal service as under Section 6;
or by publication in a newspaper of general circulation in such places
and for such time as the court may order, in which case a copy of the

summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the
court may deem sufficient. Any order granting such leave shall
specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.
As stated above, there are only four instances wherein a defendant
who is a non-resident and is not found in the country may be served a
summons by extraterritorial service, to wit: (1) when the action
affects the personal status of the plaintiff; (2) when the action relates
to, or the subject of which is property within the Philippines, on
which the defendant claims a lien or an interest, actual or contingent;
(3) when the relief demanded in such action consists, wholly or in
part, in excluding the defendant from any interest in property located
in the Philippines; and (4) when the defendant non-resident’s
property has been attached within the Philippines. In these instances,
service of summons may be effected by (a) personal service out of
the country, with leave of court; (b) publication, also with leave of
court; or (c) any other manner the court may deem sufficient.25
In such cases, what gives the court jurisdiction in an action in rem or
quasi in rem is that it has jurisdiction over the res, i.e., the personal
status of the plaintiff who is domiciled in the Philippines or the
property litigated or attached. Service of summons in the manner
provided in Section 15, Rule 14 of the Rules of Court is not for the
purpose of vesting the court with jurisdiction, but for complying with
the requirements of fair play or due process, so that the defendant
will be informed of the pendency of the action against him; and the
possibility that property in the Philippines belonging to him, or in
which he has an interest, might be subjected to a judgment in favor of
the plaintiff and he can thereby take steps to protect his interest if he
is so minded.26
In petitioner’s Complaint in Civil Case No. CEB No. 23427, she
alleged that Cynthia is residing at 462 West Vine No. 201, Glendale,
California, 912041, U.S.A.; while Teresa is residing at 2408 South
Hacienda Boulevard, Hacienda Heights, California, but they usually
visit here in the Philippines and can be served summonses and other
processes at the Borja Family Clinic, Bohol. Pertinent portions of the
Complaint read:
2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married
to Ramon Logarta, resident (sic) 463 West Vine No.201, Glendale,
California, 912041, USA. She however usually visits in the
Philippines and can be served with summons and other processes of
this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol;
3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age,
married to Antonio Tormis, and a resident of 2408 South Hacienda
Heights, California, 19745, U.S.A. She however usually visits in the
Philippines and can be served with summons and other processes of
this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol.27
Petitioner prayed for a declaration of nullity of the deed of donation,
to restrain Cebu Country Club, Inc. from transferring title and
ownership of Proprietary Ownership Certificate No. 0272 to Cynthia
and Teresa, and for moral and exemplary damages. Civil Case No.
CEB 23927 is evidently an action against Cynthia and Teresa on the
basis of their personal liability for the alleged fraudulent transfer of
the subject Country Club membership from Luis to their name. In
this sense, petitioner questions the participation and shares of
Cynthia and Teresa in the transferred Country Club membership.
Moreover, the membership certificate from the Cebu Country Club,
Inc. is a personal property. Thus, the action instituted by petitioner
before the RTC is in personam.
Being an action in personam, the general rule requires the personal
service of summons on Cynthia within the Philippines, but this is not
41
possible in the present case because Cynthia is a non-resident and is
not found within the Philippines.
As Cynthia is a nonresident who is not found in the Philippines,
service of summons on her must be in accordance with Section 15,
Rule 14 of the Rules of Court. Such service, to be effective outside
the Philippines, must be made either (1) by personal service; (2) by
publication in a newspaper of general circulation in such places and
for such time as the court may order, in which case a copy of the
summons and order of the court should be sent by registered mail to
the last known address of the defendant; or (3) in any other manner
which the court may deem sufficient. The third mode, like the first
two, must be made outside the Philippines, such as through the
Philippine Embassy in the foreign country where Cynthia resides.
Since in the case at bar, the service of summons upon Cynthia was
not done by any of the authorized modes, the trial court was correct
in dismissing petitioner’s complaint.
Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states –
SEC. 3. Dismissal due to fault of plaintiff. – If, for no justifiable
cause, the plaintiff fails to appear on the date of the presentation of
his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any
order of the court, the complaint may be dismissed upon motion of
the defendant or upon the court's own motion, without prejudice to
the right of the defendant to prosecute his counterclaim in the same
or in a separate action. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise declared by the court.
As can be gleaned from the rule, there are three instances when the
complaint may be dismissed due to the plaintiff's fault: (1) if he fails
to appear during a scheduled trial, especially on the date for the
presentation of his evidence in chief; (2) if he fails to prosecute his
action for an unreasonable length of time; and (3) if he fails to
comply with the rules or any order of the court.28
Considering the circumstances of the case, it can be concluded that
the petitioner failed to prosecute the case for an unreasonable length
of time. There is failure to prosecute when the plaintiff, being present,
is not ready or is unwilling to proceed with the scheduled trial or
when postponements in the past were due to the plaintiff's own
making, intended to be dilatory or caused substantial prejudice on the
part of the defendant.29
While a court can dismiss a case on the ground of failure to prosecute,
the true test for the exercise of such power is whether, under the
prevailing circumstances, the plaintiff is culpable for want of due
diligence in failing to proceed with reasonable promptitude.30 As to
what constitutes an "unreasonable length of time," within the
purview of the above-quoted provision, the Court has ruled that it
"depends upon the circumstances of each particular case," and that
"the sound discretion of the court" in the determination of said
question "will not be disturbed, in the absence of patent abuse"; and
that "the burden of showing abuse of judicial discretion is upon the
appellant since every presumption is in favor of the correctness of the
court's action."31 Likewise, the concept of promptness is a relative
term and must not unnecessarily be an inflexible one. It connotes an
action without hesitation and loss of time. As to what constitutes the
term is addressed to the consideration of the trial court, bearing in
mind that while actions must be disposed of with dispatch, the
essential ingredient is the administration of justice and not mere
speed.32
It is well to quote the doctrine laid in Padua v. Ericta,33 as
accentuated in the subsequent case Marahay v. Melicor34:

Courts should not brook undue delays in the ventilation and
determination of causes. It should be their constant effort to assure
that litigations are prosecuted and resolved with dispatch.
Postponements of trials and hearings should not be allowed except on
meritorious grounds; and the grant or refusal thereof rests entirely in
the sound discretion of the Judge. It goes without saying, however,
that discretion must be reasonably and wisely exercised, in the light
of the attendant circumstances. Some reasonable deferment of the
proceedings may be allowed or tolerated to the end that cases may be
adjudged only after full and free presentation of evidence by all the
parties, especially where the deferment would cause no substantial
prejudice to any part. The desideratum of a speedy disposition of
cases should not, if at all possible, result in the precipitate loss of a
party’s right to present evidence and either in plaintiff's being
non-suited or the defendant's being pronounced liable under an ex
parte judgment.
"[T]rial courts have x x x the duty to dispose of controversies after
trial on the merits whenever possible. It is deemed an abuse of
discretion for them, on their own motion, ‘to enter a dismissal which
is not warranted by the circumstances of the case’ (Municipality of
Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While it is true that the
dismissal of an action on grounds specified under Section 3, Rule 17
of the Revised Rules of Court is addressed to their discretion (Flores
v. Phil. Alien Property Administrator, 107 Phil. 778 [1960];
Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio,
105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna,
L-17631, October 19, 1966, 18 SCRA 390), such discretion must be
exercised soundly with a view to the circumstances surrounding each
particular case (Vernus-Sanciangco v. Sanciangco, L-12619, April 28,
1962, 4 SCRA 1209). If facts obtain that serve as mitigating
circumstances for the delay, the same should be considered and
dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672;
Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]),
especially where the suit appears to be meritorious and the plaintiff
was not culpably negligent and no injury results to defendant (27
C.J.S. 235-36; 15 ALR 3rd 680)." (Abinales vs. Court of First
Instance of Zamboanga City, Br. I, 70 SCRA 590, 595).
"It is true that the allowance or denial of petitions for postponement
and the setting aside of orders previously issued, rest principally
upon the sound discretion of the judge to whom they are addressed,
but always predicated on the consideration that more than the mere
convenience of the courts or of the parties of the case, the ends of
justice and fairness would be served thereby (Camara Vda. de Zubiri
v. Zubiri, et al., L-16745, December 17, 1966). When no substantial
rights are affected and the intention to delay is not manifest, the
corresponding motion to transfer the hearing having been filed
accordingly, it is sound judicial discretion to allow them (Rexwell
Corp. v. Canlas, L-16746, December 30, 1961)." x x x.
This Court recalls that the complaint herein was filed on 15 June
1999. The summonses for Cynthia and Teresa were served on their
sister Melinda at the Borja Family Clinic in Tagbilaran City, but the
latter refused to receive the same. It was only on 1 June 2000 that
summons was served on Teresa at Room 304, Regency Crest
Condominium, Banilad, Cebu City, when she was in the Philippines
for a visit. However, the summons for Cynthia was never served
upon her.1âwphi1
Although Section 1, Rule 14 of the Rules, imposes upon the clerk of
court the duty to serve summons, this does not relieve the petitioner
of her own duty as the plaintiff in a civil case to prosecute the case
diligently. If the clerk had been negligent, it was petitioner’s duty to
call the court’s attention to that fact. It must be noted that it was not
even petitioner who called the court’s attention that summons had not
been served on Cynthia, but Teresa. This despite the fact that
petitioner was aware, as early as 15 June 1999, when she filed her
42
complaint, that the summonses could not be served on Teresa and
Cynthia, as she admitted therein that Teresa and Cynthia were
residing abroad. Petitioner as plaintiff should have asked that Cynthia
and Teresa be summoned by publication at the earliest possible time.
She cannot idly sit by and wait till this is done. She cannot afterwards
wash her hands and say that the delay was not her fault. She cannot
simply "fold [her] hands" and say that it is the duty of the clerk of
court to have the summonses served on Cynthia and Teresa for the
prompt disposition of her case. If there were no means of summoning
any of the defendants, petitioner should have so informed the court
within a reasonable period of time, so that the case could be disposed
of one way or another and the administration of justice would not
suffer delay. The non-performance of that duty by petitioner as
plaintiff is an express ground for dismissing an action. For, indeed,
this duty imposed upon her was precisely to spur on the slothful.
For failure to diligently pursue the complaint, petitioner trifled with
the right of the respondents to speedy trial. It also sorely tried the
patience of the court and wasted its precious time and attention. To
allow petitioner to wait until such time that summonses were served
on respondents would frustrate the protection against unreasonable
delay in the prosecution of cases and violate the constitutional
mandate of speedy dispensation of justice which would in time erode
the people’s confidence in the judiciary. We take a dim view of
petitioner’s complacent attitude. Ex nihilo nihil fit.35
Likewise, petitioner’s counsel inexplicably failed to diligently pursue
the service of summonses on respondents. These were acts of
negligence, laxity and truancy which the court could have very easily
avoided or timely remedied. Petitioner and her counsel could not
avail themselves of this Court’s sympathy, considering their apparent
complacency, if not delinquency, in the conduct of their litigation.
Considering the foregoing, we sustain the dismissal by the trial court
of the petitioner’s complaint for failure to prosecute for a period of
more than one year (from the time of filing thereof on 15 June 1997
until Teresa’s filing of a motion to dismiss).
WHEREFORE, premises considered, the instant petition is DENIED
for lack of merit and the assailed Decision dated 6 May 2005 of the
Court of Appeals in CA-G.R. CV No. 71028 is hereby AFFIRMED.
Costs against petitioner. SO ORDERED.
[G.R. No. 138104. April 11, 2002]
MR HOLDINGS, LTD., petitioner, vs. SHERIFF CARLOS P.
BAJAR, SHERIFF FERDINAND M. JANDUSAY,
SOLIDBANK CORPORATION, AND MARCOPPER MINING
CORPORATION, respondents.
SANDOVAL-GUTIERREZ, J.:
In the present Petition for Review on Certiorari, petitioner MR
Holdings, Ltd. assails the a) Decision[1] dated January 8, 1999 of the
Court of Appeals in CA-G.R. SP No. 49226finding no grave abuse of
discretion on the part of Judge Leonardo P. Ansaldo of the Regional
Trial Court (RTC), Branch 94, Boac, Marinduque, in denying
petitioners application for a writ of preliminary
injunction;[2] and b) Resolution[3] dated March 29, 1999 denying
petitioners motion for reconsideration.
The facts of the case are as follows:
Under a Principal Loan Agreement[4] and Complementary Loan
Agreement,[5] both dated November 4, 1992, Asian Development
Bank (ADB), a multilateral development finance institution, agreed

to extend to Marcopper Mining Corporation (Marcopper) a loan in
the aggregate amount of US$40,000,000.00 to finance the latters
mining project at Sta. Cruz, Marinduque. The principal loan of
US$ 15,000,000.00 was sourced from ADBs ordinary capital
resources, while the complementary loan of US$ 25,000,000.00 was
funded by the Bank of Nova Scotia, a participating finance
institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign
corporation which owns 40% of Marcopper, executed a Support and
Standby Credit Agreement whereby the latter agreed to provide
Marcopper with cash flow support for the payment of its obligations
to ADB.
To secure the loan, Marcopper executed in favor of ADB a Deed of
Real Estate and Chattel Mortgage[6] dated November 11, 1992,
covering substantially all of its (Marcoppers) properties and assets in
Marinduque. It was registered with the Register of Deeds on
November 12, 1992.
When Marcopper defaulted in the payment of its loan obligation,
Placer Dome, in fulfillment of its undertaking under the Support and
Standby Credit Agreement, and presumably to preserve its
international credit standing, agreed to have its subsidiary
corporation, petitioner MR Holding, Ltd., assumed Marcoppers
obligation to ADB in the amount of
US$ 18,453,450.02. Consequently, in an Assignment
Agreement[7] dated March 20, 1997, ADB assigned to petitioner all
its rights, interests and obligations under the principal and
complementary loan agreements, (Deed of Real Estate and Chattel
Mortgage, and Support and Standby Credit Agreement). On
December 8, 1997, Marcopper likewise executed a Deed of
Assignment[8] in favor of petitioner. Under its provisions,
Marcopper assigns, transfers, cedes and conveys to petitioner, its
assigns and/or successors-in-interest all of its (Marcoppers)
properties, mining equipment and facilities, to wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation
(Solidbank) obtained a Partial Judgment[9] against Marcopper from
the RTC, Branch 26, Manila, in Civil Case No. 96-80083
entitled Solidbank Corporation vs. Marcopper Mining Corporation,
John E. Loney, Jose E. Reyes and Teodulo C. Gabor, Jr., the decretal
portion of which reads:
WHEREFORE, PREMISES CONSIDERED, partial judgment is
hereby rendered ordering defendant Marcopper Mining Corporation,
as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine
Hundred Seventy Thousand Pesos Seven Hundred Fifty Six and
89/100 only (PHP 52,970,756.89), plus interest and charges until
fully paid;
2. To pay an amount equivalent to Ten Percent (10%) of above-stated
amount as attorneys fees; and
3. To pay the costs of suit.
"SO ORDERED.
43
Upon Solidbanks motion, the RTC of Manila issued a writ of
execution pending appeal directing Carlos P. Bajar, respondent
sheriff, to require Marcopper to pay the sums of money to satisfy the
Partial Judgment.[10] Thereafter, respondent Bajar issued two
notices of levy on Marcoppers personal and real properties, and over
all its stocks of scrap iron and unserviceable mining
equipment.[11] Together with sheriff Ferdinand M. Jandusay (also a
respondent) of the RTC, Branch 94, Boac, Marinduque, respondent
Bajar issued two notices setting the public auction sale of the levied
properties on August 27, 1998 at the Marcopper mine site.[12]
Having learned of the scheduled auction sale, petitioner served an
Affidavit of Third-Party Claim[13] upon respondent sheriffs on
August 26, 1998, asserting its ownership over all Marcoppers mining
properties, equipment and facilities by virtue of the Deed of
Assignment.
Upon the denial of its Affidavit of ThirdParty Claim by the RTC of
Manila,[14] petitioner commenced with the RTC of Boac,
Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint
for reivindication of properties, etc., with prayer for preliminary
injunction and temporary restraining order against respondents
Solidbank, Marcopper, and sheriffs Bajar and Jandusay.[15] The case
was docketed as Civil Case No. 98-13.
In an Order[16]dated October 6, 1998, Judge Ansaldo
denied petitioners application for a writ of preliminary injunction on
the ground that a) petitioner has no legal capacity to sue, it being a
foreign corporation doing business in the Philippines without
license; b) an injunction will amount to staying the execution of a
final judgment by a court of co-equal and concurrent jurisdiction;
and c) the validity of the Assignment Agreement and the Deed of
Assignment has been put into serious question by the timing of their
execution and registration.
Unsatisfied, petitioner elevated the matter to the Court of Appeals on
a Petition for Certiorari, Prohibition and Mandamus, docketed therein
as CA-G.R. SP No. 49226. On January 8, 1999, the Court of Appeals
rendered a Decision holding that Judge Ansaldo did not commit
grave abuse of discretion in denying petitioners prayer for a writ of
preliminary injunction, ratiocinating as follows:
Petitioner contends that it has the legal capacity to sue and seek
redress from Philippine courts as it is a non-resident foreign
corporation not doing business in the Philippines and suing on
isolated transactions.
xxxxxx
We agree with the finding of the respondent court that petitioner is
not suing on an isolated transaction as it claims to be, as it is very
obvious from the deed of assignment and its relationships with
Marcopper and Placer Dome, Inc. that its unmistakable intention is to
continue the operations of Marcopper and shield its properties/assets
from the reach of legitimate creditors, even those holding valid and
executory court judgments against it. There is no other way for
petitioner to recover its huge financial investments which it poured
into Marcoppers rehabilitation and the local situs where the Deeds of
Assignment were executed, without petitioner continuing to do
business in the country.
xxxxxx
While petitioner may just be an assignee to the Deeds of Assignment,
it may still fall within the meaning of doing business in light of the
Supreme Court ruling in the case of Far East International Import and
Export Corporation vs. Nankai Kogyo Co., 6 SCRA 725, that:
Where a single act or transaction however is not merely incidental or
casual but indicates the foreign corporations intention to do other

business in the Philippines, said single act or transaction constitutes
doing or engaging in or transacting business in the Philippines.
Furthermore, the court went further by declaring that even a single
act may constitute doing business if it is intended to be the beginning
of a series of transactions. (Far East International Import and Export
Corporation vs. Nankai Kogyo Co. supra).
On the issue of whether petitioner is the bona fide owner of all the
mining facilities and equipment of Marcopper, petitioner relies
heavily on the Assignment Agreement allegedly executed on March
20, 1997 wherein all the rights and interest of Asian Development
Bank (ADB) in a purported Loan Agreement were ceded and
transferred in favor of the petitioner as assignee, in addition to a
subsequent Deed of Assignment dated December 28, 1997 conveying
absolutely all the properties, mining equipment and facilities of
Marcopper in favor of petitioner.
The Deeds of Assignment executed in favor of petitioner cannot be
binding on the judgment creditor, private respondent Solidbank,
under the general legal principle that contracts can only bind the
parties who had entered into it, and it cannot favor or prejudice a
third person (Quano vs. Court of Appeals, 211 SCRA 40). Moreover,
by express stipulation, the said deeds shall be governed, interpreted
and construed in accordance with laws of New York.
The Deeds of Assignment executed by Marcopper, through its
President, Atty. Teodulo C. Gabor, Jr., were clearly made in bad faith
and in fraud of creditors, particularly private respondent Solidbank.
The first Assignment Agreement purportedly executed on March 20,
1997 was entered into after Solidbank had filed on September 19,
1996 a case against Marcopper for collection of sum of money before
Branch 26 of the Regional Trial Court docketed as Civil Case No.
96-80083. The second Deed of Assignment purportedly executed on
December 28, 1997 was entered into by President Gabor after
Solidbank had filed its Motion for Partial Summary Judgment, after
the rendition by Branch 26 of the Regional Trial Court of Manila of a
Partial Summary Judgment and after the said trial court had issued a
writ of execution, and which judgment was later affirmed by the
Court of Appeals. While the assignments (which were not registered
with the Registry of Property as required by Article 1625 of the new
Civil Code) may be valid between the parties thereof, it produces no
effect as against third parties. The purported execution of the Deeds
of Assignment in favor of petitioner was in violation of Article 1387
of the New Civil Code x x x. (Emphasis Supplied)
Hence, the present Petition for Review on Certiorari by MR Holdings,
Ltd. moored on the following grounds:
A. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN COMPLETELY DISREGARDING AS
A MATERIAL FACT OF THE CASE THE EXISTENCE OF THE
PRIOR, REGISTERED 1992 DEED OF REAL ESTATE AND
CHATTEL MORTGAGE CREATING A LIEN OVER THE
LEVIED PROPERTIES, SUBJECT OF THE ASSIGNMENT
AGREEMENT DATED MARCH 20, 1997, THUS, MATERIALLY
CONTRIBUTING TO THE SAID COURTS MISPERCEPTION
AND MISAPPRECIATION OF THE MERITS OF PETITIONERS
CASE.
B. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN MAKING A FACTUAL FINDING
THAT THE SAID ASSIGNMENT AGREEMENT IS NOT
REGISTERED, THE SAME BEING CONTRARY TO THE FACTS
ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE
SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF
THE MERITS OF PETITIONERS CASE.
44
C. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN MAKING A FACTUAL FINDING ON
THE EXISTENCE OF AN ATTACHMENT ON THE
PROPERTIES SUBJECT OF INSTANT CASE, THE SAME
BEING CONTRARY TO THE FACTS ON RECORD, THUS,
MATERIALLY CONTRIBUTING TO THE SAID COURTS
MISPERCEPTION AND MISAPPRECIATION OF THE MERITS
OF PETITIONERS CASE.
D. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT THE SAID
ASSIGNMENT AGREEMENT AND THE DEED OF
ASSIGNMENT ARE NOT BINDING ON RESPONDENT
SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME
BEING CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE
LIENS AND ON PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN FINDING THAT THE
AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED
OF ASSIGNMENT ARE SHAM, SIMULATED, OF DUBIOUS
CHARACTER, AND WERE MADE IN BAD FAITH AND IN
FRAUD OF CREDITORS, PARTICULARLY RESPONDENT
SOLIDBANK, THE SAME BEING IN COMPLETE DISREGARD
OF, VIZ: (1) THE LAW AND ESTABLISHED JURISPRUDENCE
ON PRIOR, REGISTERED MORTGAGE LIENS AND ON
PREFERENCE OF CREDITS, BY REASON OF WHICH THERE
EXISTS NO CAUSAL CONNECTION BETWEEN THE SAID
CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO.
96-80083; (2) THAT THE ASIAN DEVELOPMENT BANK WILL
NOT OR COULD NOT HAVE AGREED TO A SHAM;
SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION;
AND (3) THAT RESPONDENT SOLIDBANKS BIGGEST
STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A
MAJOR BENEFICIARY OF THE ASSIGNMENT AGREEMENT
IN QUESTION.
F. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT PETITIONER IS
WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS
FROM PHILIPPINE COURTS, IT BEING THE CASE THAT
SECTION 133 OF THE CORPORATION CODE IS WITHOUT
APPLICATION TO PETITIONER, AND IT BEING THE CASE
THAT THE SAID COURT MERELY RELIED ON SURMISES
AND CONJECTURES IN OPINING THAT PETITIONER
INTENDS TO DO BUSINESS IN THE PHILIPPINES.
G. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT RESPONDENT
MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE
ONE AND THE SAME ENTITY, THE SAME BEING WITHOUT
FACTUAL OR LEGAL BASIS.
H. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING PETITIONER GUILTY OF
FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS
PENDENTIA NOR RES JUDICATA MAY BAR THE INSTANT
REIVINDICATORY ACTION, AND IT BEING CLEAR THAT AS
THIRD-PARTY CLAIMANT, THE LAW AFFORDS
PETITIONER THE RIGHT TO FILE SUCH REIVINDICATORY
ACTION.
I. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN RENDERING A DECISION WHICH IN
EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE
CASE.

J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS
CERTIFICATE OF SALE DATED OCTOBER 12, 1998, THE
RTC-MANILA ORDER DATED FEBRUARY 12, 1999, AND THE
RTC-BOAC ORDER DATED NOVEMBER 25, 1998 ARE NULL
AND VOID.
K. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN AFFIRMING THE DENIAL BY THE
RTC-BOAC OF PETITIONERS APPLICATION FOR
PRELIMINARY INJUNCTION, THE SAME BEING IN TOTAL
DISREGARD OF PETITIONERS RIGHT AS ASSIGNEE OF A
PRIOR, REGISTERED MORTGAGE LIEN, AND IN
DISREGARD OF THE LAW AND JURISPRUDENCE ON
PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not doing business in the
Philippines and characterizes its participation in the assignment
contracts (whereby Marcoppers assets where transferred to it) as
mere isolated acts that cannot foreclose its right to sue in local courts.
Petitioner likewise maintains that the two assignment contracts,
although executed during the pendency of Civil Case No. 96-80083
in the RTC of Manila, are not fraudulent conveyances as they were
supported by valuable considerations. Moreover, they were executed
in connection with prior transactions that took place as early as 1992
which involved ADB, a reputable financial institution. Petitioner
further claims that when it paid Marcoppers obligation to ADB, it
stepped into the latters shoes and acquired its (ADBS) rights, titles,
and interests under the Deed of Real Estate and Chattel
Mortgage. Lastly, petitioner asserts its existence as a corporation,
separate and distinct from Placer Dome and Marcopper.
In its comment, Solidbank avers that: a) petitioner is doing business
in the Philippines and this is evidenced by the huge investment it
poured into the assignment contracts; b) granting that petitioner is not
doing business in the Philippines, the nature of its transaction reveals
an intention to do business or to begin a series of transaction in the
country; c) petitioner, Marcopper and Placer Dome are one and the
same entity, petitioner being then a wholly-owned subsidiary of
Placer Dome, which, in turn, owns 40% of Marcopper; d) the timing
under which the assignments contracts were executed shows that
petitioners purpose was to defeat any judgment favorable to it
(Solidbank); and e) petitioner violated the rule on forum shopping
since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque)
is similar to the other cases filed by Marcopper in order to forestall
the sale of the levied properties.
Marcopper, in a separate comment, states that it is merely a nominal
party to the present case and that its principal concerns are being
ventilated in another case.
The petition is impressed with merit.
Crucial to the outcome of this case is our resolution of the following
issues: 1) Does petitioner have the legal capacity to sue? 2) Was the
Deed of Assignment between Marcopper and petitioner executed in
fraud of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome,
and Marcopper one and the same entity? and 4) Is petitioner guilty of
forum shopping?
We shall resolve the issues in seriatim.
I officer to represent its interests in such corporation, nor appointing a
The Court of Appeals ruled that petitioner has no legal capacity to
sue in the Philippine courts because it is a foreign corporation doing
business here without license. A review of this ruling does not pose
much complexity as the principles governing a foreign
corporations right to sue in local courts have long been settled by our
Corporation Law.[17] These principles may be condensed in three
45
statements, to wit: a) if a foreign corporation does business in the
Philippines without a license, it cannot sue before the Philippine
courts;[18] b) if a foreign corporation is not doing business in the
Philippines, it needs no license to sue before Philippine courts on an
isolated transaction[19]or on a cause of action entirely independent
of any business transaction;[20] and c) if a foreign corporation does
business in the Philippines with the required license, it can sue before
Philippine courts on any transaction. Apparently, it is not the absence
of the prescribed license but the doing (of) business in the
Philippines without such license which debars the foreign
corporation from access to our courts.[21]
The task at hand requires us to weigh the facts vis--vis the
established principles. The question whether or not a foreign
corporation is doing business is dependent principally upon the facts
and circumstances of each particular case, considered in the light of
the purposes and language of the pertinent statute or statutes involved
and of the general principles governing the jurisdictional authority of
the state over such corporations.[22]
Batas Pambansa Blg. 68, otherwise known as The Corporation Code
of the Philippines, is silent as to what constitutes doing or transacting
business in the Philippines. Fortunately, jurisprudence has supplied
the deficiency and has held that the term implies a continuity of
commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or works or the exercise of some of
the functions normally incident to, and in progressive prosecution of,
the purpose and object for which the corporation was
organized.[23] In Mentholatum Co. Inc., vs. Mangaliman,[24] this
Court laid down the test to determine whether a foreign company
is doing business, thus:
x x x The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or
enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another. (Traction Cos. vs.
Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984,987.) x x x.
The traditional case law definition has metamorphosed into a
statutory definition, having been adopted with some qualifications in
various pieces of legislation in our jurisdiction. For instance,
Republic Act No. 7042, otherwise known as the Foreign Investment
Act of 1991, defines doing business as follows:
d) The phrase doing business shall include soliciting orders, service
contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a
period or periods totalling one hundred eight(y) (180) days or more;
participating in the management, supervision or control of any
domestic business, firm, entity, or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of
acts or works; or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization; Provided,
however, That the phrase doing business shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor, nor having a nominee director or
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.
(Emphasis supplied)[25]
Likewise, Section 1 of Republic Act No. 5455,[26] provides that:
SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase
doing business shall include soliciting orders, purchases, service

contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a
period or periods totaling one hundred eighty days or more;
participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
There are other statutes[27] defining the term doing business in the
same tenor as those above-quoted, and as may be observed, one
common denominator among them all is the concept of continuity.
In the case at bar, the Court of Appeals categorized as doing
business petitioners participation under the Assignment Agreement
and the Deed of Assignment. This is simply untenable.The
expression doing business should not be given such a strict and literal
construction as to make it apply to any corporate
dealing whatever.[28] At this early stage and with petitioners acts or
transactions limited to the assignment contracts, it cannot be said that
it had performed acts intended to continue the business for which it
was organized. It may not be amiss to point out
that the purpose or business for which petitioner was organized is not
discernible in the records. No effort was exerted by the Court of
Appeals to establish the nexus between petitioners business and the
acts supposed to constitute doing business. Thus, whether the
assignment contracts were incidental to petitioners business or were
continuation thereof is beyond determination. We cannot apply the
case cited by the Court of Appeals, Far East Intl Import and Export
Corp. vs. Nankai Kogyo Co., Ltd.,[29] which held that a single act
may still constitute doing business if it is not merely incidental or
casual, but is of such character as distinctly to indicate a purpose on
the part of the foreign corporation to do other business in the state. In
said case, there was an express admission from an official of the
foreign corporation that he was sent to the Philippines to look into
the operation of mines, thereby revealing the foreign corporations
desire to continue engaging in business here. But in the case at bar,
there is no evidence of similar desire or intent. Unarguably, petitioner
may, as the Court of Appeals suggested, decide to operate
Marcoppers mining business, but, of course, at this stage, that is a
mere speculation. Or it may decide to sell the credit secured by the
mining properties to an offshore investor, in which case the acts will
still be isolated transactions. To see through the present facts an
intention on the part of petitioner to start a series of business
transaction is to rest on assumptions or probabilities falling short of
actual proof. Courts should never base its judgments on a state of
facts so inadequately developed that it cannot be determined where
inference ends and conjecture begins.
Indeed, the Court of Appeals holding that petitioner was determined
to be doing business in the Philippines is based mainly on
conjectures and speculation. In concluding that the unmistakable
intention of petitioner is to continue Marcoppers business, the Court
of Appeals hangs on the wobbly premise that there is no other way
for petitioner to recover its huge financial investments which it
poured into Marcoppers rehabilitation without it (petitioner)
continuing Marcoppers business in the country.[30] This is a mere
presumption. Absent overt acts of petitioner from which we may
directly infer its intention to continue Marcoppers business, we
cannot give our concurrence. Significantly, a view subscribed upon
by many authorities is that the mere ownership by a foreign
corporation of a property in a certain state, unaccompanied by its
active use in furtherance of the business for which it was formed, is
insufficient in itself to constitute doing business.[31] In Chittim vs.
46
Belle Fourche Bentonite Products Co.,[32] it was held that even if a
foreign corporation purchased and took conveyances of amining
claim, did some assessment work thereon, and endeavored to sell it,
its acts will not constitute the doing of business so as to subject the
corporation to the statutory requirements for the transacting of
business. On the same vein, petitioner, a foreign corporation, which
becomes the assignee of mining properties, facilities and equipment
cannot be automatically considered as doing business, nor presumed
to have the intention of engaging in mining business.
One important point. Long before petitioner assumed Marcoppers
debt to ADB and became their assignee under the two assignment
contracts, there already existed a Support and Standby Credit
Agreement between ADB and Placer Dome whereby the latter bound
itself to provide cash flow support for Marcoppers payment of its
obligations to ADB. Plainly, petitioners payment of US$ 18,453,
450.12 to ADB was more of a fulfillment of an obligation under the
Support and Standby Credit Agreement rather than an
investment. That petitioner had to step into the shoes of ADB as
Marcoppers creditor was just a necessary legal consequence of the
transactions that transpired. Also, we must hasten to add that the
Support and Standby Credit Agreement was executed four (4) years
prior to Marcoppers insovency, hence, the alleged intention of
petitioner to continue Marcoppers business could have no basis for at
that time, Marcoppers fate cannot yet be determined.
In the final analysis, we are convinced that petitioner was engaged
only in isolated acts or transactions. Single or isolated acts, contracts,
or transactions of foreign corporations are not regarded as a doing or
carrying on of business. Typical examples of these are the making of
a single contract, sale, sale with the taking of a note and mortgage in
the state to secure payment therefor, purchase, or note, or the mere
commission of a tort.[33] In these instances, there is no purpose to do
any other business within the country.
II
Solidbank contends that from the chronology and timing of events, it
is evident that there existed a pre-set pattern of response on the part
of Marcopper to defeat whatever court ruling that may be rendered in
favor of Solidbank.
We are not convinced.
While it may appear, at initial glance, that the assignment contracts
are in the nature of fraudulent conveyances, however, a closer look at
the events that transpired prior to the execution of those contracts
gives rise to a different conclusion. The obvious flaw in the Court of
Appeals Decision lies in its constricted view of the facts obtaining in
the case. In its factual narration, the Court of Appeals definitely left
out some events. We shall see later the significance of those events.
Article 1387 of the Civil Code of the Philippines provides:
Art. 1387. All contracts by virtue of which the debtor alienates
property by gratuitous title are presumed to have been entered into in
fraud of creditors, when the donor did not reserve sufficient property
to pay all debts contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made
by persons against whom some judgment has been rendered in any
instance or some writ of attachment has been issued. The decision or
attachment need not refer to the property alienated, and need not
have been obtained by the party seeking rescission.
In addition to these presumptions, the design to defraud creditors
may be proved in any other manner recognized by law and of
evidence.

This article presumes the existence of fraud made by a debtor. Thus,
in the absence of satisfactory evidence to the contrary, an alienation
of a property will be held fraudulent if it is made after a judgment has
been rendered against the debtor making the alienation.[34] This
presumption of fraud is not conclusive and may be rebutted by
satisfactory and convincing evidence. All that is necessary is to
establish affirmatively that the conveyance is made in good faith and
for a sufficient and valuable consideration.[35]
The Assignment Agreement and the Deed of Assignment were
executed for valuable considerations. Patent from the Assignment
Agreement is the fact that petitioner assumed the payment of
US$ 18,453,450.12 to ADB in satisfaction of Marcoppers remaining
debt as of March 20, 1997.[36] Solidbank cannot deny this fact
considering that a substantial portion of the said payment, in the sum
of US$ 13,886,791.06, was remitted in favor of the Bank of Nova
Scotia, its major stockholder.[37]
The facts of the case so far show that the assignment contracts were
executed in good faith. The execution of the Assignment Agreement
on Macrh 20, 1997 and the Deed of Assignment on December 8,1997
is not the alpha of this case. While the execution of these assignment
contracts almost coincided with the rendition on May 7, 1997 of the
Partial Judgment in Civil Case No. 96-80083 by the Manila RTC,
however, there was no intention on the part of petitioner to defeat
Solidbanks claim. It bears reiterating that as early as November 4,
1992, Placer Dome had already bound itself under a Support and
Standby Credit Agreement to provide Marcopper with cash flow
support for the payment to ADB of its obligations.When Marcopper
ceased operations on account of disastrous mine tailings spill into the
Boac River and ADB pressed for payment of the loan, Placer Dome
agreed to have its subsidiary, herein petitioner, paid ADB the amount
of US $18,453,450.12. Thereupon, ADB and Marcopper executed,
respectively, in favor of petitioner an Assignment Agreement and a
Deed of Assignment. Obviously, the assignment contracts were
connected with transactions that happened long before the rendition
in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the
Manila RTC. Those contracts cannot be viewed in isolation. If we
may add, it is highly inconceivable that ADB, a reputable
international financial organization, will connive with Marcopper to
feign or simulate a contract in 1992 just to defraud Solidbank for its
claim four years thereafter. And it is equally incredible for petitioner
to be paying the huge sum of US $ 18, 453, 450.12 to ADB only for
the purpose of defrauding Solidbank of the sum of P52,970.756.89.
It is said that the test as to whether or not a conveyance is fraudulent
is -- does it prejudice the rights of creditors?[38] We cannot see how
Solidbanks right was prejudiced by the assignment contracts
considering that substantially all of Marcoppers properties were
already covered by the registered Deed of Real Estate and Chattel
Mortgage executed by Marcopper in favor of ADB as early as
November 11, 1992. As such, Solidbank cannot assert a better right
than ADB, the latter being a preferred creditor. It is basic that
mortgaged properties answer primarily for the mortgaged credit, not
for the judgment credit of the mortgagors unsecured creditor.
Considering that petitioner assumed Marcoppers debt to ADB, it
follows that Solidbanks right as judgment creditor over the subject
properties must give way to that of the former.
III
The record is lacking in circumstances that would suggest that
petitioner corporation, Placer Dome and Marcopper are one and the
same entity. While admittedly, petitioner is a wholly-owned
subsidiary of Placer Dome, which in turn, which, in turn, was then a
minority stockholder of Marcopper, however, the mere fact that a
corporation owns all of the stocks of another corporation, taken alone
is not sufficient to justify their being treated as one entity. If used to
47
perform legitimate functions, a subsidiarys separate existence shall
be respected, and the liability of the parent corporation as well as the
subsidiary will be confined to those arising in their respective
business.[39]
The recent case of Philippine National Bank vs. Ritratto Group
Inc.,[40] outlines the circumstances which are useful in the
determination of whether a subsidiary is but a mere instrumentality
of the parent-corporation, to wit:
(a) The parent corporation owns all or most of the capital stock of the
subsidiary.
(b) The parent and subsidiary corporations have common directors or
officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of the
subsidiary or otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or
losses of the subsidiary.
(g) The subsidiary has substantially no business except with the
parent corporation or no assets except those conveyed to or by the
parent corporation.
(h) In the papers of the parent corporation or in the statements of its
officers, the subsidiary is described as a department or division of the
parent corporation, or its business or financial responsibility is
referred to as the parent corporations own.
(i) The parent corporation uses the property of the subsidiary as its
own.
(j) The directors or executives of the subsidiary do not act
independently in the interest of the subsidiary, but take their orders
from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
In this catena of circumstances, what is only extant in the records is
the matter of stock ownership. There are no other factors
indicative that petitioner is a mere instrumentality of Marcopper or
Placer Dome. The mere fact that Placer Dome agreed, under the
terms of the Support and Standby Credit Agreement to provide
Marcopper with cash flow support in paying its obligations to ADB,
does not mean that its personality has merged with that of
Marcopper. This singular undertaking, performed by Placer Dome
with its own stockholders in Canada and elsewhere, is not a sufficient
ground to merge its corporate personality with Marcopper which has
its own set of shareholders, dominated mostly by Filipino citizens.
The same view applies to petitioners payment of Marcoppers
remaining debt to ADB.
With the foregoing considerations and the absence of fraud in the
transaction of the three foreign corporations, we find it improper to
pierce the veil of corporate fiction that equitable doctrine developed
to address situations where the corporate personality of a corporation
is abused or used for wrongful purposes.
IV
On the issue of forum shopping, there could have been a violation of
the rules thereon if petitioner and Marcopper were indeed one and
the same entity. But since petitioner has a separate personality, it has
the right to pursue its third-party claim by filing the independent
reivindicatory action with the RTC of Boac, Marinduque, pursuant to

Rule 39, Section 16 of the 1997 Rules of Civil Procedures. This
remedy has been recognized in a long line of cases decided by this
Court.[41] In Rodriguez vs. Court of Appeals,[42] we held:
. . . It has long been settled in this jurisdiction that the claim of
ownership of a third party over properties levied for execution of a
judgment presents no issue for determination by the court issuing the
writ of execution.
. . .Thus, when a property levied upon by the sheriff pursuant to a
writ of execution is claimed by third person in a sworn statement of
ownership thereof, as prescribed by the rules, an entirely different
matter calling for a new adjudication arises. And dealing as it does
with the all important question of title, it is reasonable to require the
filing of proper pleadings and the holding of a trial on the matter in
view of the requirements of due process.
. . . In other words, construing Section 17 of Rule 39 of the Revised
Rules of Court (now Section 16 of the 1997 Rules of Civil
Procedure), the rights of third-party claimants over certain properties
levied upon by the sheriff to satisfy the judgment may not be taken
up in the case where such claims are presented but in a separate and
independent action instituted by the claimants. (Emphasis supplied)
This reivindicatory action has for its object the recovery of
ownership or possession of the property seized by the sheriff, despite
the third party claim, as well as damages resulting therefrom, and it
may be brought against the sheriff and such other parties as may be
alleged to have connived with him in the supposedly wrongful
execution proceedings, such as the judgment creditor himself. Such
action is an entirely separate and distinct action from that in which
execution has been issued. Thus, there being no identity of parties
and cause of action between Civil Case No. 98-13 (RTC, Boac) and
those cases filed by Marcopper, including Civil Case No. 96-80083
(RTC, Manila) as to give rise to res judicata or litis pendentia,
Solidbanks allegation of forum-shopping cannot prosper.[43]
All considered, we find petitioner to be entitled to the issuance of a
writ of preliminary injunction. Section 3, Rule 58 of the 1997 Rules
of Civil Procedure provides:
SEC. 3 Grounds for issuance of preliminary injunction. A
preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or
perpetually;
(b) That the commission, continuance or non-performance of the acts
or acts complained of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is
attempting to do, or is procuring or suffering to be done, some act or
acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the
judgment ineffectual.
Petitioners right to stop the further execution of the properties
covered by the assignment contracts is clear under the facts so far
established. An execution can be issued only against a party and not
against one who did not have his day in court.[44] The duty of the
sheriff is to levy the property of the judgment debtor not that of a
third person. For, as the saying goes, one mans goods shall not be
sold for another man's debts.[45] To allow the execution of
petitioners properties would surely work injustice to it and render the
judgment on the reivindicatory action, should it be favorable,
ineffectual. In Arabay, Inc., vs. Salvador,[46] this Court held that an
48
injunction is a proper remedy to prevent a sheriff from selling the
property of one person for the purpose of paying the debts of another;
and that while the general rule is that no court has authority to
interfere by injunction with the judgments or decrees of another court
of equal or concurrent or coordinate jurisdiction, however, it is not so
when a third-party claimant is involved. We quote the instructive
words of Justice Querube C. Makalintal in Abiera vs. Court of
Appeals,[47] thus:
The rationale of the decision in the Herald Publishing Company
case[48] is peculiarly applicable to the one before Us, and removes it
from the general doctrine enunciated in the decisions cited by the
respondents and quoted earlier herein.
1. Under Section 17 of Rule 39 a third person who claims property
levied upon on execution may vindicate such claim by
action. Obviously a judgment rendered in his favor, that is, declaring
him to be the owner of the property, would not constitute interference
with the powers or processes of the court which rendered the
judgment to enforce which the execution was levied. If that be so and
it is so because the property, being that of a stranger, is not subject to
levy then an interlocutory order such as injunction, upon a claim and
prima facie showing of ownership by the claimant, cannot be
considered as such interference either.
WHEREFORE, the petition is GRANTED. The assailed Decision
dated January 8, 1999 and the Resolution dated March 29, 1999 of
the Court of Appeals in CA G.R. No. 49226 are set aside. Upon
filing of a bond of P1,000,000.00, respondent sheriffs are restrained
from further implementing the writ of execution issued in
Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until
further orders from this Court. The RTC, Branch 94, Boac,
Marinduque, is directed to dispose of Civil Case No. 98-13 with
dispatch. SO ORDERED.
[G.R. No. 113074. January 22, 1997]
ALFRED HAHN, petitioner, vs. COURT OF APPEALS and
BAYERISCHE MOTOREN WERKE
AKTIENGESELLSCHAFT (BMW), respondents.
MENDOZA, J.:
This is a petition for review of the decision[1] of the Court of
Appeals dismissing a complaint for specific performance which
petitioner had filed against private respondent on the ground that the
Regional Trial Court of Quezon City did not acquire jurisdiction over
private respondent, a nonresident foreign corporation, and of the
appellate court's order denying petitioner's motion for
reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the
name and style "Hahn-Manila." On the other hand, private
respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is
a nonresident foreign corporation existing under the laws of the
former Federal Republic of Germany, with principal office at Munich,
Germany.
On March 7, 1967, petitioner executed in favor of private respondent
a "Deed of Assignment with Special Power of Attorney," which
reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the
BMW trademark and device in the Philippines which ASSIGNOR

uses and has been using on the products manufactured by
ASSIGNEE, and for which ASSIGNOR is the authorized exclusive
Dealer of the ASSIGNEE in the Philippines, the same being
evidenced by certificate of registration issued by the Director of
Patents on 12 December 1963 and is referred to as Trademark No.
10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently
record said transfer of the said BMW trademark and device in favor
of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration
of the stipulations hereunder stated, the ASSIGNOR hereby affirms
the said assignment and transfer in favor of the ASSIGNEE under the
following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other
than ASSIGNOR or infringer of the BMW trademark in the
Philippines, for such purpose, the ASSIGNOR shall inform the
ASSIGNEE immediately of any such use or infringement of the said
trademark which comes to his knowledge and upon such information
the ASSIGNOR shall automatically act as Attorney-In-Fact of the
ASSIGNEE for such case, with full power, authority and
responsibility to prosecute unilaterally or in concert with ASSIGNEE,
any such infringer of the subject mark and for purposes hereof the
ASSIGNOR is hereby named and constituted as ASSIGNEE's
Attorney-In-Fact, but any such suit without ASSIGNEE's consent
will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business
relations as has been usual in the past without a formal contract, and
for that purpose, the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the only limitation
that, for the present, in view of ASSIGNEE's limited production, the
latter shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has
been usual in the past without a formal contract." But on February 16,
1993, in a meeting with a BMW representative and the president of
Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was
informed that BMW was arranging to grant the exclusive dealership
of BMW cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 1993, petitioner received
confirmation of the information from BMW which, in a letter,
expressed dissatisfaction with various aspects of petitioner's business,
mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and
petitioner's alleged failure to comply with the standards for an
exclusive BMW dealer.[2]Nonetheless, BMW expressed willingness
to continue business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive
dealership would be a breach of the Deed of Assignment.[3] Hahn
insisted that as long as the assignment of its trademark and device
subsisted, he remained BMW's exclusive dealer in the Philippines
because the assignment was made in consideration of the exclusive
dealership. In the same letter petitioner explained that the decline in
sales was due to lower prices offered for BMW cars in the United
States and the fact that few customers returned for repairs and
servicing because of the durability of BMW parts and the efficiency
of petitioner's service.
Because of Hahn's insistence on the former business relation, BMW
withdrew on March 26, 1993 its offer of a "standard importer
contract" and terminated the exclusive dealer relationship effective
49
June 30, 1993.[4] At a conference of BMW Regional Importers held
on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez
among those invited from the Asian region. On April 29, 1993,
BMW proposed that Hahn and CMC jointly import and distribute
BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a
complaint for specific performance and damages against BMW to
compel it to continue the exclusive dealership. Later he filed an
amended complaint to include an application for temporary
restraining order and for writs of preliminary, mandatory and
prohibitory injunction to enjoin BMW from terminating his exclusive
dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the
Philippines with principal offices at Munich, Germany. It may be
served with summons and other court processes through the
Secretary of the Department of Trade and Industry of the
Philippines. . . .
....
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW
a Deed of Assignment with Special Power of Attorney covering the
trademark and in consideration thereof, under its first whereas clause,
Plaintiff was duly acknowledged as the "exclusive Dealer of the
Assignee in the Philippines" . . . .
....
8. From the time the trademark "BMW & DEVICE" was first used
by the Plaintiff in the Philippines up to the present, Plaintiff, through
its firm name "HAHN MANILA" and without any monetary
contribution from defendant BMW, established BMW's goodwill and
market presence in the Philippines. Pursuant thereto, Plaintiff has
invested a lot of money and resources in order to single-handedly
compete against other motorcycle and car companies .... Moreover,
Plaintiff has built buildings and other infrastructures such as service
centers and showrooms to maintain and promote the car and products
of defendant BMW.
....
10. In a letter dated February 24, 1993, defendant BMW advised
Plaintiff that it was willing to maintain with Plaintiff a relationship
but only "on the basis of a standard BMW importer contract as
adjusted to reflect the particular situation in the Philippines" subject
to certain conditions, otherwise, defendant BMW would terminate
Plaintiff's exclusive dealership and any relationship for cause
effective June 30, 1993. . . .
....
15. The actuations of defendant BMW are in breach of the
assignment agreement between itself and plaintiff since the
consideration for the assignment of the BMW trademark is the
continuance of the exclusive dealership agreement. It thus, follows
that the exclusive dealership should continue for so long as defendant
BMW enjoys the use and ownership of the trademark assigned to it
by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to
Branch 104 of the Quezon City Regional Trial Court, which on June
14, 1993 issued a temporary restraining order. Summons and copies
of the complaint and amended complaint were thereafter served on
the private respondent through the Department of Trade and Industry,
pursuant to Rule 14, 14 of the Rules of Court. The order, summons
and copies of the complaint and amended complaint were later sent
by the DTI to BMW via registered mail on June 15, 1993[5] and
received by the latter on June 24, 1993.

On June 17, 1993, without proof of service on BMW, the hearing on
the application for the writ of preliminary injunction proceeded ex
parte, with petitioner Hahn testifying. On June 30, 1993, the trial
court issued an order granting the writ of preliminary injunction upon
the filing of a bond of P100,000.00. On July 13, 1993, following the
posting of the required bond, a writ of preliminary injunction was
issued.
On July 1, 1993, BMW moved to dismiss the case, contending that
the trial court did not acquire jurisdiction over it through the service
of summons on the Department of Trade and Industry, because it
(BMW) was a foreign corporation and it was not doing business in
the Philippines. It contended that the execution of the Deed of
Assignment was an isolated transaction; that Hahn was not its agent
because the latter undertook to assemble and sell BMW cars and
products without the participation of BMW and sold other products;
and that Hahn was an indentor or middleman transacting business in
his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW
was doing business in the Philippines through him as its agent, as
shown by the fact that BMW invoices and order forms were used to
document his transactions; that he gave warranties as exclusive
BMW dealer; that BMW officials periodically inspected standards of
service rendered by him; and that he was described in service
booklets and international publications of BMW as a "BMW
Importer" or "BMW Trading Company" in the Philippines.
The trial court[6] deferred resolution of the Motion to dismiss until
after trial on the merits for the reason that the grounds advanced by
BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW
filed a petition for certiorari with the Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE
OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS
LEADING TOWARD THE ISSUANCE OF THE WRIT OF
PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE
TERMS FOR THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN
DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON
THE GROUND OF LACK OF JURISDICTION, AND THEREBY
FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining
order and, after hearing, for a writ of preliminary injunction, to
enjoin the trial court from proceeding further in Civil Case No.
Q-93-15933. Private respondent pointed out that, unless the trial
court's order was set aside, it would be forced to submit to the
jurisdiction of the court by filing its answer or to accept judgment in
default, when the very question was whether the court had
jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing
petitioner's complaint. On December 20, 1993, it rendered judgment
finding the trial court guilty of grave abuse of discretion in deferring
resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before
it came out with its questioned order of July 26, 1993, we rule and so
hold that petitioner's (BMW) motion to dismiss could be resolved
then and there, and that the respondent judge's deferment of his
action thereon until after trial on the merit constitutes, to our mind,
grave abuse of discretion.
....
50
. . . [T]here is not much appreciable disagreement as regards the
factual matters relating, to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal
conclusions they respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing business in the
Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make
on the motion to dismiss would anyway be elevated to it on appeal,
the Court of Appeals itself resolved the motion. It ruled that BMW
was not doing business in the country and, therefore, jurisdiction
over it could not be acquired through service of summons on the DTI
pursuant to Rule 14, Section 14. The court upheld private
respondent's contention that Hahn acted in his own name and for his
own account and independently of BMW, based on Alfred Hahn's
allegations that he had invested his own money and resources in
establishing BMW's goodwill in the Philippines and on BMW's claim
that Hahn sold products other than those of BMW. It held that
petitioner was a mere indentor or broker and not an agent through
whom private respondent BMW transacted business in the
Philippines. Consequently, the Court of Appeals dismissed
petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals
erred (1) in finding that the trial court gravely abused its discretion in
deferring action on the motion to dismiss and (2) in finding that
private respondent BMW is not doing business in the Philippines and,
for this reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign
corporation, or a nonresident joint stock company or
association, doing business in the Philippines, service may be made
on its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents
within the Philippines. (Emphasis added)
What acts are considered "doing business in the Philippines" are
enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows:[7]
d) the phrase "doing business" shall include soliciting orders, service
contracts, opening offices, whether called "liaison" offices or
branches, appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a
period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings
or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having, a nominee director or
officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines
which transacts business in its own name and for its own
account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors
in the Philippines" but not when the representative or distributor
"transacts business in its name and for its own account." In addition,
Section 1(f)(1) of the Rules and Regulations implementing (IRR) the
Omnibus Investment Code of 1987 (E.O. No. 226) provided:

(f) "Doing business" shall be any act or combination of acts,
enumerated in Article 44 of the Code. In particular, "doing business"
includes:
(1).... A foreign firm which does business through middlemen acting
in their own names, such as indentors, commercial brokers or
commission merchants, shall not be deemed doing business in the
Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the
Philippines.
The question is whether petitioner Alfred Hahn is the agent or
distributor in the Philippines of private respondent BMW. If he is,
BMW may be considered doing business in the Philippines and the
trial court acquired jurisdiction over it (BMW) by virtue of the
service of summons on the Department of Trade and Industry.
Otherwise, if Hahn is not the agent of BMW but an independent
dealer, albeit of BMW cars and products, BMW, a foreign
corporation, is not considered doing business in the Philippines
within the meaning of the Foreign Investments Act of 1991 and the
IRR, and the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his
own name and for his own account and not as agent or distributor in
the Philippines of BMW on the ground that "he alone had contacts
with individuals or entities interested in acquiring BMW vehicles.
Independence characterizes Hahn's undertakings, for which reason he
is to be considered, under governing statutes, as doing business." (p.
13) In support of this conclusion, the appellate court cited the
following allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used
by the Plaintiff in the Philippines up to the present, Plaintiff, through
its firm name "HAHN MANILA" and without any monetary
contributions from defendant BMW; established BMW's goodwill
and market presence in the Philippines. Pursuant thereto, Plaintiff
invested a lot of money and resources in order to single-handedly
compete against other motorcycle and car companies.... Moreover,
Plaintiff has built buildings and other infrastructures such as service
centers and showrooms to maintain and promote the car and products
of defendant BMW.
As the above quoted allegations of the amended complaint show,
however, there is nothing to support the appellate court's finding that
Hahn solicited orders alone and for his own account and without
"interference from, let alone direction of, BMW." (p. 13) To the
contrary, Hahn claimed he took orders for BMW cars and transmitted
them to BMW. Upon receipt of the orders, BMW fixed the down
payment and pricing charges, notified Hahn of the scheduled
production month for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance sheets. Payment was
made by the buyer directly to BMW. Title to cars purchased passed
directly to the buyer and Hahn never paid for the purchase price of
BMW cars sold in the Philippines. Hahn was credited with a
commission equal to 14% of the purchase price upon the invoicing of
a vehicle order by BMW. Upon confirmation in writing that the
vehicles had been registered in the Philippines and serviced by him,
Hahn received an additional 3% of the full purchase price. Hahn
performed after-sale services, including, warranty services, for which
he received reimbursement from BMW. All orders were on invoices
and forms of BMW.[8]
These allegations were substantially admitted by BMW which, in its
petition for certiorari before the Court of Appeals, stated:[9]
9.4. As soon as the vehicles are fully manufactured and full payment
of the purchase prices are made, the vehicles are shipped to the
Philippines. (The payments may be made by the purchasers or
third-persons or even by Hahn.) The bills of lading are made up in
51
the name of the purchasers, but Hahn-Manila is therein indicated as
the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports,
for purposes of conducting pre-delivery inspections. Thereafter, he
delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited
with a commission of fourteen percent (14%) of the full purchase
price thereof, and as soon as he confirms in writing, that the vehicles
have been registered in the Philippines and have been serviced by
him, he will receive an additional three percent (3%) of the full
purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows
an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller together, even if no sale
is eventually made.
As to the service centers and showrooms which he said he had put up
at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected the service centers
to see to it that BMW standards were maintained. Indeed, it would
seem from BMW's letter to Hahn that it was for Hahn's alleged
failure to maintain BMW standards that BMW was terminating
Hahn's dealership.
The fact that Hahn invested his own money to put up these service
centers and showrooms does not necessarily prove that he is not an
agent of BMW. For as already noted, there are facts in the record
which suggest that BMW exercised control over Hahn's activities as
a dealer and made regular inspections of Hahn's premises to enforce
compliance with BMW standards and specifications.[10] For
example, in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions
and letters that we have to tackle the Philippine market more
professionally and that we are through your present activities not
adequately prepared to cope with the forthcoming challenges.[11]
In effect, BMW was holding Hahn accountable to it under the 1967
Agreement.
This case fits into the mould of Communications Materials, Inc. v.
Court of Appeals,[12] in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a
domestic corporation, by virtue of which the latter was appointed
"exclusive representative" in the Philippines for a stipulated
commission. Pursuant to these contracts, the domestic corporation
sold products exported by the foreign corporation and put up a
service center for the products sold locally. This Court held that these
acts constituted doing business in the Philippines. The arrangement
showed that the foreign corporation's purpose was to penetrate the
Philippine market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive
distributor in the Philippines, even as it announced in the Asian
region that Hahn was the "official BMW agent" in the
Philippines.[13]
The Court of Appeals also found that petitioner Alfred Hahn dealt in
other products, and not exclusively in BMW products, and, on this
basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding
is based entirely on allegations of BMW in its motion to dismiss filed
in the trial court and in its petition for certiorari before the Court of
Appeals.[14] But this allegation was denied by Hahn[15] and
therefore the Court of Appeals should not have cited it as if it were
the fact.

Indeed this is not the only factual issue raised, which should have
indicated to the Court of Appeals the necessity of affirming the trial
court's order deferring resolution of BMW's motion to dismiss.
Petitioner alleged that whether or not he is considered an agent of
BMW, the fact is that BMW did business in the Philippines because
it sold cars directly to Philippine buyers. [16] This was denied by
BMW, which claimed that Hahn was not its agent and that, while it
was true that it had sold cars to Philippine buyers, this was done
without solicitation on its part.[17]
It is not true then that the question whether BMW is doing business
could have been resolved simply by considering the parties'
pleadings. There are genuine issues of facts which can only be
determined on the basis of evidence duly presented. BMW cannot
short circuit the process on the plea that to compel it to go to trial
would be to deny its right not to submit to the jurisdiction of the trial
court which precisely it denies. Rule 16, 3 authorizes courts to defer
the resolution of a motion to dismiss until after the trial if the ground
on which the motion is based does not appear to be indubitable. Here
the record of the case bristles with factual issues and it is not at all
clear whether some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding
to the summons it would be waiving its objection to the trial court's
jurisdiction. It is now settled that. for purposes of having summons
served on a foreign corporation in accordance with Rule 14, 14, it is
sufficient that it be alleged in the complaint that the foreign
corporation is doing business in the Philippines. The court need not
go beyond the allegations of the complaint in order to determine
whether it has jurisdiction.[18] A determination that the foreign
corporation is doing business is only tentative and is made only for
the purpose of enabling the local court to acquire jurisdiction over
the foreign corporation through service of summons pursuant to Rule
14, 14. Such determination does not foreclose a contrary finding
should evidence later show that it is not transacting business in the
country. As this Court has explained:
This is not to say, however, that the petitioner's right to question the
jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only
involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not
its agent, then it cannot really be said to be doing business in the
Philippines. It is a defense, however, that requires the contravention
of the allegations of the complaint, as well as a full ventilation, in
effect, of the main merits of the case, which should not thus be
within the province of a mere motion to dismiss. So, also, the issue
posed by the petitioner as to whether a foreign corporation which has
done business in the country, but which has ceased to do business at
the time of the filing, of a complaint, can still be made to answer for
a cause of action which accrued while it was doing, business, is
another matter that would yet have to await the reception and
admission of evidence. Since these points have seasonably been
raised by the petitioner, there should be no real cause for what may
understandably be its apprehension, i.e., that by its participation
during the trial on the merits, it may, absent an invocation of separate
or independent reliefs of its own, be considered to have voluntarily
submitted itself to the court's jurisdiction.[19]
Far from committing an abuse of discretion, the trial court properly
deferred resolution of the motion to dismiss and thus avoided
prematurely deciding a question which requires a factual basis, with
the same result if it had denied the motion and conditionally assumed
jurisdiction. It is the Court of Appeals which, by ruling that BMW is
not doing business on the basis merely of uncertain allegations in the
pleadings, disposed of the whole case with finality and thereby
deprived petitioner of his right to be heard on his cause of action. Nor
was there justification for nullifying the writ of preliminary
52
injunction issued by the trial court. Although the injunction was
issued ex parte, the fact is that BMW was subsequently heard on its
defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED
and the case is REMANDED to the trial court for further proceedings.
SO ORDERED.
[G.R. No. 159586. July 26, 2004]
EUROPEAN RESOURCES AND TECHNOLOGIES, INC. and
DELFIN J. WENCESLAO, petitioners, vs. INGENIEUBURO
BIRKHAHN + NOLTE, Ingeniurgesellschaft mbh and HEERS
& BROCKSTEDT GMBH & CO., respondents.
YNARES-SANTIAGO, J.:
Assailed in this Petition for Review under Rule 45 of the Rules of
Court is the Decision[1] of the Court of Appeals dated May 15, 2003,
which sustained the Order of the Regional Trial Court of Angeles
City, Branch 61, dated June 28, 2001, and its subsequent Resolution
dated August 3, 2003 denying petitioners motion for reconsideration.
European Resources and Technologies Inc. (hereinafter ERTI), a
corporation organized and existing under the laws of the Republic of
the Philippines, is joined by Delfin J. Wenceslao as petitioner in this
case. Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh and
Heers & Brockstedt Gmbh & Co. are German corporations who are
respondents in this case and shall be collectively referred to as the
German Consortium.
The German Consortium tendered and submitted its bid to the Clark
Development Corporation (CDC) to construct, operate and manage
the Integrated WasteManagement Center at the Clark Special
Economic Zone (CSEZ). CDC accepted the German Consortiums bid
and awarded the contract to it. On October 6, 1999, CDC and the
German Consortium executed the Contract for Services[2] which
embodies the terms and conditions of their agreement.
The Contract for Services provides that the German Consortium shall
be empowered to enter into a contract or agreement for the use of the
integrated waste management center by corporations, local
government units, entities, and persons not only within the CSEZ but
also outside. For waste collected within the CSEZ, the German
Consortium may impose a tipping fee per ton of waste collected from
locators and residents of the CSEZ, which fees shall be subject to the
schedule agreed upon by the parties and specified in the Contract for
Services. For its operations outside of the CSEZ, the German
Consortium shall pay CDC US$1.50 per ton of non-hazardous solid
waste collected.[3] The CDC shall guarantee that nineteen thousand
eighteen hundred (19,800) tons per year of solid waste volume shall
be collected from inside and outside the CSEZ.[4] The contract has a
term of twenty-five (25) years,[5] during which time the German
Consortium shall operate the waste management center on a
day-to-day basis.[6]
Article VIII, Section 7 of the Contract for Services provides that the
German Consortium shall undertake to organize a local corporation
as its representative for this project. On April 18, 2000, the German
Consortium entered into a Joint Venture with D.M. Wenceslao and
Associates, Inc. (DMWAI) and Ma. Elena B. Villarama (doing
business as LBV and Associates), embodied in a Memorandum of
Understanding[7] (MOU) signed by the parties. Under the MOU, the
parties agreed to jointly form a local corporation to which the
German Consortium shall assign its rights under the Contract for
Services. Pursuant to this agreement, petitioner European Resources

and Technologies, Inc. was incorporated. The parties likewise agreed
to prepare and finalize a Shareholders Agreement within one (1)
month from the execution of the MOU, which shall provide that the
German Consortium shall own fifteen percent (15%) of the equity in
the joint venture corporation, DMWAI shall own seventy percent
(70%) and LBV&A shall own fifteen percent (15%). In the event that
the parties fail to execute the Shareholders Agreement, the MOU
shall be considered null and void.[8]
On August 1, 2000, without the Shareholders Agreement having
been executed, the German Consortium and petitioner ERTI entered
into a Memorandum of Agreement (MOA)[9] whereby the German
Consortium ceded its rights and obligations under the Contract for
Services in favor of ERTI and assigned unto ERTI, among others, its
license from CDC to engage in the business of providing
environmental services needed in the CSEZ in connection with the
waste management within the CSEZ and other areas.[10] Likewise,
the parties agreed that should there be a disagreement between or
among them relative to the interpretation or implementation of the
MOA and the collateral documents including but not limited to the
Contract for Services between the German Consortium and CDC, the
dispute shall be referred to a panel of arbitrators.[11]
On December 11, 2000, ERTI received a letter from BN Consultants
Philippines, Inc., signed by Mr. Holger Holst for and on behalf of the
German Consortium,[12]stating that the German Consortiums
contract with DMWAI, LBV&A and ERTI has been terminated or
extinguished on the following grounds: (a) the CDC did not give its
approval to the Consortiums request for the approval of the
assignment or transfer by the German Consortium in favor of ERTI
of its rights and interests under the Contract for Services; (b) the
parties failed to prepare and finalize the Shareholders Agreement
pursuant to the provision of the MOU; (c) there is no more factual or
legal basis for the joint venture to continue; and (d) with the
termination of the MOU, the MOA is also deemed terminated or
extinguished.
Attached to the letter was a copy of the letter of the CDC,[13] stating
that the German Consortiums assignment of an eighty-five percent
(85%) majority interest to another party violated its representation to
undertake both the financial and technical aspects of the project. The
dilution of the Consortiums interest in ERTI is a substantial
modification of the Consortiums representations which were used as
bases for the award of the project to it.
On February 20, 2001, petitioner ERTI, through counsel, sent a letter
to CDC requesting for the reconsideration of its disapproval of the
agreement between ERTI and the German Consortium.
Before CDC could act upon petitioner ERTIs letter, the German
Consortium filed a complaint for injunction against herein petitioners
before the Regional Trial Court ofAngeles City, Branch 61, docketed
as Civil Case No. 10049. The German Consortium claimed that
petitioner ERTIs continued misrepresentation as to their right to
accept solid wastes from third parties for processing at the waste
management center will cause irreparable damage to the Consortium
and its exclusive right to operate the waste management center at the
CSEZ. Moreover, petitioner ERTIs acts destroy the Consortiums
credibility and undermine customer confidence in it. Hence, the
German Consortium prayed that a writ of temporary restraining order
be issued against petitioner ERTI and, after hearing, a writ of
preliminary injunction be likewise issued ordering petitioner ERTI to
cease and desist from misrepresenting to third parties or the public
that it has any right or interest in the waste management center at
CSEZ.[14]
Petitioners filed their Opposition to the application for preliminary
injunction on February 7, 2001. The following day, February 8, 2001,
53
petitioners sent respondents, through Mr. Holger Holst, a letter
demanding that the parties proceed to arbitration in accordance with
Section 17 of the MOA. At the hearings on the application for
injunction, petitioners objected to the presentation of evidence on the
ground that the trial court had no jurisdiction over the case since the
German Consortium was composed of foreign corporations doing
business in the country without a license. Moreover, the MOA
between the parties provides that the dispute should be referred to
arbitration.
The trial court overruled the objection and proceeded with the
hearing. On June 28, 2001, the trial court issued an Order granting
the writ of preliminary injunction.[15]Petitioners filed a motion for
reconsideration, which was denied in a Resolution dated November
21, 2001.
On January 17, 2002, petitioners filed a petition for certiorari and
prohibition under Rule 65 of the Rules of Court before the Court of
Appeals, assailing the trial courts Orders dated June 28,
2001 and November 21, 2001.
Meanwhile, on February 11, 2002, the temporary restraining order
issued was lifted in view of respondents failure to file sufficient
bond.[16] On September 6, 2002, all proceedings in Civil Case No.
10049 were suspended until the petition for certiorari pending before
the Court of Appeals shall have been resolved.[17]
On May 15, 2003, the Court of Appeals dismissed the petition for
certiorari. Petitioners Motion for Reconsideration was denied in a
Resolution dated August 25, 2003.
Hence, this petition arguing that the Court of Appeals committed
reversible error in:
(a) Ruling that petitioners are estopped from assailing the capacity of
the respondents to institute the suit for injunction
(b) Ruling that respondents are entitled to an injunctive writ.
(c) Not holding that the dispute is covered by the arbitration clause in
the memorandum of agreement.
(d) Issuing the writ of preliminary injunction that is tantamount to a
decision of the case on the merits.[18]
The petition is partly meritorious.
There is no general rule or governing principle laid down as to what
constitutes doing or engaging in or transacting business in
the Philippines. Thus, it has often been held that a single act or
transaction may be considered as doing business when a corporation
performs acts for which it was created or exercises some of the
functions for which it was organized.[19] We have held that the act
of participating in a bidding process constitutes doing business
because it shows the foreign corporations intention to engage in
business in the Philippines. In this regard, it is the performance by a
foreign corporation of the acts for which it was created, regardless of
volume of business, that determines whether a foreign corporation
needs a license or not.[20]
Consequently, the German Consortium is doing business in
the Philippines without the appropriate license as required by our
laws. By participating in the bidding conducted by the CDC for the
operation of the waste management center, the German Consortium
exhibited its intent to transact business in the Philippines. Although
the Contract for Services provided for the establishment of a local
corporation to serve as respondents representative, it is clear from the
other provisions of the Contract for Services as well as the letter by
the CDC containing the disapproval that it will be the German
Consortium which shall manage and conduct the operations of the

waste management center for at least twenty-five years. Moreover,
the German Consortium was allowed to transact with other entities
outside the CSEZ for solid waste collection. Thus, it is clear that the
local corporation to be established will merely act as a conduit or
extension of the German Consortium.
As a general rule, unlicensed foreign non-resident corporations
cannot file suits in the Philippines. Section 133 of the Corporation
Code specifically provides:
SECTION 133. No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines, but such
corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.
A corporation has legal status only within the state or territory in
which it was organized. For this reason, a corporation organized in
another country has no personality to file suits in the Philippines. In
order to subject a foreign corporation doing business in the country
to the jurisdiction of our courts, it must acquire a license from the
Securities and Exchange Commission (SEC) and appoint an agent for
service of process. Without such license, it cannot institute a suit in
the Philippines.[21]
However, there are exceptions to this rule. In a number of
cases,[22] we have declared a party estopped from challenging or
questioning the capacity of an unlicensed foreign corporation from
initiating a suit in our courts. In the case of Communication Materials
and Design, Inc. v. Court of Appeals,[23] a foreign corporation
instituted an action before our courts seeking to enjoin a local
corporation, with whom it had a Representative Agreement, from
using its corporate name, letter heads, envelopes, sign boards and
business dealings as well as the foreign corporations trademark. The
case arose when the foreign corporation discovered that the local
corporation has violated certain contractual commitments as
stipulated in their agreement. In said case, we held that a foreign
corporation doing business in the Philippines without license may
sue in Philippine Courts a Philippine citizen or entity that had
contracted with and benefited from it.
Hence, the party is estopped from questioning the capacity of a
foreign corporation to institute an action in our courts where it had
obtained benefits from its dealings with such foreign corporation and
thereafter committed a breach of or sought to renege on its
obligations. The rule relating to estoppel is deeply rooted in the
axiom of commodum ex injuria sua non habere debetno person ought
to derive any advantage from his own wrong.
In the case at bar, petitioners have clearly not received any benefit
from its transactions with the German Consortium. In fact, there is no
question that petitioners were the ones who have expended a
considerable amount of money and effort preparatory to the
implementation of the MOA. Neither do petitioners seek to back out
from their obligations under both the MOU and the MOA by
challenging respondents capacity to sue. The reverse could not be
any more accurate. Petitioners are insisting on the full validity and
implementation of their agreements with the German Consortium.
To rule that the German Consortium has the capacity to institute an
action against petitioners even when the latter have not committed
any breach of its obligation would be tantamount to an unlicensed
foreign corporation gaining access to our courts for protection and
redress. We cannot allow this without violating the very rationale for
the law prohibiting a foreign corporation not licensed to do business
in the Philippines from suing or maintaining an action in Philippine
courts. The object of requiring a license is not to prevent the foreign
54
corporation from performing single acts, but to prevent it from
acquiring domicile for the purpose of business without taking the
steps necessary to render it amenable to suits in the local
courts.[24] In other words, the foreign corporation is merely
prevented from being in a position where it takes the good without
accepting the bad.
On the issue of whether the respondents were entitled to the
injunctive writ, the petitioners claim that respondents right is not
in esse but is rather a future right which is contingent upon a judicial
declaration that the MOA has been validly rescinded. The Court of
Appeals, in its decision, held that the MOA should be deemed
subject to a suspensive condition, that is, that CDCs prior written
consent must be obtained for the validity of the assignment.
This issue must be resolved in a separate proceeding. It must be
noted that the hearing conducted in the trial court was merely a
preliminary hearing relating to the issuance of the injunctive writ. In
order to fully appreciate the facts of this case and the surrounding
circumstances relating to the agreements and contract involved,
further proof should be presented for consideration of the
court. Likewise, corollary matters, such as whether either of the
parties is liable for damages and to what extent, cannot be resolved
with absolute certainty, thus rendering any decision we might make
incomplete as to fully dispose of this case.
More importantly, it is evident that CDC must be made a proper
party in any case which seeks to resolve the effectivity or
ineffectivity of its disapproval of the assignment made between
petitioners and respondent German Consortium. Where, as in the
instant case, CDC is not impleaded as a party, any decision of the
court which will inevitably affect or involve CDC cannot be deemed
binding on it.
For the same reason, petitioners assertion that the instant case should
be referred to arbitration pursuant to the provision of the MOA is
untenable.
We have ruled in several cases that arbitration agreements are valid,
binding, enforceable and not contrary to public policy such that when
there obtains a written provision for arbitration which is not complied
with, the trial court should suspend the proceedings and order the
parties to proceed to arbitration in accordance with the terms of their
agreement.[25] In the case at bar, the MOA between petitioner ERTI
and respondent German Consortium provided:
17. Should there be a disagreement between or among the Parties
relative to the interpretation or implementation of this Agreement
and the collateral documents including but not limited to the Contract
for Services between GERMAN CONSORTIUM and CDC and the
Parties cannot resolve the same by themselves, the same shall be
endorsed to a panel of arbitrators which shall be convened in
accordance with the process ordained under the Arbitration Law of
the Republic of the Philippines.[26]
Indeed, to brush aside a contractual agreement calling for arbitration
in case of disagreement between parties would be a step
backward.[27] But there are exceptions to this rule. Even if there is
an arbitration clause, there are instances when referral to arbitration
does not appear to be the most prudent action. The object of
arbitration is to allow the expeditious determination of a
dispute. Clearly, the issue before us could not be speedily and
efficiently resolved in its entirety if we allow simultaneous
arbitration proceedings and trial, or suspension of trial pending
arbitration.[28]
As discussed earlier, the dispute between respondent German
Consortium and petitioners involves the disapproval by the CDC of
the assignment by the German Consortium of its rights under the

Contract for Services to petitioner ERTI. Admittedly, the arbitration
clause is contained in the MOA to which only the German
Consortium and petitioner ERTI were parties. Even if the case is
brought before an arbitration panel, the decision will not be binding
upon CDC who is a non-party to the arbitration agreement. What is
more, the arbitration panel will not be able to completely dispose of
all the issues of this case without including CDC in its
proceedings. Accordingly, the interest of justice would only be
served if the trial court hears and adjudicates the case in a single and
complete proceeding.
Lastly, petitioners question the propriety of the issuance of writ of
preliminary injunction claiming that such is already tantamount to
granting the main prayer of respondents complaint without the
benefit of a trial. Petitioners point out that the purpose of a
preliminary injunction is to prevent threatened or continuous
irremediable injury to some of the parties before their claims can be
thoroughly studied and decided. It cannot be used to railroad the
main case and seek a judgment without a full-blown trial as in the
instant case.
The Court of Appeals ruled that since petitioners did not raise this
issue during the hearing on the application for preliminary injunction
before the trial court, the same cannot be raised for the first time on
appeal and even in special civil actions for certiorari as in this case.
At the outset, it must be noted that with the finding that the German
Consortium is without any personality to file the petition with the
trial court, the propriety of the injunction writ issued is already moot
and academic. Even assuming for the sake of argument that
respondents have the capacity to file the petition, we find merit in the
issue raised by petitioners against the injunction writ issued.
Before an injunctive writ can be issued, it is essential that the
following requisites are present: (1) there must be a right in esse or
the existence of a right to be protected; and (2) the act against which
injunction to be directed is a violation of such right.[29] The onus
probandi is on movant to show that there exists a right to be
protected, which is directly threatened by the act sought to be
enjoined. Further, there must be a showing that the invasion of the
right is material and substantial and that there is an urgent and
paramount necessity for the writ to prevent a serious damage.[30]
Thus, it is clear that for the issuance of the writ of preliminary
injunction to be proper, it must be shown that the invasion of the
right sought to be protected is material and substantial, that the right
of complainant is clear and unmistakable and that there is an urgent
and paramount necessity for the writ to prevent serious
damage.[31] At the time of its application for an injunctive writ,
respondents right to operate and manage the waste management
center, to the exclusion of or without any participation by petitioner
ERTI, cannot be said to be clear and unmistakable. The MOA
executed between respondents and petitioner ERTI has not yet been
judicially declared as rescinded when the complaint was lodged in
court.[32] Hence, a cloud of doubt exists over respondent German
Consortiums exclusive right relating to the waste management
center.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP
No. 68923 dated May 15, 2003 is REVERSED and SET ASIDE. The
Orders of the trial court dated June 28, 2001 and November 21,
2001 are ANNULLED and SET ASIDE and Civil Case No. 10049 is
DISMISSED for lack of legal capacity of respondents to institute the
action. Costs against respondents. SO ORDERED.
[G.R. No. 154618. April 14, 2004]
55
AGILENT TECHNOLOGIES SINGAPORE (PTE)
LTD., petitioner, vs. INTEGRATED SILICON TECHNOLOGY
PHILIPPINES CORPORATION, TEOH KIANG HONG,
TEOH KIANG SENG, ANTHONY CHOO, JOANNE KATE M.
DELA CRUZ, JEAN KAY M. DELA CRUZ and ROLANDO T.
NACILLA, respondents.
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12,
2002 of the Court of Appeals in CA-G.R. SP No. 66574, which
dismissed Civil Case No. 3123-2001-C and annulled and set aside
the Order dated September 4, 2001 issued by the Regional Trial
Court of Calamba, Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a
foreign corporation, which, by its own admission, is not licensed to
do business in the Philippines.[1]Respondent Integrated Silicon
Technology Philippines Corporation (Integrated Silicon) is a private
domestic corporation, 100% foreign owned, which is engaged in the
business of manufacturing and assembling electronics
components.[2] Respondents Teoh Kiang
Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are
current members of Integrated Silicons board of directors, while
Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando
T. Nacilla are its former members.[3]
The juridical relation among the various parties in this case can be
traced to a 5-year Value Added Assembly Services Agreement
(VAASA), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.)
Ltd., Singapore Components Operation (HP-Singapore).[4] Under
the terms of the VAASA, Integrated Silicon was to locally
manufacture and assemble fiber optics for export to
HP-Singapore. HP-Singapore, for its part, was to consign raw
materials to Integrated Silicon; transport machinery to the plant of
Integrated Silicon; and pay Integrated Silicon the purchase price of
the finished products.[5] The VAASA had a five-year term,
beginning on April 2, 1996, with a provision for annual renewal by
mutual written consent.[6] On September 19, 1999, with the consent
of Integrated Silicon,[7] HP-Singapore assigned all its rights and
obligations in the VAASA to Agilent.[8]
On May 25, 2001, Integrated Silicon filed a complaint for Specific
Performance and Damages against Agilent and its officers
Tan Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor,
docketed as Civil Case No. 3110-01-C. It alleged
that Agilent breached the parties oral agreement to extend
the VAASA. Integrated Silicon thus prayed that defendant be ordered
to execute a written extension of the VAASA for a period of five
years as earlier assured and promised; to comply with the
extended VAASA; and to pay actual, moral, exemplary damages and
attorneys fees.[9]
On June 1, 2001, summons and a copy of the complaint were served
on Atty. Ramon Quisumbing, who returned these processes on the
claim that he was not the registered agent of Agilent. Later, he
entered a special appearance to assail the courts jurisdiction over the
person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated
Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne
Kate M. dela Cruz, Jean Kay M. dela Cruz and Rolando
T. Nacilla,[10] for Specific Performance, Recovery of Possession,
and Sum of Money with Replevin, Preliminary Mandatory Injunction,
and Damages, before the Regional Trial Court, Calamba, Laguna,
Branch 92, docketed as Civil Case No. 3123-2001-C. Agilent prayed

that a writ of replevin or, in the alternative, a writ of preliminary
mandatory injunction, be issued ordering defendants to immediately
return and deliver to plaintiff its equipment, machineries and the
materials to be used for fiber-optic components which were left in
the plant of Integrated Silicon. It further prayed that defendants be
ordered to pay actual and exemplary damages and attorneys fees.[11]
Respondents filed a Motion to Dismiss in Civil Case No.
3123-2001-C,[12] on the grounds of lack of Agilents legal capacity
to sue;[13] litis pendentia;[14] forum shopping;[15] and failure to
state a cause of action.[16]
On September 4, 2001, the trial court denied the Motion to Dismiss
and granted petitioner Agilents application for a writ of replevin.[17]
Without filing a motion for reconsideration, respondents filed a
petition for certiorari with the Court of Appeals.[18]
In the meantime, upon motion filed by respondents, Judge Antonio
S. Pozas of Branch 92 voluntarily inhibited himself in Civil Case No.
3123-2001-C. The case was re-raffled and assigned to Branch 35, the
same branch where Civil Case No. 3110-2001-C is pending.
On August 12, 2002, the Court of Appeals granted respondents
petition for certiorari, set aside the assailed Order of the trial court
dated September 4, 2001, and ordered the dismissal of Civil Case No.
3123-2001-C.
Hence, the instant petition raising the following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN NOT DISMISSING RESPONDENTS PETITION FOR
CERTIORARI FOR RESPONDENTS FAILURE TO FILE A
MOTION FOR RECONSIDERATION BEFORE RESORTING TO
THE REMEDY OF CERTIORARI.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN ANNULLING AND SETTING ASIDE THE TRIAL
COURTS ORDER DATED 4 SEPTEMBER 2001 AND
ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C
BELOW ON THE GROUND OF LITIS PENDENTIA, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO.
3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN ANNULLING AND SETTING ASIDE THE TRIAL
COURTS ORDER DATED 4 SEPTEMBER 2001 AND
ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C
BELOW ON THE GROUND OF FORUM SHOPPING, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO.
3110-2001-C.
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN ORDERING THE DISMISSAL OF CIVIL CASE NO.
323-2001-C BELOW INSTEAD OF ORDERING IT
CONSOLIDATED WITH CIVIL CASE NO. 3110-2001-C.[19]
The two primary issues raised in this petition: (1) whether or not the
Court of Appeals committed reversible error in giving due course to
respondents petition, notwithstanding the failure to file a Motion for
Reconsideration of the September 4, 2001 Order; and (2) whether or
not the Court of Appeals committed reversible error in dismissing
Civil Case No. 3123-2001-C.
56
We find merit in the petition.
The Court of Appeals, citing the case
of Malayang Manggagawa sa ESSO v. ESSO Standard Eastern,
Inc.,[20] held that the lower court had no jurisdiction over Civil Case
No. 3123-2001-C because of the pendency of Civil Case No.
3110-2001-C and, therefore, a motion for reconsideration was not
necessary before resort to a petition for certiorari. This was error.
Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests
jurisdiction over the subject matter of Civil Case No. 3123-2001-C in
the RTC.[21]
The Court of Appeals ruling that the assailed Order issued by the
RTC of Calamba, Branch 92, was a nullity for lack of jurisdiction
due to litis pendentia and forum shopping, has no legal
basis. The pendency of another action does not strip a court of the
jurisdiction granted by law.
The Court of Appeals further ruled that a Motion for Reconsideration
was not necessary in view of the urgent necessity in this case. We are
not convinced. In the case of Bache and Co. (Phils.), Inc. v.
Ruiz,[22] relied on by the Court of Appeals, it was held that time is
of the essence in view of the tax assessments sought to be enforced
by respondent officers of the Bureau of Internal Revenue against
petitioner corporation, on account of which immediate and more
direct action becomes necessary. Tax assessments in that case were
based on documents seized by virtue of an illegal search, and the
deprivation of the right to due process tainted the entire proceedings
with illegality. Hence, the urgent necessity of preventing the
enforcement of the tax assessments was patent. Respondents, on the
other hand, cite the case of Geronimo v. Commission on
Elections,[23] where the urgent necessity of resolving a
disqualification case for a position in local government warranted the
expeditious resort to certiorari.In the case at bar, there is no
analogously urgent circumstance which would necessitate the
relaxation of the rule on a Motion for Reconsideration.
Indeed, none of the exceptions for dispensing with a Motion for
Reconsideration is present here. None of the following cases cited by
respondents serves as adequate basis for their procedural lapse.
In Vigan Electric Light Co., Inc. v. Public Service
Commission,[24] the questioned order was null and void for failure
of respondent tribunal to comply with due process requirements;
in Matanguihan v. Tengco,[25] the questioned order was a patent
nullity for failure to acquire jurisdiction over the defendants, which
fact the records plainly disclosed; and in National Electrification
Administration v. Court of Appeals,[26] the questioned orders were
void for vagueness. No such patent nullity is evident in the Order
issued by the trial court in this case. Finally, while urgency may be a
ground for dispensing with a Motion for Reconsideration, in the case
of Vivo v. Cloribel,[27] cited by respondents, the slow progress of
the case would have rendered the issues moot had a motion for
reconsideration been availed of. We find no such urgent
circumstance in the case at bar.
Respondents, therefore, availed of a premature remedy when they
immediately raised the matter to the Court of Appeals on certiorari;
and the appellate court committed reversible error when it took
cognizance of respondents petition instead of dismissing the same
outright.
We come now to the substantive issues of the petition.
Litis pendentia is a Latin term which literally means a pending suit. It
is variously referred to in some decisions
as lis pendens and auter action pendant. While it is normally
connected with the control which the court has on a property

involved in a suit during the continuance proceedings, it is more
interposed as a ground for the dismissal of a civil action pending in
court.
Litis pendentia as a ground for the dismissal of a civil action refers to
that situation wherein another action is pending between the same
parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. For litis pendentia to be invoked,
the concurrence of the following requisites is necessary:
(a) identity of parties or at least such as represent the same interest in
both actions;
(b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and
(c) the identity in the two cases should be such that the judgment that
may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other.[28]
The Court of Appeals correctly appreciated the identity of parties in
Civil Cases No. 3123-2001-C and 3110-2001-C. Well-settled is the
rule that lis pendens requires only substantial, and not absolute,
identity of parties.[29] There is substantial identity of parties when
there is a community of interest between a party in the first case and
a party in the second case, even if the latter was not impleaded in the
first case.[30] The parties in these cases are vying over the interests
of the two opposing corporations; the individuals are only
incidentally impleaded, being the natural persons purportedly
accused of violating these corporations rights.
Likewise, the fact that the positions of the parties are reversed, i.e.,
the plaintiffs in the first case are the defendants in the second case or
vice versa, does not negate the identity of parties for purposes of
determining whether the case is dismissible on the ground
of litis pendentia.[31]
The identity of parties notwithstanding, litis pendentia does not
obtain in this case because of the absence of the second and third
requisites. The rights asserted in each of the cases involved are
separate and distinct; there are two subjects of controversy presented
for adjudication; and two causes of action are clearly involved. The
fact that respondents instituted a prior action for Specific
Performance and Damages is not a ground for defeating the
petitioners action for Specific Performance, Recovery of Possession,
and Sum of Money with Replevin, Preliminary Mandatory Injunction,
and Damages.
In Civil Case No. 3110-2001-C filed by respondents, the issue is
whether or not there was a breach of an oral promise to renew of
the VAASA. The issue in Civil Case No. 3123-2001-C, filed by
petitioner, is whether petitioner has the right to take possession of the
subject properties. Petitioners right of possession is founded on the
ownership of the subject goods, which ownership is not disputed and
is not contingent on the extension or non-extension of
the VAASA. Hence, the replevin suit can validly be tried even while
the prior suit is being litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No.
3110-2001-C. The reliefs sought by respondent Integrated Silicon
therein are as follows: (1) execution of a written extension or renewal
of the VAASA; (2) compliance with the extended VAASA; and (3)
payment of overdue accounts, damages, and attorneys
fees.The reliefs sought by petitioner Agilent in Civil Case No.
3123-2001-C, on the other hand, are as follows: (1) issuance of a
Writ of Replevin or Writ of Preliminary Mandatory Injunction; (2)
recovery of possession of the subject properties; (3) damages and
attorneys fees.
57
Concededly, some items or pieces of evidence may be admissible in
both actions. It cannot be said, however, that exactly the same
evidence will support the decisions in both, since the legally
significant and controlling facts in each case are entirely different.
Although the VAASA figures prominently in both suits, Civil Case
No. 3110-2001-C is premised on a purported breach of an oral
obligation to extend the VAASA, and damages arising out
of Agilents alleged failure to comply with such purported
extension. Civil Case No. 3123-2001-C, on the other hand, is
premised on a breach of the VAASA itself, and damages arising
to Agilent out of that purported breach.
It necessarily follows that the third requisite for litis pendentia is also
absent. The following are the elements of res judicata:
(a) The former judgment must be final;
(b) The court which rendered judgment must have jurisdiction over
the parties and the subject matter;
(c) It must be a judgment on the merits; and
(d) There must be between the first and second actions identity of
parties, subject matter, and cause of action.[32]
In this case, any judgment rendered in one of the actions will not
amount to res judicata in the other action. There being different
causes of action, the decision in one case will not
constitute res judicata as to the other.
Of course, a decision in one case may, to a certain extent, affect the
other case. This, however, is not the test to determine the identity of
the causes of action.Whatever difficulties or inconvenience may be
entailed if both causes of action are pursued on separate remedies,
the proper solution is not the dismissal order of the Court of Appeals.
The possible consolidation of said cases, as well as stipulations and
appropriate modes of discovery, may well be considered by the court
below to subserve not only procedural expedience but, more
important, the ends of justice.[33]
We now proceed to the issue of forum shopping.
The test for determining whether a party violated the rule against
forum-shopping was laid down in the case of Buan v.
Lopez.[34] Forum shopping exists where the elements
of litis pendentia are present, or where a final judgment in one case
will amount to res judicata in the final other. There being
no litis pendentia in this case, a judgment in the said case will not
amount to res judicata in Civil Case No. 3110-2001-C, and
respondents contention on forum shopping must likewise fail.
We are not unmindful of the afflictive consequences that may be
suffered by both petitioner and respondents if replevin is granted by
the trial court in Civil Case No. 3123-2001-C. If respondent
Integrated Silicon eventually wins Civil Case No. 3110-2001-C, and
the VAASAs terms are extended, petitioner corporation will have to
comply with its obligations thereunder, which would include the
consignment of properties similar to those it may recover by way
of replevin in Civil Case No. 3123-2001-C.However, petitioner will
also suffer an injustice if denied the remedy of replevin, resort to
which is not only allowed but encouraged by law.
Respondents argue that since Agilent is an unlicensed foreign
corporation doing business in the Philippines, it lacks the legal
capacity to file suit.[35] The assailed acts of petitioner Agilent,
purportedly in the nature of doing business in the Philippines, are the
following: (1) mere entering into the VAASA, which is a service
contract;[36] (2) appointment of a full-time representative in
Integrated Silicon, to oversee and supervise the production
of Agilents products;[37] (3) the appointment by Agilent of six

full-time staff members, who were permanently stationed at
Integrated Silicons facilities in order to inspect the finished goods
for Agilent;[38] and (4) Agilents participation in the management,
supervision and control of Integrated Silicon,[39] including
instructing Integrated Silicon to hire more employees to
meet Agilents increasing production needs,[40] regularly performing
quality audit, evaluation and supervision of Integrated Silicons
employees,[41] regularly performing inventory audit of raw materials
to be used by Integrated Silicon, which was also required to provide
weekly inventory updates to Agilent,[42] and providing and dictating
Integrated Silicon on the daily production schedule, volume and
models of the products to manufacture and ship for Agilent.[43]
A foreign corporation without a license is not ipso facto incapacitated
from bringing an action in Philippine courts. A license is necessary
only if a foreign corporation is transacting or doing business in the
country. The Corporation Code provides:
Sec. 133. Doing business without a license. No foreign corporation
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency
of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws.
The aforementioned provision prevents an unlicensed foreign
corporation doing business in the Philippines from accessing our
courts.
In a number of cases, however, we have held that an unlicensed
foreign corporation doing business in the Philippines may bring suit
in Philippine courts against a Philippine citizen or entity who had
contracted with and benefited from said corporation.[44] Such a suit
is premised on the doctrine of estoppel. A party is estopped from
challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. This
doctrine of estoppel to deny corporate existence and capacity applies
to foreign as well as domestic corporations.[45] The application of
this principle prevents a person contracting with a foreign
corporation from later taking advantage of its noncompliance with
the statutes chiefly in cases where such person has received the
benefits of the contract.[46]
The principles regarding the right of a foreign corporation to bring
suit in Philippine courts may thus be condensed in four statements: (1)
if a foreign corporation does business in the Philippines without a
license, it cannot sue before the Philippine courts;[47] (2) if a foreign
corporation is not doing business in the Philippines, it needs no
license to sue before Philippine courts on an isolated transaction or
on a cause of action entirely independent of any business
transaction[48]; (3) if a foreign corporation does business in the
Philippines without a license, a Philippine citizen or entity which has
contracted with said corporation may be estopped from challenging
the foreign corporations corporate personality in a suit brought
before Philippine courts;[49] and (4) if a foreign corporation does
business in the Philippines with the required license, it can sue before
Philippine courts on any transaction.
The challenge to Agilents legal capacity to file suit hinges on
whether or not it is doing business in the Philippines. However, there
is no definitive rule on what constitutes doing, engaging in, or
transacting business in the Philippines, as this Court observed in the
case of Mentholatum v. Mangaliman.[50] The Corporation Code
itself is silent as to what acts constitute doing or transacting business
in the Philippines.
Jurisprudence has it, however, that the term implies a continuity of
commercial dealings and arrangements, and contemplates, to that
58
extent, the performance of acts or works or the exercise of some of
the functions normally incident to or in progressive prosecution of
the purpose and subject of its organization.[51]
In Mentholatum,[52] this Court discoursed on the two general tests to
determine whether or not a foreign corporation can be considered as
doing business in the Philippines. The first of these is
the substance test, thus:[53]
The true test [for doing business], however, seems to be whether the
foreign corporation is continuing the body of the business or
enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another.
The second test is the continuity test, expressed thus:[54]
The term [doing business] implies a continuity of commercial
dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions
normally incident to, and in the progressive prosecution of, the
purpose and object of its organization.
Although each case must be judged in light of its attendant
circumstances, jurisprudence has evolved several guiding principles
for the application of these tests. For instance, considering that it
transacted with its Philippine counterpart for seven years, engaging
in futures contracts, this Court concluded that the foreign corporation
in Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses
Lara,[55] was doing business in the Philippines. In Commissioner of
Internal Revenue v. Japan Airlines (JAL),[56]the Court held that JAL
was doing business in the Philippines, i.e., its commercial dealings in
the country were continuous despite the fact that no JAL aircraft
landed in the country as it sold tickets in the Philippines through a
general sales agent, and opened a promotions office here as well.
In General Corp. of the Phils. v. Union Insurance Society of Canton
and Firemans Fund Insurance,[57] a foreign insurance corporation
was held to be doing business in the Philippines, as it appointed a
settling agent here, and issued 12 marine insurance policies. We held
that these transactions were not isolated or casual, but manifested the
continuity of the foreign corporations conduct and its intent to
establish a continuous business in the country. In Eriks PTE Ltd. v.
Court of Appeals and Enriquez,[58] the foreign corporation sold its
products to a Filipino buyer who ordered the goods 16 times within
an eight-month period. Accordingly, this Court ruled that the
corporation was doing business in the Philippines, as there was a
clear intention on its part to continue the body of its business here,
despite the relatively short span of time involved.Communication
Materials and Design, Inc., et al. v. Court of Appeals, ITEC, et
al.[59] and Top-Weld Manufacturing v. ECED, IRTI, et al.[60] both
involved the License and Technical Agreement and Distributor
Agreement of foreign corporations with their respective local
counterparts that were the primary bases for the Courts ruling that the
foreign corporations were doing business in the Philippines.[61] In
particular, the Court cited the highly restrictive nature of certain
provisions in the agreements involved, such that, as stated
in Communication Materials, the Philippine entity is reduced to a
mere extension or instrument of the foreign corporation. For example,
in Communication Materials, the Court deemed the No Competing
Product provision of the Representative Agreement therein
restrictive.[62]
The case law definition has evolved into a statutory definition,
having been adopted with some qualifications in various pieces of
legislation. The Foreign Investments Act of 1991 (the FIA; Republic
Act No. 7042, as amended), defines doing business as follows:
Sec. 3, par. (d). The phrase doing business shall include soliciting
orders, service contracts, opening offices, whether called liaison

offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totaling one hundred eighty (180)
days or more; participating in the management, supervision or
control of any domestic business, firm, entity, or corporation in the
Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent
the performance of acts or works, or the exercise of some of the
functions normally incident to, and in the progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
An analysis of the relevant case law, in conjunction with Section 1 of
the Implementing Rules and Regulations of the FIA (as amended by
Republic Act No. 8179), would demonstrate that the acts enumerated
in the VAASA do not constitute doing business in the Philippines.
Section 1 of the Implementing Rules and Regulations of the FIA (as
amended by Republic Act No. 8179) provides that the following
shall not be deemed doing business:
(1) Mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor;
(2) Having a nominee director or officer to represent its interest in
such corporation;
(3) Appointing a representative or distributor domiciled in
the Philippines which transacts business in the representatives or
distributors own name and account;
(4) The publication of a general advertisement through any print or
broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the
purpose of having the same processed by another entity in
the Philippines;
(6) Consignment by a foreign entity of equipment with a local
company to be used in the processing of products for export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract of
sale which are not on a continuing basis, such as installing in the
Philippines machinery it has manufactured or exported to the
Philippines, servicing the same, training domestic workers to operate
it, and similar incidental services.
By and large, to constitute doing business, the activity to be
undertaken in the Philippines is one that is for profit-making.[63]
By the clear terms of the VAASA, Agilents activities in the
Philippines were confined to (1) maintaining a stock of goods in the
Philippines solely for the purpose of having the same processed by
Integrated Silicon; and (2) consignment of equipment with Integrated
Silicon to be used in the processing of products for export. As such,
we hold that, based on the evidence presented thus
far, Agilent cannot be deemed to be doing business in
the Philippines. Respondents contention that Agilent lacks the legal
capacity to file suit is therefore devoid of merit. As a foreign
corporation not doing business in the Philippines, it needed no
license before it can sue before our courts.
Finally, as to Agilents purported failure to state a cause of action
against the individual respondents, we likewise rule in favor of
petitioner. A Motion to Dismiss hypothetically admits all the
allegations in the Complaint, which plainly alleges that these
individual respondents had committed or permitted the commission
59
of acts prejudicial to Agilent. Whether or not these individuals had
divested themselves of their interests in Integrated Silicon, or are no
longer members of Integrated Silicons Board of Directors, is a matter
of defense best threshed out during trial.
WHEREFORE, PREMISES CONSIDERED, the petition is
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 66574 dated August 12, 2002, which dismissed Civil Case No.
3123-2001-C, is REVERSED and SET ASIDE. The Order
dated September 4, 2001 issued by the Regional Trial Court
of Calamba, Laguna, Branch 92, in Civil Case No. 3123-2001-C, is
REINSTATED. Agilents application for a Writ of Replevin is
GRANTED.
No pronouncement as to costs. SO ORDERED.
FIRST DIVISION EXPRESS PADALA (ITALIA) S.P.A., now
BDO REMITTANCE (ITALIA) S.P.A., G.R. No. 202505 Present:
Petitioner, -versus-HELEN M. OCAMPO, Respondent.
SERENO, CJ., Chairperson,* LEONARDO-DE CASTRO,**
DEL CASTILLO, JARDELEZA, and TIJAM, JJ.
Jr-JARDELEZA, J.:
This is a petition for review on certiorari1 challenging the Decision2
dated January 5, 2012 and Resolution3 dated June 27, 2012 of the
Court of Appeals (CA) in CA-G.R. SP No. 113475. The CA granted
the petition for certiorari filed by respondent Helen M. Ocampo
(Ocampo) and set aside the Decision4 dated September 14, 2009 of
the Regional Trial Court (RTC) in Civil Case No. MC08-3775 which
granted BOO Remittance (Italia) S.P.A. 's (BDO Remittance)
petition for recognition of foreign judgment. The core issue being
raised is whether service of summons was validly effected upon
respondent, who lives in Italy, through substituted service. On
official leave. .. Designated as Acting Chairperson of the First
Division per Special Order No. 2480 dated August 31, 2017. Rollo,
pp. 8-25. Id. at 27-44, penned It Associate Justice Danton Q. Bueser
and Associate Justices Rosmari D. Carandang and Ricardo
Ji( Rosario, concurring. 3 Id. at 46-47. 4 Id. at 123-129.
Decision 2 G.R. No. 202505 BDO Remittance, a corporation with
principal office in Italy, hired respondent Ocampo as a remittance
processor in September 2002. She was dismissed in February 2004
for misappropriating the sum of €24,035.60 by falsifying invoices of
money payments relating to customers' money transfer orders from
February to December 2003. 5 Accordingly, BDO Remittance filed a
criminal complaint against Ocampo for the same acts before the
Court of Turin, Italy. Ocampo pleaded guilty to the offense charged.
On April 13, 2005, the Honorable Court of Turin convicted and
sentenced her to suffer imprisonment of six months and a penalty of
€300.00, but granted her the benefit of suspension of the enforcement
of sentence on account of her guilty plea (the Court of Turin
D. . ) 6 ec1s1on . On September 22, 2008, BDO Remittance
filed a petition for recognition of foreign judgment7 with the RTC of
Mandaluyong City. BDO Remittance prayed for the recognition of
the Court of Turin Decision and the cancellation or restriction of
Ocampo' s Philippine passport by the Department of Foreign Affairs
(DF A). 8 On November 21, 2008, the sheriff attempted to personally
serve the summons on Ocampo in her local address alleged in the
petition located in San Bernardo Village, Darasa, Tanauan, Batangas.
However, since the address was incomplete, the sheriff sought the
help of barangay officials, who pointed him to the house belonging to
Ocampo's father, Nicasio Ocampo, Victor P. Macahia (Macahia),
uncle of Ocampo and present occupant, informed the sheriff that
Ocampo and her family were already in Italy, and that he was only a
caretaker of the house. The sheriff then proceeded to serve the

summons upon Macahia.9 After Ocampo failed to file an answer,
BDO Remittance filed a motion to declare Ocampo in default. The R
TC granted the motion and allowed BDO Remittance to present .d 10
ev1 ence ex parte. On September 14, 2009, the RTC rendered a
Decision11 in favor of BDO Remittance (RTC Decision). It
recognized as valid and binding in the Philippines the Court of Turin
Decision and ordered the DF A to cancel or restrict Ocampo's
Philippine passport and not to allow its renewal until she has served
her sentence.12 6 9 Id. at 123-124. Id. at 29. Id. at 115-121. Id. at 119.
Id. at 30-31. 10 td. at 31. ( 11 Supra note 4. 12 Rollo, p. 128·
Decision 3 G.R. No. 202505 On February 11, 2010, Ocampo's
mother, Laureana Macahia, received a copy of the RTC Decision and
forwarded it to Ocampo.13 Not having been represented by counsel a
quo, the period of appeal lapsed. Ocampo was later able to engage
the services of counsel who filed a petition for certiorari under Rule
65 with the CA on April 12, 2010.14 Ocampo principally argued that
the RTC acted in grave abuse of discretion in recognizing and
ordering the enforcement of the Court of Turin Decision. 15 In its
now assailed Decision, 16 the CA set aside the RTC Decision and
revoked the order to cancel or restrict Ocampo's Philippine passport
(CA Decision). The CA first settled the issue of procedural due
process, particularly whether Ocampo was properly served with
summons. It held that since Ocampo's whereabouts were unknown,
summons should have been served in accordance with Section 14,
Rule 14 of the Rules of Civil Procedure. The sheriff however,
erroneously effected the substituted service. of summons under
Section 7 of Rule 14. Thus, the CA concluded that the RTC did not
acquire jurisdiction over Ocampo, and the RTC Decision against her
is null and void. It also found that the R TC acted in grave abuse of
discretion when it recognized a foreign judgment of a criminal case
and ordered the DFA to restrict or cancel Ocampo's passport.17 After
the CA denied its motion for reconsideration, BDO Remittance filed
the present petition for review under Rule 45 arguing that: ( 1)
Ocampo availed of the wrong remedy; and (2) the RTC did not
gravely abuse its discretion in granting the petition for recognition of
foreign judgment and ordering the DFA to restrict or cancel
Ocampo's passport.18 In her comment, 19 Ocampo explained that
BDO Remittance's insistence on the enforcement of Court of Turin
Decision is misleading because, by availing of the benefit of
suspension of the enforcement, the penalty of confinement will not
be enforced upon her. She also presented a decree20 from the High
Court of Turin dated June 29, 2010 which stated that her criminal
liability has been extinguished. We deny the petition. The general
rule in this jurisdiction is that summons must be served personally on
the defendant. Section 6, Rule 14 of the Rules of Court provides: 13
Id. at 95. 14 Id. at l 76. 15 Id. at 33. 16 Supra note 2. 17 Rollo, pp.
33-3,. 18 Id. at 15-22. 19 Id.at94-114. 20 Id. at 155-156.
Decision 4 G.R. No. 202505 Sec. 6. Service in person on defendant.
-Whenever practicable, the summons shall be served by handing a
copy thereof to the defendant in person, or, if he refuses to receive
and sign for it, by tendering it to him. For justifiable reasons,
however, other modes of serving summons may be resorted to. When
the defendant cannot be served personally within a reasonable time
after efforts to locate him have failed, the rules allow summons to be
served by substituted service. Substituted service is effected by
leaving copies of the summons at the defendant's residence with
some person of suitable age and discretion then residing therein, or
by leaving the copies at defendant's office or regular place of
business with some competent person in charge thereof.21 When the
defendant's whereabouts are unknown, the rules allow service of
summons by publication.22 As an exception to the preferred mode of
service, service of summons by publication may only be resorted to
when the whereabouts of the defendant are not only unknown, but
cannot be ascertained by diligent inquiry. The diligence requirement
means that there must be prior resort to personal service under
60
Section 7 and substituted service under Section 8, and proof that
these modes were ineffective before summons by publication may be
allowed. 23 This mode also requires the plaintiff to file a written
motion for leave of court to effect service of summons by publication,
supported by affidavit of the plaintiff or some person on his behalf,
setting forth the grounds for the application.24 In the present case,
the sheriff resorted to substituted service upon Ocampo through her
uncle, who was the caretaker of Ocampo's old family residence in
Tanauan, Batangas. The CA held that substituted service was
improperly resorted to. It found that since Ocampo' s "whereabouts
are unknown and cannot be ascertained by diligent inquiry x x x
service may be effected only by publication in a newspaper of
general circulation."25 We agree with the CA that substituted service
is improper under the facts of this case. Substituted service
presupposes that the place where the summons is being served is the
defendant's current residence or office/regular place of business.
Thus, where the defendant neither resides nor holds office in the
address stated in the summons, substituted service cannot be resorted
to. As we explained in Keister v. Navarro:26 Under the Rules,
substituted service may be effect[ ed] (a) by leaving copies of the
summons at the defendant's dwelling house or residence with some
person of suitable 21 RULES OF courn, Rule 14, Sec. 7. 22 RULES
OF COURT, Rule 14, Sec. 14. 23 See Pua v. Deyto, G.R. No.
173336, November 26, 2012, 686 SCRA 365, 372-373, citing Santos,
Jr. v. PNOC Exploration Corporation, G.R. No. 170943, September
23, 2008, 566 SCRA 272. 2'1 RULES OF COURT, Rule 14, Sec. 17.
25 Rollo, p. 35. 26 G.R. No. L-29067, May 31, 1977, 77 SCRA 209
Decision 5 G.R. No. 202505 age and discretion then residing therein,
or (b) by leaving the copies at defendant's office or regular place of
business with some competent person in charge thereof The terms
"dwelling house" or "residence" are generally held to refer to the
time of service, hence it is not sufficient "to leave the copy at
defendant's former dwelling house, residence, or place of abode, as
the case may be, after his removal therefrom." They refer to the place
where the person named in the summons is living at the time when
the service is made, even though he may be temporarily out of the
country at the time. Similarly, the terms "office" or "regular place of
business" refer to the office or place of business of defendant at the
time of service. Note that the rule designates the persons to whom
copies of the process may be left. The rule presupposes that such a
relation of confidence exists between the person with whom the copy
is left and the defendant and, therefore, assumes that such person will
deliver the process to defendant or in some way give him notice
thereof.27 (Italics in the original, citations omitted.) Based on the
sheriffs report, it is clear that Ocampo no longer resides in San
Bernardo Village, Darasa, Tanauan, Batangas. The report
categorically stated that "defendant Helen M. Ocampo and her family
were already in Italy,"28 without, however, identifying any specific
address. Even BDO Remittance itself admitted in its petition for
recognition that Ocampo' s "whereabouts in Italy are no longer
certain."29 This, we note, is the reason why in alleging the two
addresses of Ocampo, one in Italy and one in the Philippines, BDO
Remittance used the phrase "last known [address ]"30 instead of the
usual "resident of." Not being a resident of the address where the
summons was served, the substituted service of summons is
ineffective. Accordingly, the RTC did not acquire jurisdiction over
the person of Ocampo. BDO Remittance's reliance on Palma v.
Galvez31 is misplaced for the simple reason that the case involved
service of summons to a person who is temporarily out of the country.
In this case, however, Ocampo's sojourn in Italy cannot be classified
as temporary considering that she already resides there, albeit her
precise address was not known. Modes of service of summons must
be strictly followed in order that the court may acquire jurisdiction
over the person of the defendant. The purpose of this is to afford the
defendant an opportunity to be heard on the claim against him. 32
BDO Remittance is not totally without recourse, as the rules allow
 61

summons by publication and extraterritorial service. 33 Unlike

substituted service, however, these are extraordinary modes which
require leave of court. 27 Id. at215-216. 28 Rollo, p. 30. 29 Id. at 118.
30 /d.atl15. 31 G.R. No. 165273, March IO, 2010, 615 SCRA 86. 32
Pacana-Gonzales v. Court qf y.No. 150908, January 21, 2005, 449
SCRA 196, 204. 33 RULES OF COURT, Rule 14, Sec. 15r

Decision 6 G.R. No. 202505 The service of summons is a vital and

indispensable ingredient of a defendant's constitutional right to due
process. As a rule, if a defendant has not been validly summoned, the
court acquires no jurisdiction over his person, and a judgment
rendered against him is void.34 Since the RTC never acquired
jurisdiction over the person of Ocampo, the judgment rendered by
the court could not be considered binding upon her. Consequently, it
is no longer necessary to delve into the other issues raised in the
petition. These issues can be resolved by the trial court upon
acquiring jurisdiction over Ocampo and giving her an opportunity to
be heard. It is in a better position to receive and assess the evidence
that may be presented by Ocampo, including the decree dated June
29, 2010 issued by the High Court of Turin, to the effect that her
liability has been extinguished. While such claim would tend to
render the case moot, we refuse to consider the argument at the first
instance on two grounds: first, we are not a trier of facts; and second,
the document submitted has not been authenticated in accordance
with the rules on evidence. WHEREFORE, the petition is DENIED.
The Decision dated January 5, 2012 and Resolution dated June 27,
2012 of the Court of Appeals in CA-G.R. SP No. 113475 are
AFFIRMED insofar as there was no valid service of summons. The
Decision dated September 14, 2009 of the Regional Trial Court,
Branch 212, Mandaluyong City in Civil Case No. MCOS-3775 is
declared VOID. SO ORDERED.