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a.

Basis for Exercising Jurisdiction This is an action to recover the possession of a tract of land, of the alleged value of
$15,000, situated in the State of Oregon. The plaintiff asserts title to the premises by
Pennoyer v. Neff, 95 U.S. 714 (1878) a patent of the United States issued to him in 1866, under the act of Congress of
Sept. 27, 1850, usually known as the Donation Law of Oregon. The defendant claims
RULE: to have acquired the premises under a sheriff's deed, made upon a sale of the
property on execution issued upon a judgment recovered against the plaintiff in one of
Since the adoption of U.S. Const. amend. XIV, the validity of judgments against
the circuit courts of the State. The case turns upon the validity of this judgment.
persons who have not been personally summoned or had notice of the proceeding
may be directly questioned, and their enforcement in the State resisted, on the It appears from the record that the judgment was rendered in February, 1866, in favor
ground that proceedings in a court of justice to determine the personal rights and of J. H. Mitchell, for less than $300, including costs, in an action brought by him upon
obligations of parties over whom that court has no jurisdiction do not constitute due a demand for services as an attorney; that, at the time the action was commenced
process of law. and the judgment rendered, the defendant therein, the plaintiff here, was a
nonresident of the State; [p720] that he was not personally served with process, and
FACTS:
did not appear therein; and that the judgment was entered upon his default in not
This was an action to recover possession of a tract of land to which both parties answering the complaint, upon a constructive service of summons by publication.
asserted title. Pennoyer claimed to have acquired the premises under a sheriff's deed
The Code of Oregon provides for such service when an action is brought against a
made upon a sale of the property resulting from a judgment recovered against Neff by
nonresident and absent defendant who has property within the State. It also provides,
a certain J. H. Mitchell in one of the circuit courts of the state of Oregon. At the time,
where the action is for the recovery of money or damages, for the attachment of the
Neff was not a resident of Oregon and a default judgment was obtained by Mitchell
property of the nonresident. And it also declares that no natural person is subject to
after Neff failed to come to court despite service of the process by publication. The
the jurisdiction of a court of the State
case turned upon the validity of that judgment.
unless he appear in the court, or be found within the State, or be a resident thereof, or
ISSUE:
have property therein; and, in the last case, only to the extent of such property at the
Can a state court exercise personal jurisdiction against a non-resident who was not time the jurisdiction attached.
personally served with process within the state but by publication in a newspaper?
Construing this latter provision to mean that, in an action for money or damages
ANSWER: where a defendant does not appear in the court, and is not found within the State,
and is not a resident thereof, but has property therein, the jurisdiction of the court
No. extends only over such property, the declaration expresses a principle of general, if
not universal, law. The authority of every tribunal is necessarily restricted by the
CONCLUSION: territorial limits of the State in which it is established. Any attempt to exercise authority
beyond those limits would be deemed in every other forum, as has been said by this
The judgment from the underlying action was invalid since the plaintiff was a non- Court, an illegitimate assumption of power, and be resisted as mere abuse. D'Arcy v.
resident of the state in which the action was brought and was not personally served. Ketchum et al., 11 How. 165. In the case against the plaintiff, the property here in
The validity of judgments against persons who have not been personally summoned controversy sold under the judgment rendered was not attached, nor in any way
or had notice of the proceeding may be directly questioned, and their enforcement in brought under the jurisdiction of the court. Its first connection with the case was
the State resisted, on the ground that proceedings in a court of justice to determine caused by a levy of the execution. It was not, therefore, disposed of pursuant to any
the personal rights and obligations of parties over whom that court has no jurisdiction adjudication, but only in enforcement of a personal judgment, having no relation to the
do not constitute due process of law. property, rendered against a nonresident without service of process upon him in the
action or his appearance therein. The court below did not consider that an attachment
Opinion of the property was essential to its jurisdiction or to the validity of the sale, but held
that the judgment was invalid from defects in the affidavit upon which the order of
FIELD, J., Opinion of the Court publication was obtained and in the affidavit by which the publication was proved.
[p721]
MR. JUSTICE FIELD delivered the opinion of the court.

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There is some difference of opinion among the members of this Court as to the contracts shall be executed, the rights and obligations arising from them, and the
rulings upon these alleged defects. The majority are of opinion that, inasmuch as the mode in which their validity shall be determined and their obligations enforced; and
statute requires, for an order of publication, that certain facts shall appear by affidavit also the regulate the manner and conditions upon which property situated within such
to the satisfaction of the court or judge, defects in such affidavit can only be taken territory, both personal and real, may be acquired, enjoyed, and transferred. The
advantage of on appeal, or by some other direct proceeding, and cannot be urged to other principle of public law referred to follows from the one mentioned; that is, that no
impeach the judgment collaterally. The majority of the court are also of opinion that State can exercise direct jurisdiction and authority over persons or property without its
the provision of the statute requiring proof of the publication in a newspaper to be territory. Story, Confl. Laws, c. 2; Wheat. Int. Law, pt. 2, c. 2. The several States are
made by the "affidavit of the printer, or his foreman, or his principal clerk" is satisfied of equal dignity and authority, and the independence of one implies the exclusion of
when the affidavit is made by the editor of the paper. The term "printer," in their power from all others. And so it is laid down by jurists as an elementary principle that
judgment, is there used not to indicate the person who sets up the type -- he does not the laws of one State have no operation outside of its territory except so far as is
usually have a foreman or clerks -- it is rather used as synonymous with publisher. allowed by comity, and that no tribunal established by it can extend its process
The Supreme Court of New York so held in one case; observing that, for the purpose beyond that territory so as to subject either persons or property to its decisions. "Any
of making the required proof, publishers were "within the spirit of the statute." Bunce exertion of authority of this sort beyond this limit," says Story, "is a mere nullity, and
v. Reed, 16 Barb. (N. Y.) 350. And, following this ruling, the Supreme Court of incapable of binding [p723] such persons or property in any other tribunals." Story,
California held that an affidavit made by a "publisher and proprietor" was sufficient. Confl.Laws, sect. 539.
Sharp v. Daugney, 33 Cal. 512. The term "editor," as used when the statute of New
York was passed, from which the Oregon law is borrowed, usually included not only But as contracts made in one State may be enforceable only in another State, and
the person who wrote or selected the articles for publication, but the person who property may be held by nonresidents, the exercise of the jurisdiction which every
published the paper and put it into circulation. Webster, in an early edition of his State is admitted to possess over persons and property within its own territory will
Dictionary, gives as one of the definitions of an editor, a person "who superintends often affect persons and property without it. To any influence exerted in this way by a
the publication of a newspaper." It is principally since that time that the business of an State affecting persons resident or property situated elsewhere, no objection can be
editor has been separated from that of a publisher and printer, and has become an justly taken; whilst any direct exertion of authority upon them, in an attempt to give ex-
independent profession. territorial operation to its laws, or to enforce an ex-territorial jurisdiction by its
tribunals, would be deemed an encroachment upon the independence of the State in
If, therefore, we were confined to the rulings of the court below upon the defects in which the persons are domiciled or the property is situated, and be resisted as
the affidavits mentioned, we should be unable to uphold its decision. But it was also usurpation.
contended in that court, and is insisted upon here, that the judgment in the State court
against the plaintiff was void for want of personal service of process on him, or of his Thus the State, through its tribunals, may compel persons domiciled within its limits to
appearance in the action in which it was rendered and that the premises in execute, in pursuance of their contracts respecting property elsewhere situated,
controversy could not be subjected to the payment of the demand [p722] of a instruments in such form and with such solemnities as to transfer the title, so far as
resident creditor except by a proceeding in rem, that is, by a direct proceeding against such formalities can be complied with; and the exercise of this jurisdiction in no
the property for that purpose. If these positions are sound, the ruling of the Circuit manner interferes with the supreme control over the property by the State within
Court as to the invalidity of that judgment must be sustained notwithstanding our which it is situated. Penn v. Lord Baltimore, 1 Ves. 444; Massie v. Watts, 6 Cranch
dissent from the reasons upon which it was made. And that they are sound would 148; Watkins v. Holman, 16 Pet. 25; Corbett v. Nutt, 10 Wall. 464.
seem to follow from two well established principles of public law respecting the
jurisdiction of an independent State over persons and property. The several States of So the State, through its tribunals, may subject property situated within its limits
the Union are not, it is true, in every respect independent, many of the right and owned by nonresidents to the payment of the demand of its own citizens against
powers which originally belonged to them being now vested in the government them, and the exercise of this jurisdiction in no respect infringes upon the sovereignty
created by the Constitution. But, except as restrained and limited by that instrument, of the State where the owners are domiciled. Every State owes protection to its own
they possess and exercise the authority of independent States, and the principles of citizens, and, when nonresidents deal with them, it is a legitimate and just exercise of
public law to which we have referred are applicable to them. One of these principles authority to hold and appropriate any property owned by such nonresidents to satisfy
is that every State possesses exclusive jurisdiction and sovereignty over persons and the claims of its citizens. It is in virtue of the State's jurisdiction over the property of
property within its territory. As a consequence, every State has the power to the nonresident situated within its limits that its tribunals can inquire into that
determine for itself the civil status and capacities of its inhabitants; to prescribe the nonresident's obligations to its own citizens, and the inquiry can then be carried only
subjects upon which they may contract, the forms and solemnities with which their to the extent necessary to control the disposition of the property. If the nonresident

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[p724] have no property in the State, there is nothing upon which the tribunals can property, the original owner brought ejectment for its recovery. In considering the
adjudicate. character of the proceeding, the Court, speaking through Mr. Justice Miller, said:--

These views are not new. They have been frequently expressed, with more or less Its essential purpose or nature is to establish, by the judgment of the court, a demand
distinctness, in opinions of eminent judges, and have been carried into adjudications or claim against the defendant, and subject his property lying within the territorial
in numerous cases. Thus, in Picquet v. Swan, 5 Mas. 35, Mr. Justice Story said:-- jurisdiction of the court to the payment of that demand. But the plaintiff is met at the
commencement of his proceedings by the fact that the defendant is not within the
Where a party is within a territory, he may justly be subjected to its process, and territorial jurisdiction, and cannot be served with any process by which he can be
bound personally by the judgment pronounced on such process against him. Where brought personally within the power of the court. For this difficulty, the statute has
he is not within such territory, and is not personally subject to its laws, if, on account provided a remedy. It says that, upon affidavit's being made of that fact, a writ of
of his supposed or actual property being within the territory, process by the local laws attachment may be issued and levied on any of the defendant's property, and a
may, by attachment, go to compel his appearance, and, for his default to appear, publication may be made warning him to appear; and that thereafter the court may
judgment may be pronounced against him, such a judgment must, upon general proceed in the case, whether he appears or not. If the defendant appears, the cause
principles, be deemed only to bind him to the extent of such property, and cannot becomes mainly a suit in personam, with the added incident that the property
have the effect of a conclusive judgment in personam, for the plain reason, that, attached remains liable, under the control of the court, to answer to any demand
except so far as the property is concerned, it is a judgment coram non judice. which may be established against the defendant by the final judgment of the court.
But if there is no appearance of the defendant, and no service of process on him, the
And in Boswell's Lessee v. Otis, 9 How. 336, where the title of the plaintiff in case becomes in its essential nature a proceeding in rem, the only effect of which is
ejectment was acquired on a sheriff's sale under a money decree rendered upon to subject the property attached to the payment of the demand which the court may
publication of notice against nonresidents, in a suit brought to enforce a contract find to be due to the plaintiff. That such is [p726] the nature of this proceeding in this
relating to land, Mr. Justice McLean said:-- latter class of cases is clearly evinced by two well established propositions: first, the
judgment of the court, though in form a personal judgment against the defendant, has
Jurisdiction is acquired in one of two modes: first, as against the person of the
no effect beyond the property attached in that suit. No general execution can be
defendant by the service of process; or, secondly, by a procedure against the
issued for any balance unpaid after the attached property is exhausted. No suit can
property of the defendant within the jurisdiction of the court. In the latter case, the
be maintained on such a judgment in the same court, or in any other; nor can it be
defendant is not personally bound by the judgment beyond the property in question.
used as evidence in any other proceeding not affecting the attached property; nor
And it is immaterial whether the proceeding against the property be by an attachment
could the costs in that proceeding be collected of defendant out of any other property
or bill in chancery. It must be substantially a proceeding in rem.
than that attached in the suit. Second, the court in such a suit cannot proceed unless
These citations are not made as authoritative expositions of the law, for the language the officer finds some property of defendant on which to levy the writ of attachment. A
was perhaps not essential to the decision of the cases in which it was used, but as return that none can be found is the end of the case, and deprives the court of further
expressions of the opinion of eminent jurists. But in Cooper v. Reynolds, reported in jurisdiction, though the publication may have been duly made and proven in court.
the 10th of Wallace, it was essential to the disposition of the case to declare the effect
The fact that the defendants in that case had fled from the State, or had concealed
of a personal action against an absent party, without the jurisdiction of the court, not
themselves, so as not to be reached by the ordinary process of the court, and were
served [p725] with process or voluntarily submitting to the tribunal, when it was
not nonresidents, was not made a point in the decision. The opinion treated them as
sought to subject his property to the payment of a demand of a resident complainant;
being without the territorial jurisdiction of the court, and the grounds and extent of its
and, in the opinion there delivered, we have a clear statement of the law as to the
authority over persons and property thus situated were considered when they were
efficacy of such actions, and the jurisdiction of the court over them. In that case, the
not brought within its jurisdiction by personal service or voluntary appearance.
action was for damages for alleged false imprisonment of the plaintiff; and, upon his
affidavit that the defendants had fled from the State, or had absconded or concealed The writer of the present opinion considered that some of the objections to the
themselves so that the ordinary process of law could not reach them, a writ of preliminary proceedings in the attachment suit were well taken, and therefore
attachment was sued out against their property. Publication was ordered by the court, dissented from the judgment of the Court, but, to the doctrine declared in the above
giving notice to them to appear and plead, answer or demur, or that the action would citation, he agreed, and he may add that it received the approval of all the judges. It is
be taken as confessed and proceeded in ex parte as to them. Publication was had, the only doctrine consistent with proper protection to citizens of other States. If,
but they made default, and judgment was entered against them, and the attached without personal service, judgments in personam, obtained ex parte against
property was sold under it. The purchaser having been put into possession of the

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nonresidents and absent parties, upon mere publication of process, which, in the confined to cases where the nonresident defendant possessed property in the State
great majority of cases, would never be seen by the parties interested, could be at the commencement of the action, it would still make the validity of the proceedings
upheld and enforced, they would be the constant instruments of fraud and and judgment depend upon the question whether, before the levy of the execution,
oppression. Judgments for all sorts of claims upon contracts and for torts, real or the defendant had or had not disposed of the property. If, before the levy, the property
pretended, would be thus obtained, under which property would be seized, when the should be sold, then, according to this position, the judgment would not be binding.
evidence of the transactions upon [p727] which they were founded, if they ever had This doctrine would introduce a new element of uncertainty in judicial proceedings.
any existence, had perished. The contrary is the law: the validity of every judgment depends upon the jurisdiction of
the court before it is rendered, not upon what may occur subsequently. In Webster v.
Substituted service by publication, or in any other authorized form, may be sufficient Reid, reported in 11th of Howard, the plaintiff claimed title to land sold under
to inform parties of the object of proceedings taken where property is once brought judgments recovered in suits brought in a territorial court of Iowa, upon publication of
under the control of the court by seizure or some equivalent act. The law assumes notice under a law of the territory, without service of process; and the court said:
that property is always in the possession of its owner, in person or by agent, and it
proceeds upon the theory that its seizure will inform him not only that it is taken into These suits were not a proceeding in rem against the land, but were in personam
the custody of the court, but that he must look to any proceedings authorized by law against the owners of it. Whether they all resided within the territory or not does not
upon such seizure for its condemnation and sale. Such service may also be sufficient appear, nor is it a matter of any importance. No person is required to answer in a suit
in cases where the object of the action is to reach and dispose of property in the on whom process has not been served, or whose property has not been attached. In
State, or of some interest therein, by enforcing a contract or a lien respecting the this case, there was no personal notice, nor an attachment or other proceeding
same, or to partition it among different owners, or, when the public is a party, to against the land, until after the judgments. The judgments, therefore, are nullities, and
condemn and appropriate it for a public purpose. In other words, such service may did not authorize the executions on which the land was sold. [p729]
answer in all actions which are substantially proceedings in rem. But where the entire
object of the action is to determine the personal rights and obligations of the The force and effect of judgments rendered against nonresidents without personal
defendants, that is, where the suit is merely in personam, constructive service in this service of process upon them, or their voluntary appearance, have been the subject
form upon a nonresident is ineffectual for any purpose. Process from the tribunals of of frequent consideration in the courts of the United States and of the several States,
one State cannot run into another State, and summon parties there domiciled to leave as attempts have been made to enforce such judgments in States other than those in
its territory and respond to proceedings against them. Publication of process or notice which they were rendered, under the provision of the Constitution requiring that "full
within the State where the tribunal sits cannot create any greater obligation upon the faith and credit shall be given in each State to the public acts, records, and judicial
nonresident to appear. Process sent to him out of the State, and process published proceedings of every other State;" and the act of Congress providing for the mode of
within it, are equally unavailing in proceedings to establish his personal liability. authenticating such acts, records, and proceedings, and declaring that, when thus
authenticated,
The want of authority of the tribunals of a State to adjudicate upon the obligations of
nonresidents, where they have no property within its limits, is not denied by the court they shall have such faith and credit given to them in every court within the United
below: but the position is assumed, that, where they have property within the State, it States as they have by law or usage in the courts of the State from which they are or
is immaterial whether the property is in the first instance brought under the control of shall or taken.
the court by attachment or some other equivalent act, and afterwards applied by its
judgment to the satisfaction of demands against its owner; or such demands be first In the earlier cases, it was supposed that the act gave to all judgments the same
established in a personal action, and [p728] the property of the nonresident be effect in other States which they had by law in the State where rendered. But this
afterwards seized and sold on execution. But the answer to this position has already view was afterwards qualified so as to make the act applicable only when the court
been given in the statement that the jurisdiction of the court to inquire into and rendering the judgment had jurisdiction of the parties and of the subject matter, and
determine his obligations at all is only incidental to its jurisdiction over the property. Its not to preclude an inquiry into the jurisdiction of the court in which the judgment was
jurisdiction in that respect cannot be made to depend upon facts to be ascertained rendered, or the right of the State itself to exercise authority over the person or the
after it has tried the cause and rendered the judgment. If the judgment be previously subject matter. M'Elmoyle v. Cohen, 13 Pet. 312. In the case of D'Arcy v. Ketchum,
void, it will not become valid by the subsequent discovery of property of the reported in the 11th of Howard, this view is stated with great clearness. That was an
defendant, or by his subsequent acquisition of it. The judgment, if void when action in the Circuit Court of the United States for Louisiana, brought upon a judgment
rendered, will always remain void; it cannot occupy the doubtful position of being valid rendered in New York under a State statute, against two joint debtors, only one of
if property be found, and void if there be none. Even if the position assumed were whom had been served with process, the other being a nonresident of the State. The
Circuit Court held the judgment conclusive and binding upon the nonresident not

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served with process, but this Court reversed its decision, observing, that it was a their obligations to its citizens when exercising its conceded jurisdiction over their
familiar rule that countries foreign to our own disregarded a judgment merely against property within its limits. In Bissell v. Briggs, decided by the Supreme Court of
the person, where the defendant had not been served with process nor had a day in Massachusetts as early as 1813, the law is stated substantially in conformity with
court; that national comity was never thus extended; that the proceeding was deemed these views. In that case, the court considered at length the effect of the constitutional
an illegitimate assumption of power, and resisted as mere abuse; that no faith and provision, and the act of Congress mentioned, and after stating that, in order to entitle
credit or force and effect had been given to such judgments by any State of the the judgment rendered in any court of the United States to the full faith and credit
Union, so far [p730] as known; and that the State courts had uniformly, and in many mentioned in the Constitution, the court must have had jurisdiction not only of the
instances, held them to be void. "The international law," said the court, cause, but of the parties, it proceeded to illustrate its position by observing, that,
where a debtor living in one State has goods, effects, and credits in another, his
as it existed among the States in 1790, was that a judgment rendered in one State, creditor living in the other State may have the property attached pursuant to its laws,
assuming to bind the person of a citizen of another, was void within the foreign State, and, on recovering judgment, have the property applied to its satisfaction, and that
when the defendant had not been served with process or voluntarily made defence, the party in whose hands the property was would be protected by the judgment in the
because neither the legislative jurisdiction nor that of courts of justice had binding State of the debtor against a suit for it, because the court rendering the judgment had
force. jurisdiction to that extent; but that, if the property attached were insufficient to satisfy
the judgment, and the creditor should sue on that judgment in the State of the debtor,
And the Court held that the act of Congress did not intend to declare a new rule, or to he would fail because the defendant was not amenable to the court rendering the
embrace judicial records of this description. As was stated in a subsequent case, the judgment. In other words, it was held that over the property within the State the court
doctrine of this Court is that the act had jurisdiction by the attachment, but had none over his person, and that any
determination of his liability, except so far as was necessary for the disposition of the
was not designed to displace that principle of natural justice which requires a person
property, was invalid.
to have notice of a suit before he can be conclusively bound by its result, nor those
rules of public law which protect persons and property within one State from the In Kilbourn v. Woodworth, 5 Johns. (N.Y.) 37, an action of debt was brought in New
exercise of jurisdiction over them by another. York upon a personal judgment recovered in Massachusetts. The defendant in that
judgment was not served with process, and the suit was commenced by the
The Lafayette Insurance Co. v. French et al., 18 How. 404.
attachment of a bedstead belonging to the defendant, accompanied with a summons
This whole subject has been very fully and learnedly considered in the recent case of to appear, served on his wife after she had left her place in Massachusetts. The court
Thompson v. Whitman, 18 Wall. 457, where all the authorities are carefully reviewed held that [p732] the attachment bound only the property attached as a proceeding in
and distinguished, and the conclusion above stated is not only reaffirmed, but the rem, and that it could not bind the defendant, observing, that to bind a defendant
doctrine is asserted that the record of a judgment rendered in another State may be personally when he was never personally summoned or had notice of the proceeding
contradicted as to the facts necessary to give the court jurisdiction against its recital would be contrary to the first principles of justice, repeating the language in that
of their existence. In all the cases brought in the State and Federal courts, where respect of Chief Justice DeGrey, used in the case of Fisher v. Lane, 3 Wils. 297, in
attempts have been made under the act of Congress to give effect in one State to 1772. See also Borden v. Fitch, 15 Johns. (N. Y.) 121, and the cases there cited, and
personal judgments rendered in another State against nonresidents, without service Harris v. Hardeman et al., 14 How. 334. To the same purport, decisions are found in
upon them, or upon substituted service by publication, or in some other form, it has all the State courts. In several of the cases, the decision has been accompanied with
been held, without an exception, so far as we are aware, that such judgments were the observation that a personal judgment thus recovered has no binding force without
without any binding force except as to property, or interests in property, within the the State in which it is rendered, implying that, in such State, it may be valid and
State, to reach and affect which was the object of the action in which the judgment binding. But if the court has no jurisdiction over the person of the defendant by reason
was rendered, and which property was brought under control of the court in of his nonresidence, and consequently no authority to pass upon his personal rights
connection with the process against the person. The proceeding in such cases, and obligations; if the whole proceeding, without service upon him or his appearance,
though in the form of a personal action, has been uniformly treated, where service is coram non judice and void; if to hold a defendant bound by such a judgment is
was not obtained, and the party did not voluntarily [p731] appear, as effectual and contrary to the first principles of justice -- it is difficult to see how the judgment can
binding merely as a proceeding in rem, and as having no operation beyond the legitimately have any force within the State. The language used can be justified only
disposition of the property, or some interest therein. And the reason assigned for this on the ground that there was no mode of directly reviewing such judgment or
conclusion has been that which we have already stated -- that the tribunals of one impeaching its validity within the State where rendered, and that therefore it could be
State have no jurisdiction over persons beyond its limits, and can inquire only into called in question only when its enforcement was elsewhere attempted. In later

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cases, this language is repeated with less frequency than formerly, it beginning to be It is true that, in a strict sense, a proceeding in rem is one taken directly against
considered, as it always ought to have been, that a judgment which can be treated in property, and has for its object the disposition of the property, without reference to the
any State of this Union as contrary to the first principles of justice, and as an absolute title of individual claimants; but, in a larger and more general sense, the terms are
nullity, because rendered without any jurisdiction of the tribunal over the party, is not applied to actions between parties where the direct object is to reach and dispose of
entitled to any respect in the State where rendered. Smith v. McCutchen, 38 Mo. 415; property owned by them, or of some interest therein. Such are cases commenced by
Darrance v. Preston, 18 Iowa, 396; Hakes v. Shupe, 27 id. 465; Mitchell's attachment against the property of debtors, or instituted to partition real estate,
Administrator v. Gray, 18 Ind. 123. foreclose a mortgage, or enforce a lien. So far as they affect property in the State,
they are substantially proceedings in rem in the broader sense which we have
Be that as it may, the courts of the United States are not required to give effect to mentioned.
judgments of this character when any right is claimed under them. Whilst they are not
foreign tribunals in their relations to the State courts, they are tribunals [p733] of a It is hardly necessary to observe that, in all we have said, we have had reference to
different sovereignty, exercising a distinct and independent jurisdiction, and are proceedings in courts of first instance, and to their jurisdiction, and not to proceedings
bound to give to the judgments of the State courts only the same faith and credit in an appellate tribunal to review the action of such courts. The latter may be taken
which the courts of another State are bound to give to them. upon such notice, personal or constructive, as the State creating the tribunal may
provide. They are considered as rather a continuation of the original litigation than the
Since the adoption of the Fourteenth Amendment to the Federal Constitution, the commencement of a new action. Nations et al. v. Johnson et al., 24 How. 195.
validity of such judgments may be directly questioned, and their enforcement in the
State resisted, on the ground that proceedings in a court of justice to determine the It follows from the views expressed that the personal judgment recovered in the State
personal rights and obligations of parties over whom that court has no jurisdiction do court of Oregon against the plaintiff herein, then a nonresident of the State, was
not constitute due process of law. Whatever difficulty may be experienced in giving to without any validity, and did not authorize a sale of the property in controversy.
those terms a definition which will embrace every permissible exertion of power
affecting private rights, and exclude such as is forbidden, there can be no doubt of To prevent any misapplication of the views expressed in this opinion, it is proper to
their meaning when applied to judicial proceedings. They then mean a course of legal observe that we do not mean to assert by anything we have said that a State may not
proceedings according to those rules and principles which have been established in authorize proceedings to determine the status of one of its citizens towards a
our systems of jurisprudence for the protection and enforcement of private rights. To nonresident which would be binding within the State, though made without service of
give such proceedings any validity, there must be a tribunal competent by its process or personal notice to the nonresident. The jurisdiction which every State
constitution -- that is, by the law of its creation -- to pass upon the subject matter of possesses to determine the civil status and capacities of all its inhabitants involves
the suit; and if that involves merely a determination of the personal liability of the authority to prescribe the conditions on which proceedings affecting them may be
defendant, he must be brought within its jurisdiction by service of process within the commenced and carried on within its territory. The State, for example, has absolute
State, or his voluntary appearance. [p735] right to prescribe the conditions upon which the marriage relation between its
own citizens shall be created, and the causes for which it may be dissolved. One of
Except in cases affecting the personal status of the plaintiff and cases in which that the parties guilty of acts for which, by the law of the State, a dissolution may be
mode of service may be considered to have been assented to in advance, as granted may have removed to a State where no dissolution is permitted. The
hereinafter mentioned, the substituted service of process by publication, allowed by complaining party would, therefore, fail if a divorce were sought in the State of the
the law of Oregon and by similar laws in other States, where actions are brought defendant; and if application could not be made to the tribunals of the complainant's
against nonresidents, is effectual only where, in connection with process against the domicile in such case, and proceedings be there instituted without personal service of
person for commencing the action, property in the State is brought under the control process or personal notice to the offending party, the injured citizen would be without
of the court, and subjected to its disposition by process adapted to that purpose, or redress. Bish. Marr. and Div., sect. 156.
where the judgment is sought as a means of reaching such property or affecting
some interest therein; in other words, where the action is in the nature of a Neither do we mean to assert that a State may not require a nonresident entering into
proceeding in rem. As stated by Cooley in his Treatise on Constitutional Limitations a partnership or association within its limits, or making contracts enforceable there, to
405, for any other purpose than to subject the property of a nonresident to valid appoint an agent or representative in the State to receive service of process and
claims against [p734] him in the State, "due process of law would require appearance notice in legal proceedings instituted with respect to such partnership, association, or
or personal service before the defendant could be personally bound by any judgment contracts, or to designate a place where such service may be made and notice given,
rendered." and provide, upon their failure, to make such appointment or to designate such place
that service may be made upon a public officer designated for that purpose, or in

6
some other prescribed way, and that judgments rendered upon such service may not
be binding upon the nonresidents both within and without the State. As was said by
the Court of Exchequer in Vallee v. Dumergue, 4 Exch. 290,

It is not contrary to natural justice that a man who has agreed to receive a particular
mode of notification of legal proceedings should be bound by a judgment in which that
particular mode of notification has been followed, even though he may not have
actual notice of them.

See also The Lafayette Insurance Co. v. French et al., 18 How. 404, and Gillespie v.
Commercial Mutual Marine Insurance Co., 12 Gray (Mass.), 201. Nor do we doubt
that a State, on creating corporations or other institutions for pecuniary or charitable
purposes, may provide a mode in which their conduct may be investigated, their
obligations enforced, or their charters revoked, which shall require other than
personal service upon their officers or members. Parties becoming members of such
corporations or institutions would hold their [p736] interest subject to the conditions
prescribed by law. Copin v. Adamson, Law Rep. 9 Ex. 345.

In the present case, there is no feature of this kind, and consequently no


consideration of what would be the effect of such legislation in enforcing the contract
of a nonresident can arise. The question here respects only the validity of a money
judgment rendered in one State in an action upon a simple contract against the
resident of another without service of process upon him or his appearance therein.

Judgment affirmed.

7
a. Basis for Exercising Jurisdiction CONCLUSION:

326 U.S. 310 Due process requires only that in order to subject a defendant to a judgment in
personam, if he be not present within the territory of the forum, he have certain
International Shoe v. State of Washington (No. 107) minimum contacts with it such that the maintenance of the suit does not offend
"traditional notions of fair play and substantial justice." The activities carried on in the
Argued: November 14, 1945 state of Washington on behalf of the Corporation were neither irregular nor
casual. They were systematic and continuous throughout the years in
Decided: December 3, 1945
question. They resulted in a large volume of interstate business, in the course of
22 Wash.2d 146, 154 P.2d 801, affirmed. which appellant received the benefits and protection of the laws of the state, including
the right to resort to the courts for the enforcement of its rights. The obligation which
RULE: is here sued upon arose out of those very activities. It is evident that the operations
of the salesmen in Washington established sufficient contacts or ties with the state to
Due process requires only that in order to subject a defendant to a judgment in make it reasonable and just, according to traditional conception of fair play and
personam, if he is not present within the territory of the forum, he have certain substantial justice, to permit the state to enforce the obligations which appellant has
minimum contacts with it such that the maintenance of the suit does not offend incurred there. Hence we cannot say that the maintenance of the present suit in the
traditional notions of fair play and substantial justice. State of Washington involves an unreasonable or undue procedure. It is enough that
appellant established such contacts with the state that the particular form of
FACTS: substituted service adopted there gives reasonable assurance that the notice will be
actual.
International Shoe Co. was incorporated in Delaware and had its principal place of
business in St. Louis, Missouri. While the corporation did not have an office in Syllabus
Washington (“State”), it employed eleven to thirteen salesmen, who were residents of
the State and who exhibited product samples to prospective buyers from the State. Activities within a State of salesmen in the employ of a foreign corporation, exhibiting
The corporation compensated the salesmen in the form of commissions for any sales samples of merchandise and soliciting orders from prospective buyers to be accepted
from customers they solicited. Due to these business activities, the State issued a or rejected by the corporation at a point outside the State, were systematic and
Notice of Assessment holding the corporation liable for contributions to the State’s continuous, and resulted in a large volume of interstate business. A statute of the
unemployment compensation fund by virtue of the Washington Unemployment State requires employers to pay into the state unemployment compensation fund a
Compensation Act. Notice was served via mail and personal service to the specified percentage of the wages paid for the services of employees within the
Washington salesmen. The corporation refused to pay, arguing that they were not State.
conducting business in Washington and thus the State had no jurisdiction over it.
They further argued that the service of notice was insufficient to constitute due Held:
process. The trial court ruled in favor of the State and the Supreme Court of
Washington ruled that there was sufficient business activity to hold the corporation 1. In view of 26 U.S.C. § 1606(a) , providing that no person shall be relieved from
liable for taxes to the State. The corporation appealed the decision to the Supreme compliance with a state law requiring payments to an unemployment fund on the
Court of the United States. ground that he is engaged in interstate commerce, the fact that the corporation is
engaged in interstate commerce does not relieve it from liability for payments to the
ISSUE: state unemployment compensation fund. P. 315.

Can a non-resident corporation's activities in a state make it subject to the jurisdiction 2. The activities in behalf of the corporation render it amenable to suit in courts of the
of that state? State to recover payments due to the state unemployment compensation fund. P.
320.
ANSWER:
(a) The activities in question established between the State and the corporation
Yes. sufficient contacts or ties to make it reasonable and just, and in conformity to the due

8
process requirements of the Fourteenth Amendment, for the State to enforce against of unemployment upon petition of the employer, and this determination is, by § 6i,
the corporation an obligation arising out of such activities. P. 320. made subject to judicial review on questions of law by the state Superior Court, with
further right of appeal in the state Supreme Court, as in other civil cases.
(b) In such a suit to recover payments due to the unemployment compensation fund,
service of process upon one of the corporation's salesmen within the State, and In this case, notice of assessment for the years in question was personally served
notice sent by registered mail to the corporation at its home office, satisfies the upon a sales solicitor employed by appellant in the State of Washington, and a copy
requirements of due process. P. 320. [p311] of the notice was mailed by registered mail to appellant at its address in St. Louis,
Missouri. Appellant appeared specially before the office of unemployment, and moved
3. The tax imposed by the state unemployment compensation statute -- construed by to set aside the order and notice of assessment on the ground that the service upon
the state court, in its application to the corporation, as a tax on the privilege of appellant's salesman was not proper service upon appellant; that appellant was not a
employing salesmen within the State -- does not violate the due process clause of the corporation of the State of Washington, and was not doing business within the state;
Fourteenth Amendment. P. 321. that it had no agent within the state upon whom service could be made; and that
appellant is not an employer, and does not furnish employment within the meaning of
APPEAL from a judgment upholding the constitutionality of a state unemployment the statute.
compensation statute as applied to the appellant corporation.
The motion was heard on evidence and a stipulation of facts by the appeal tribunal,
which denied the motion [p313] and ruled that appellee Commissioner was entitled to
recover the unpaid contributions. That action was affirmed by the Commissioner; both
Opinion
the Superior Court and the Supreme Court affirmed. 22 Wash.2d 146, 154 P.2d 801.
STONE, C.J., Opinion of the Court Appellant in each of these courts assailed the statute as applied, as a violation of the
due process clause of the Fourteenth Amendment, and as imposing a constitutionally
MR. CHIEF JUSTICE STONE delivered the opinion of the Court. prohibited burden on interstate commerce. The cause comes here on appeal under
§ 237(a) of the Judicial Code, 28 U.S.C. § 344(a), appellant assigning as error that
The questions for decision are (1) whether, within the limitations of the due process the challenged statutes, as applied, infringe the due process clause of the Fourteenth
clause of the Fourteenth Amendment, appellant, a Delaware corporation, has, by its Amendment and the commerce clause.
activities in the State of Washington, rendered itself amenable to proceedings in the
courts of that state to recover unpaid contributions to the state unemployment The facts, as found by the appeal tribunal and accepted by the state Superior Court
compensation fund exacted by state statutes, Washington Unemployment and Supreme Court, are not in dispute. Appellant is a Delaware corporation, having
Compensation Act, Washington Revised Statutes, § 9998-103a through § 9998-123a, its principal place of business in St. Louis, Missouri, and is engaged in the
1941 Supp., and (2) whether the state can exact those contributions consistently with manufacture and sale of shoes and other footwear. It maintains places of business in
the due process clause of the Fourteenth Amendment. several states other than Washington, at which its manufacturing is carried on and
from which its merchandise is distributed interstate through several sales units or
The statutes in question set up a comprehensive scheme of unemployment branches located outside the State of Washington.
compensation, the costs of which are defrayed by contributions required to be made
by employers to a state unemployment compensation fund. [p312] The contributions Appellant has no office in Washington, and makes no contracts either for sale or
are a specified percentage of the wages payable annually by each employer for his purchase of merchandise there. It maintains no stock of merchandise in that state,
employees' services in the state. The assessment and collection of the contributions and makes there no deliveries of goods in intrastate commerce. During the years
and the fund are administered by appellees. Section 14(c) of the Act (Wash.Rev.Stat., from 1937 to 1940, now in question, appellant employed eleven to thirteen salesmen
1941 Supp., § 9998-114c) authorizes appellee Commissioner to issue an order and under direct supervision and control of sales managers located in St. Louis. These
notice of assessment of delinquent contributions upon prescribed personal service of salesmen resided in Washington; their principal activities were confined to that state,
the notice upon the employer if found within the state, or, if not so found, by mailing and they were compensated by commissions based upon the amount of their sales.
the notice to the employer by registered mail at his last known address. That section The commissions for each year totaled more than $31,000. Appellant supplies its
also authorizes the Commissioner to collect the assessment by distraint if it is not salesmen with a line of samples, each consisting of one shoe of a pair, which [p314]
paid within ten days after service of the notice. By §§ 14e and 6b, the order of they display to prospective purchasers. On occasion, they rent permanent sample
assessment may be administratively reviewed by an appeal tribunal within the office rooms, for exhibiting samples, in business buildings, or rent rooms in hotels or

9
business buildings temporarily for that purpose. The cost of such rentals is 306, 308; Hooven & Allison Co. v. Evatt, 324 U.S. 652, 679; Southern Pacific Co. v.
reimbursed by appellant. Arizona, 325 U.S. 761, 769.

The authority of the salesmen is limited to exhibiting their samples and soliciting Appellant also insists that its activities within the state were not sufficient to manifest
orders from prospective buyers, at prices and on terms fixed by appellant. The its "presence" there, and that, in its absence, the state courts were without
salesmen transmit the orders to appellant's office in St. Louis for acceptance or jurisdiction, that, consequently, it was a denial of due process for the state to subject
rejection, and, when accepted, the merchandise for filling the orders is shipped f.o.b. appellant to suit. It refers to those cases in which it was said that the mere solicitation
from points outside Washington to the purchasers within the state. All the of orders for the purchase of goods within a state, to be accepted without the state
merchandise shipped into Washington is invoiced at the place of shipment, from and filled by shipment of the purchased goods interstate, does not render the
which collections are made. No salesman has authority to enter into contracts or to corporation seller amenable to suit within the state. See Green v. Chicago, B. & Q. R.
make collections. Co., 205 U.S. 530, 533; International Harvester Co. v. Kentucky, supra, 586-587;
Philadelphia [p316] & Reading R. Co. v. McKibbin, 243 U.S. 264, 268; People's
The Supreme Court of Washington was of opinion that the regular and systematic Tobacco Co. v. American Tobacco Co., supra, 87. And appellant further argues that,
solicitation of orders in the state by appellant's salesmen, resulting in a continuous since it was not present within the state, it is a denial of due process to subject it to
flow of appellant's product into the state, was sufficient to constitute doing business in taxation or other money exaction. It thus denies the power of the state to lay the tax
the state so as to make appellant amenable to suit in its courts. But it was also of or to subject appellant to a suit for its collection.
opinion that there were sufficient additional activities shown to bring the case within
the rule, frequently stated, that solicitation within a state by the agents of a foreign Historically, the jurisdiction of courts to render judgment in personam is grounded on
corporation plus some additional activities there are sufficient to render the their de facto power over the defendant's person. Hence, his presence within the
corporation amenable to suit brought in the courts of the state to enforce an obligation territorial jurisdiction of a court was prerequisite to its rendition of a judgment
arising out of its activities there. International Harvester Co. v. Kentucky, 234 U.S. personally binding him. Pennoyer v. Neff, 95 U.S. 714, 733. But now that the capias
579, 587; People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 87; Frene v. ad respondendum has given way to personal service of summons or other form of
Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 516. The court found notice, due process requires only that, in order to subject a defendant to a judgment
such additional activities in the salesmen's display of samples sometimes in in personam, if he be not present within the territory of the forum, he have certain
permanent display rooms, and the salesmen's residence within the state, continued minimum contacts with it such that the maintenance of the suit does not offend
over a period of years, all resulting in a [p315] substantial volume of merchandise "traditional notions of fair play and substantial justice." Milliken v. Meyer, 311 U.S.
regularly shipped by appellant to purchasers within the state. The court also held that 457, 463. See Holmes, J., in McDonald v. Mabee, 243 U.S. 90, 91. Compare
the statute, as applied, did not invade the constitutional power of Congress to Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316, 319. See Blackmer v. United
regulate interstate commerce, and did not impose a prohibited burden on such States, 284 U.S. 421; Hess v. Pawloski, 274 U.S. 352; Young v. Masci, 289 U.S. 253.
commerce. ,

Appellant's argument, renewed here, that the statute imposes an unconstitutional Since the corporate personality is a fiction, although a fiction intended to be acted
burden on interstate commerce need not detain us. For 53 Stat. 1391, 26 U.S.C. upon as though it were a fact, Klein v. Board of Supervisors, 282 U.S. 19, 24, it is
§ 1606(a) provides that clear that, unlike an individual, its "presence" without, as well as within, the state of its
origin can be manifested only by activities carried on in its behalf by those who are
No person required under a State law to make payments to an unemployment fund authorized to act for it. To say that the corporation is so far "present" there as to
shall be relieved from compliance therewith on the ground that he is engaged in satisfy due process requirements, for purposes of taxation or the maintenance of suits
interstate or foreign commerce, or that the State law does not distinguish between against it in the courts of the state, is to beg the question to be decided. For the terms
employees engaged in interstate or foreign commerce and those engaged in "present" or "presence" are [p317] used merely to symbolize those activities of the
intrastate commerce. corporation's agent within the state which courts will deem to be sufficient to satisfy
the demands of due process. L. Hand, J., in Hutchinson v. Chase & Gilbert, 45 F.2d
It is no longer debatable that Congress, in the exercise of the commerce power, may 139, 141. Those demands may be met by such contacts of the corporation with the
authorize the states, in specified ways, to regulate interstate commerce or impose state of the forum as make it reasonable, in the context of our federal system of
burdens upon it. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U.S. 334; government, to require the corporation to defend the particular suit which is brought
Perkins v. Pennsylvania, 314 U.S. 586; Standard Dredging Corp. v. Murphy, 319 U.S. there. An "estimate of the inconveniences" which would result to the corporation from

10
a trial away from its "home" or principal place of business is relevant in this realistically, it may be said that those authorized acts were of such a nature as to
connection. Hutchinson v. Chase & Gilbert, supra, 141. justify the fiction. Smolik v. Philadelphia & [p319] Reading Co., 222 F. 148, 151.
Henderson, The Position of Foreign Corporations in American Constitutional Law, 94-
"Presence" in the state in this sense has never been doubted when the activities of 95.
the corporation there have not only been continuous and systematic, but also give
rise to the liabilities sued on, even though no consent to be sued or authorization to It is evident that the criteria by which we mark the boundary line between those
an agent to accept service of process has been given. St. Clair v. Cox, 106 U.S. 350, activities which justify the subjection of a corporation to suit and those which do not
355; Connecticut Mutual Co. v. Spratley, 172 U.S. 602, 610-611; Pennsylvania cannot be simply mechanical or quantitative. The test is not merely, as has
Lumbermen's Ins. Co. v. Meyer, 197 U.S. 407, 414-415; Commercial Mutual Co. v. sometimes been suggested, whether the activity, which the corporation has seen fit to
Davis, 213 U.S. 245, 255-256; International Harvester Co. v. Kentucky, supra; cf. St. procure through its agents in another state, is a little more or a little less. St. Louis
Louis S.W. R. Co. v. Alexander, 227 U.S. 218. Conversely, it has been generally S.W. R. Co. v. Alexander, supra, 228; International Harvester Co. v. Kentucky, supra,
recognized that the casual presence of the corporate agent, or even his conduct of 587. Whether due process is satisfied must depend, rather, upon the quality and
single or isolated items of activities in a state in the corporation's behalf, are not nature of the activity in relation to the fair and orderly administration of the laws which
enough to subject it to suit on causes of action unconnected with the activities there. it was the purpose of the due process clause to insure. That clause does not
St. Clair v. Cox, supra, 359, 360; Old Wayne Life Assn. v. McDonough, 204 U.S. 8, contemplate that a state may make binding a judgment in personam against an
21; Frene v. Louisville Cement Co., supra, 515, and cases cited. To require the individual or corporate defendant with which the state has no contacts, ties, or
corporation in such circumstances to defend the suit away from its home or other relations. Cf. Pennoyer v. Neff, supra; Minnesota Commercial Assn. v. Benn, 261
jurisdiction where it carries on more substantial activities has been thought to lay too U.S. 140.
great and unreasonable a burden on the corporation to comport with due process.
[p318] But, to the extent that a corporation exercises the privilege of conducting activities
within a state, it enjoys the benefits and protection of the laws of that state. The
While it has been held, in cases on which appellant relies, that continuous activity of exercise of that privilege may give rise to obligations, and, so far as those obligations
some sorts within a state is not enough to support the demand that the corporation be arise out of or are connected with the activities within the state, a procedure which
amenable to suits unrelated to that activity, Old Wayne Life Assn. v. McDonough, requires the corporation to respond to a suit brought to enforce them can, in most
supra; Green v. Chicago, B. & Q. R. Co., supra; Simon v. Southern R. Co., 236 U.S. instances, hardly be said to be undue. Compare International Harvester Co. v.
115; People's Tobacco Co. v. American Tobacco Co., supra; cf. Davis v. Farmers Co- Kentucky, supra, with Green v. Chicago, B. & Q. R. Co., supra, and People's Tobacco
operative Co., 262 U.S. 312, 317, there have been instances in which the continuous Co. v. American Tobacco Co., supra. Compare Connecticut Mutual Co. v. Spratley,
corporate operations within a state were thought so substantial and of such a nature supra, 619, 620, and Commercial Mutual Co. v. Davis, supra, with Old Wayne Life
as to justify suit against it on causes of action arising from dealings entirely distinct Assn. v. McDonough, supra. See 29 Columbia Law Review, 187-195. [p320]
from those activities. See Missouri, K. & T. R. Co. v. Reynolds, 255 U.S. 565; Tauza
v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915; cf. St. Louis S.W. R. Co. v. Applying these standards, the activities carried on in behalf of appellant in the State of
Alexander, supra. Washington were neither irregular nor casual. They were systematic and continuous
throughout the years in question. They resulted in a large volume of interstate
Finally, although the commission of some single or occasional acts of the corporate business, in the course of which appellant received the benefits and protection of the
agent in a state sufficient to impose an obligation or liability on the corporation has not laws of the state, including the right to resort to the courts for the enforcement of its
been thought to confer upon the state authority to enforce it, Rosenberg Bros. & Co. rights. The obligation which is here sued upon arose out of those very activities. It is
v. Curtis Brown Co., 260 U.S. 516, other such acts, because of their nature and evident that these operations establish sufficient contacts or ties with the state of the
quality and the circumstances of their commission, may be deemed sufficient to forum to make it reasonable and just, according to our traditional conception of fair
render the corporation liable to suit. Cf. Kane v. New Jersey, 242 U.S. 160; Hess v. play and substantial justice, to permit the state to enforce the obligations which
Pawloski, supra; Young v. Masci, supra. True, some of the decisions holding the appellant has incurred there. Hence, we cannot say that the maintenance of the
corporation amenable to suit have been supported by resort to the legal fiction that it present suit in the State of Washington involves an unreasonable or undue
has given its consent to service and suit, consent being implied from its presence in procedure.
the state through the acts of its authorized agents. Lafayette Insurance Co. v. French,
18 How. 404, 407; St. Clair v. Cox, supra, 356; Commercial Mutual Co. v. Davis, We are likewise unable to conclude that the service of the process within the state
supra, 254; Washington v. Superior Court, 289 U.S. 361, 364-365. But, more upon an agent whose activities establish appellant's "presence" there was not
sufficient notice of the suit, or that the suit was so unrelated to those activities as to

11
make the agent an inappropriate vehicle for communicating the notice. It is enough BLACK, J., Separate Opinion
that appellant has established such contacts with the state that the particular form of
substituted service adopted there gives reasonable assurance that the notice will be MR. JUSTICE BLACK delivered the following opinion.
actual. Connecticut Mutual Co. v. Spratley, supra, 618, 619; Board of Trade v.
Hammond Elevator Co., 198 U.S. 424, 437-438; Commercial Mutual Co. v. Davis, Congress, pursuant to its constitutional power to regulate commerce, has expressly
supra, 254-255. Cf. Riverside Mills v. Menefee, 237 U.S. 189, 194, 195; see Knowles provided that a State shall not be prohibited from levying the kind of unemployment
v. Gaslight & Coke Co., 19 Wall. 58, 61; McDonald v. Mabee, supra; Milliken v. compensation tax here challenged. 26 U.S.C. 1600. We have twice decided that this
Meyer, supra. Nor can we say that the mailing of the notice of suit to appellant by Congressional consent is an adequate answer to a claim that imposition of the tax
registered mail at its home office was not reasonably calculated to apprise appellant violates the Commerce Clause. Perkins v. Pennsylvania, 314 U.S. 586, affirming 342
of the suit. Compare Hess v. Pawloski, supra, with McDonald v. Mabee, supra, [p321] Pa. 529; Standard Dredging Corp. v. Murphy, 319 U.S. 306, 308. Two determinations
92, and Wuchter v. Pizzutti, 276 U.S. 13, 19, 24; cf. Becquet v. MacCarthy, 2 B. & Ad. by this Court of an issue so palpably without merit are sufficient. Consequently, that
951; Maubourquet v. Wyse, 1 Ir.Rep.C.L. 471. See Washington v. Superior Court, part of this appeal which again seeks to raise the question seems so patently
supra, 365. frivolous as to make the case a fit candidate for dismissal. Fay v. Crozer, 217 U.S.
455. Nor is the further ground advanced on this appeal, that the State of Washington
Only a word need be said of appellant's liability for the demanded contributions to the has denied appellant due process of law, any less devoid of substance. It is my view,
state unemployment fund. The Supreme Court of Washington, construing and therefore, that we should dismiss the appeal as unsubstantial, [n1] Seaboard Air Line
applying the statute, has held that it imposes a tax on the privilege of employing R. Co. v. Watson, 287 U.S. 86, 90, 92, and decline the invitation to formulate broad
appellant's salesmen within the state measured by a percentage of the wages, here, rules as to the meaning of due process, which here would amount to deciding a
the commissions payable to the salesmen. This construction we accept for purposes constitutional question "in advance of the necessity for its decision." Federation of
of determining the constitutional validity of the statute. The right to employ labor has Labor v. McAdory, 325 U.S. 450, 461. [p323]
been deemed an appropriate subject of taxation in this country and England, both
before and since the adoption of the Constitution. Steward Machine Co. v. Davis, 301 Certainly appellant cannot, in the light of our past decisions, meritoriously claim that
U.S. 548, 579, et seq. And such a tax imposed upon the employer for unemployment notice by registered mail and by personal service on its sales solicitors in Washington
benefits is within the constitutional power of the states. Carmichael v. Southern Coal did not meet the requirements of procedural due process. And the due process
Co., 301 U.S. 495, 508, et seq. clause is not brought in issue any more by appellant's further conceptualistic
contention that Washington could not levy a tax or bring suit against the corporation
Appellant having rendered itself amenable to suit upon obligations arising out of the because it did not honor that State with its mystical "presence." For it is unthinkable
activities of its salesmen in Washington, the state may maintain the present suit in that the vague due process clause was ever intended to prohibit a State from
personam to collect the tax laid upon the exercise of the privilege of employing regulating or taxing a business carried on within its boundaries simply because this is
appellant's salesmen within the state. For Washington has made one of those done by agents of a corporation organized and having its headquarters elsewhere. To
activities which, taken together, establish appellant's "presence" there for purposes of read this into the due process clause would, in fact, result in depriving a State's
suit the taxable event by which the state brings appellant within the reach of its taxing citizens of due process by taking from the State the power to protect them in their
power. The state thus has constitutional power to lay the tax and to subject appellant business dealings within its boundaries with representatives of a foreign corporation.
to a suit to recover it. The activities which establish its "presence" subject it alike to Nothing could be more irrational, or more designed to defeat the function of our
taxation by the state and to suit to recover the tax. Equitable Life Society v. federative system of government. Certainly a State, at the very least, has power to tax
Pennsylvania, 238 U.S. 143, 146; cf. International Harvester Co. v. Department of and sue those dealing with its citizens within its boundaries, as we have held before.
Taxation, 322 U.S. 435, 442, et seq.; Hoopeston Canning Co. v. Cullen, [p322] supra, Hoopeston Canning Co. v. Cullen, 318 U.S. 313. Were the Court to follow this
316-319; see General Trading Co. v. Tax Comm'n, 322 U.S. 335. principle, it would provide a workable standard for cases where, as here, no other
questions are involved. The Court has not chosen to do so, but instead has engaged
Affirmed. in an unnecessary discussion, in the course of which it has announced vague
Constitutional criteria applied for the first time to the issue before us. It has thus
MR. JUSTICE JACKSON took no part in the consideration or decision of this case. introduced uncertain elements confusing the simple pattern and tending to curtail the
exercise of State powers to an extent not justified by the Constitution.

The criteria adopted, insofar as they can be identified, read as follows: Due Process
Separate does permit State courts to "enforce the obligations which appellant has incurred" if

12
[p324] it be found "reasonable and just according to our traditional conception of fair process clause so as to restrict a State's power to tax and sue those whose activities
play and substantial justice." And this, in turn, means that we will "permit" the State to affect persons and businesses within the State, provided proper service can be had.
act if, upon Superimposing the natural justice concept on the Constitution's specific prohibitions
could operate as a drastic abridgment of democratic safeguards they embody, such
an "estimate of the inconveniences" which would result to the corporation from a trial as freedom of speech, press and religion, [n2] and the right to counsel. This [p326] has
away from its "home" or principal place of business, already happened. Betts v. Brady, 316 U.S. 455. Compare Feldman v. United States,
322 U.S. 487, 494-503. For application of this natural law concept, whether under the
we conclude that it is "reasonable" to subject it to suit in a State where it is doing terms "reasonableness," "justice," or "fair play," makes judges the supreme arbiters of
business. the country's laws and practices. Polk Co. v. Glover, 305 U.S. 5, 17-18; Federal
Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 600, n. 4. This result, I
It is true that this Court did use the terms "fair play" and "substantial justice" in
believe, alters the form of government our Constitution provides. I cannot agree.
explaining the philosophy underlying the holding that it could not be "due process of
law" to render a personal judgment against a defendant without notice and an True, the State's power is here upheld. But the rule announced means that
opportunity to be heard. Milliken v. Meyer, 311 U.S. 457. In McDonald v. Mabee, 243 tomorrow's judgment may strike down a State or Federal enactment on the ground
U.S. 90, 91, cited in the Milliken, case, Mr. Justice Holmes, speaking for the Court, that it does not conform to this Court's idea of natural justice. I therefore find myself
warned against judicial curtailment of this opportunity to be heard, and referred to moved by the same fears that caused Mr. Justice Holmes to say in 1930:
such a curtailment as a denial of "fair play," which even the common law would have
deemed "contrary to natural justice." And previous cases had indicated that the I have not yet adequately expressed the more than anxiety that I feel at the ever-
ancient rule against judgments without notice had stemmed from "natural justice" increasing scope given to the Fourteenth Amendment in cutting down what I believe
concepts. These cases, while giving additional reasons why notice under particular to be the constitutional rights of the States. As the decisions now stand, I see hardly
circumstances is inadequate, did not mean thereby that all legislative enactments any limit but the sky to the invalidating of those rights if they happen to strike a
which this Court might deem to be contrary to natural justice ought to be held invalid majority of this Court as for any reason undesirable.
under the due process clause. None of the cases purport to support or could support
a holding that a State can tax and sue corporations only if its action comports with this
Court's notions of "natural justice." I should have thought the Tenth Amendment
settled that.

I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts,"
a power to tax and to open the doors of its courts for its citizens to sue corporations
whose agents do business in those States. Believing that the Constitution gave the
States that power, I think it a judicial deprivation to condition its exercise upon this
[p325] Court's notion of "fair play," however appealing that term may be. Nor can I
stretch the meaning of due process so far as to authorize this Court to deprive a State
of the right to afford judicial protection to its citizens on the ground that it would be
more "convenient" for the corporation to be sued somewhere else.

There is a strong emotional appeal in the words "fair play," "justice," and
"reasonableness." But they were not chosen by those who wrote the original
Constitution or the Fourteenth Amendment as a measuring rod for this Court to use in
invalidating State or Federal laws passed by elected legislative representatives. No
one, not even those who most feared a democratic government, ever formally
proposed that courts should be given power to invalidate legislation under any such
elastic standards. Express prohibitions against certain types of legislation are found in
the Constitution, and, under the long-settled practice, courts invalidate laws found to
conflict with them. This requires interpretation, and interpretation, it is true, may result
in extension of the Constitution's purpose. But that is no reason for reading the due

13
i. Jurisdiction Over the Person of that day to make a second attempt at serving the summons, but he was informed
that petitioners were still out of the office. He decided to resort to substituted service
G.R. No. 156759 June 5, 2013 of the summons, and explained why in his sheriff’s return dated September 22, 2005, 5
to wit:
ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY
REYES, JANET BAY, JESUS R. GALANG, AND RANDY HAGOS, Petitioners, SHERIFF’S RETURN
vs.
FRANCISCO R. CO, JR., Respondent. This is to certify that on September 18, 2000, I caused the service of summons
together with copies of complaint and its annexes attached thereto, upon the
DECISION following:

BERSAMIN, J.: 1. Defendant Allen A. Macasaet, President/Publisher of defendant AbanteTonite, at


Monica Publishing Corporation, Rooms 301-305 3rd Floor, BF Condominium Building,
To warrant the substituted service of the summons and copy of the complaint, the Solana corner A. Soriano Streets, Intramuros, Manila, thru his secretary Lu-Ann
serving officer must first attempt to effect the same upon the defendant in person. Quijano, a person of sufficient age and discretion working therein, who signed to
Only after the attempt at personal service has become futile or impossible within a acknowledge receipt thereof. That effort (sic) to serve the said summons personally
reasonable time may the officer resort to substituted service. upon said defendant were made, but the same were ineffectual and unavailing on the
ground that per information of Ms. Quijano said defendant is always out and not
The Case
available, thus, substituted service was applied;
Petitioners – defendants in a suit for libel brought by respondent – appeal the
2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-Ann Quijano,
decision promulgated on March 8, 20021 and the resolution promulgated on January
who signed to acknowledge receipt thereof. That effort (sic) to serve the said
13, 2003,2 whereby the Court of Appeals (CA) respectively dismissed their petition for
summons personally upon said defendant were made, but the same were ineffectual
certiorari, prohibition and mandamus and denied their motion for reconsideration.
and unavailing on the ground that per information of (sic) his wife said defendant is
Thereby, the CA upheld the order the Regional Trial Court (RTC), Branch 51, in
always out and not available, thus, substituted service was applied;
Manila had issued on March 12, 2001 denying their motion to dismiss because the
substituted service of the summons and copies of the complaint on each of them had 3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily
been valid and effective.3 Reyes, at the same address, thru Rene Esleta, Editorial Assistant of defendant
AbanteTonite, a person of sufficient age and discretion working therein who signed to
Antecedents
acknowledge receipt thereof. That effort (sic) to serve the said summons personally
On July 3, 2000, respondent, a retired police officer assigned at the Western Police upon said defendants were made, but the same were ineffectual and unavailing on
District in Manila, sued Abante Tonite, a daily tabloid of general circulation; its the ground that per information of (sic) Mr. Esleta said defendants is (sic) always
Publisher Allen A. Macasaet; its Managing Director Nicolas V. Quijano; its Circulation roving outside and gathering news, thus, substituted service was applied.
Manager Isaias Albano; its Editors Janet Bay, Jesus R. Galang and Randy Hagos;
Original copy of summons is therefore, respectfully returned duly served.
and its Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an
allegedly libelous article petitioners published in the June 6, 2000 issue of Abante Manila, September 22, 2000.
Tonite. The suit, docketed as Civil Case No. 00-97907, was raffled to Branch 51 of
the RTC, which in due course issued summons to be served on each defendant, On October 3, 2000, petitioners moved for the dismissal of the complaint through
including Abante Tonite, at their business address at Monica Publishing Corporation, counsel’s special appearance in their behalf, alleging lack of jurisdiction over their
301-305 3rd Floor, BF Condominium Building, Solana Street corner A. Soriano Street, persons because of the invalid and ineffectual substituted service of summons. They
Intramuros, Manila.4 contended that the sheriff had made no prior attempt to serve the summons
personally on each of them in accordance with Section 6 and Section 7, Rule 14 of
In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the the Rules of Court. They further moved to drop Abante Tonite as a defendant by
stated address to effect the personal service of the summons on the defendants. But virtue of its being neither a natural nor a juridical person that could be impleaded as a
his efforts to personally serve each defendant in the address were futile because the party in a civil action.
defendants were then out of the office and unavailable. He returned in the afternoon

14
At the hearing of petitioners’ motion to dismiss, Medina testified that he had gone to On June 29, 2001, the RTC denied petitioners’ motion for reconsideration. 7 It stated
the office address of petitioners in the morning of September 18, 2000 to personally in respect of the service of summons, as follows:
serve the summons on each defendant; that petitioners were out of the office at the
time; that he had returned in the afternoon of the same day to again attempt to serve The allegations of the defendants that the Sheriff immediately resorted to substituted
on each defendant personally but his attempt had still proved futile because all of service of summons upon them when he was informed that they were not around to
petitioners were still out of the office; that some competent persons working in personally receive the same is untenable. During the hearing of the herein motion,
petitioners’ office had informed him that Macasaet and Quijano were always out and Sheriff Raul Medina of this Branch of the Court testified that on September 18, 2000
unavailable, and that Albano, Bay, Galang, Hagos and Reyes were always out roving in the morning, he went to the office address of the defendants to personally serve
to gather news; and that he had then resorted to substituted service upon realizing summons upon them but they were out. So he went back to serve said summons
the impossibility of his finding petitioners in person within a reasonable time. upon the defendants in the afternoon of the same day, but then again he was
informed that the defendants were out and unavailable, and that they were always out
On March 12, 2001, the RTC denied the motion to dismiss, and directed petitioners to because they were roving around to gather news. Because of that information and
file their answers to the complaint within the remaining period allowed by the Rules of because of the nature of the work of the defendants that they are always on field, so
Court,6 relevantly stating: the sheriff resorted to substituted service of summons. There was substantial
compliance with the rules, considering the difficulty to serve the summons personally
Records show that the summonses were served upon Allen A. Macasaet, to them because of the nature of their job which compels them to be always out and
President/Publisher of defendant AbanteTonite, through LuAnn Quijano; upon unavailable. Additional matters regarding the service of summons upon defendants
defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily Reyes, were sufficiently discussed in the Order of this Court dated March 12, 2001.
through Rene Esleta, Editorial Assistant of defendant Abante Tonite (p. 12, records).
It is apparent in the Sheriff’s Return that on several occasions, efforts to served (sic) Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:
the summons personally upon all the defendants were ineffectual as they were
always out and unavailable, so the Sheriff served the summons by substituted "Abante Tonite" is a daily tabloid of general circulation. People all over the country
service. could buy a copy of "Abante Tonite" and read it, hence, it is for public consumption.
The persons who organized said publication obviously derived profit from it. The
Considering that summonses cannot be served within a reasonable time to the information written on the said newspaper will affect the person, natural as well as
persons of all the defendants, hence substituted service of summonses was validly juridical, who was stated or implicated in the news. All of these facts imply that
applied. Secretary of the President who is duly authorized to receive such document, "Abante Tonite" falls within the provision of Art. 44 (2 or 3), New Civil Code. Assuming
the wife of the defendant and the Editorial Assistant of the defendant, were arguendo that "Abante Tonite" is not registered with the Securities and Exchange
considered competent persons with sufficient discretion to realize the importance of Commission, it is deemed a corporation by estoppels considering that it possesses
the legal papers served upon them and to relay the same to the defendants named attributes of a juridical person, otherwise it cannot be held liable for damages and
therein (Sec. 7, Rule 14, 1997 Rules of Civil Procedure). injuries it may inflict to other persons.

WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby DENIED for Undaunted, petitioners brought a petition for certiorari, prohibition, mandamusin the
lack of merit.. CA to nullify the orders of the RTC dated March 12, 2001 and June 29, 2001.

Accordingly, defendants are directed to file their Answers to the complaint within the Ruling of the CA
period still open to them, pursuant to the rules.
On March 8, 2002, the CA promulgated its questioned decision, 8 dismissing the
SO ORDERED. petition for certiorari, prohibition, mandamus, to wit:

Petitioners filed a motion for reconsideration, asserting that the sheriff had We find petitioners’ argument without merit. The rule is that certiorari will prosper only
immediately resorted to substituted service of the summons upon being informed that if there is a showing of grave abuse of discretion or an act without or in excess of
they were not around to personally receive the summons, and that Abante Tonite, jurisdiction committed by the respondent Judge. A judicious reading of the questioned
being neither a natural nor a juridical person, could not be made a party in the action. orders of respondent Judge would show that the same were not issued in a
capricious or whimsical exercise of judgment. There are factual bases and legal
justification for the assailed orders. From the Return, the sheriff certified that "effort to

15
serve the summons personally xxx were made, but the same were ineffectual and Jurisdiction over the person, or jurisdiction in personam –the power of the court to
unavailing xxx. render a personal judgment or to subject the parties in a particular action to the
judgment and other rulings rendered in the action – is an element of due process that
and upholding the trial court’s finding that there was a substantial compliance with the is essential in all actions, civil as well as criminal, except in actions in rem or quasi in
rules that allowed the substituted service. rem. Jurisdiction over the defendantin an action in rem or quasi in rem is not required,
and the court acquires jurisdiction over an actionas long as it acquires jurisdiction
Furthermore, the CA ruled: over the resthat is thesubject matter of the action. The purpose of summons in such
action is not the acquisition of jurisdiction over the defendant but mainly to satisfy the
Anent the issue raised by petitioners that "Abante Tonite is neither a natural or
constitutional requirement of due process.12
juridical person who may be a party in a civil case," and therefore the case against it
must be dismissed and/or dropped, is untenable. The distinctions that need to be perceived between an action in personam, on the one
hand, and an action inrem or quasi in rem, on the other hand, are aptly delineated in
The respondent Judge, in denying petitioners’ motion for reconsideration, held that:
Domagas v. Jensen,13 thusly:
xxxx
The settled rule is that the aim and object of an action determine its character.
Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is
corporate entity, thus the doctrine of corporation by estoppel may appropriately apply. determined by its nature and purpose, and by these only. A proceeding in personam
is a proceeding to enforce personal rights and obligations brought against the person
An unincorporated association, which represents itself to be a corporation, will be and is based on the jurisdiction of the person, although it may involve his right to, or
estopped from denying its corporate capacity in a suit against it by a third person who the exercise of ownership of, specific property, or seek to compel him to control or
relies in good faith on such representation. dispose of it in accordance with the mandate of the court. The purpose of a
proceeding in personam is to impose, through the judgment of a court, some
There being no grave abuse of discretion committed by the respondent Judge in the responsibility or liability directly upon the person of the defendant. Of this character
exercise of his jurisdiction, the relief of prohibition is also unavailable. are suits to compel a defendant to specifically perform some act or actions to fasten a
pecuniary liability on him. An action in personam is said to be one which has for its
WHEREFORE, the instant petition is DENIED. The assailed Orders of respondent object a judgment against the person, as distinguished from a judgment against the
Judge are AFFIRMED. property to determine its state. It has been held that an action in personam is a
proceeding to enforce personal rights or obligations; such action is brought against
SO ORDERED.9 the person. As far as suits for injunctive relief are concerned, it is well-settled that it is
an injunctive act in personam. In Combs v. Combs, the appellate court held that
On January 13, 2003, the CA denied petitioners’ motion for reconsideration. 10
proceedings to enforce personal rights and obligations and in which personal
judgments are rendered adjusting the rights and obligations between the affected
Issues
parties is in personam. Actions for recovery of real property are in personam.
Petitioners hereby submit that:
On the other hand, a proceeding quasi in rem is one brought against persons seeking
1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING to subject the property of such persons to the discharge of the claims assailed. In an
THAT THE TRIAL COURT ACQUIRED JURISDICTION OVER HEREIN action quasi in rem, an individual is named as defendant and the purpose of the
PETITIONERS. proceeding is to subject his interests therein to the obligation or loan burdening the
property. Actions quasi in rem deal with the status, ownership or liability of a particular
2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BY property but which are intended to operate on these questions only as between the
SUSTAINING THE INCLUSION OF ABANTE TONITE AS PARTY IN THE INSTANT particular parties to the proceedings and not to ascertain or cut off the rights or
CASE.11 interests of all possible claimants. The judgments therein are binding only upon the
parties who joined in the action.
Ruling
As a rule, Philippine courts cannot try any case against a defendant who does not
The petition for review lacks merit. reside and is not found in the Philippines because of the impossibility of acquiring

16
jurisdiction over his person unless he voluntarily appears in court; but when the case with the rules regarding the service of the summons is as much an issue of due
is an action in rem or quasi in rem enumerated in Section 15, Rule 14 of the Rules of process as it is of jurisdiction.23
Court, Philippine courts have jurisdiction to hear and decide the case because they
have jurisdiction over the res, and jurisdiction over the person of the non-resident Under the Rules of Court, the service of the summons should firstly be effected on the
defendant is not essential. In the latter instance, extraterritorial service of summons defendant himself whenever practicable. Such personal service consists either in
can be made upon the defendant, and such extraterritorial service of summons is not handing a copy of the summons to the defendant in person, or, if the defendant
for the purpose of vesting the court with jurisdiction, but for the purpose of complying refuses to receive and sign for it, in tendering it to him. 24 The rule on personal service
with the requirements of fair play or due process, so that the defendant will be is to be rigidly enforced in order to ensure the realization of the two fundamental
informed of the pendency of the action against him and the possibility that property in objectives earlier mentioned. If, for justifiable reasons, the defendant cannot be
the Philippines belonging to him or in which he has an interest may be subjected to a served in person within a reasonable time, the service of the summons may then be
judgment in favor of the plaintiff, and he can thereby take steps to protect his interest effected either (a) by leaving a copy of the summons at his residence with some
if he is so minded. On the other hand, when the defendant in an action in personam person of suitable age and discretion then residing therein, or (b) by leaving the copy
does not reside and is not found in the Philippines, our courts cannot try the case at his office or regular place of business with some competent person in charge
against him because of the impossibility of acquiring jurisdiction over his person thereof.25 The latter mode of service is known as substituted service because the
unless he voluntarily appears in court.14 service of the summons on the defendant is made through his substitute.

As the initiating party, the plaintiff in a civil action voluntarily submits himself to the It is no longer debatable that the statutory requirements of substituted service must
jurisdiction of the court by the act of filing the initiatory pleading. As to the defendant, be followed strictly, faithfully and fully, and any substituted service other than that
the court acquires jurisdiction over his person either by the proper service of the authorized by statute is considered ineffective. 26 This is because substituted service,
summons, or by a voluntary appearance in the action.15 being in derogation of the usual method of service, is extraordinary in character and
may be used only as prescribed and in the circumstances authorized by statute. 27
Upon the filing of the complaint and the payment of the requisite legal fees, the clerk Only when the defendant cannot be served personally within a reasonable time may
of court forthwith issues the corresponding summons to the defendant. 16 The substituted service be resorted to. Hence, the impossibility of prompt personal service
summons is directed to the defendant and signed by the clerk of court under seal. It should be shown by stating the efforts made to find the defendant himself and the fact
contains the name of the court and the names of the parties to the action; a direction that such efforts failed, which statement should be found in the proof of service or
that the defendant answers within the time fixed by the Rules of Court; and a notice sheriff’s return.28 Nonetheless, the requisite showing of the impossibility of prompt
that unless the defendant so answers, the plaintiff will take judgment by default and personal service as basis for resorting to substituted service may be waived by the
may be granted the relief applied for.17 To be attached to the original copy of the defendant either expressly or impliedly.29
summons and all copies thereof is a copy of the complaint (and its attachments, if
any) and the order, if any, for the appointment of a guardian ad litem. 18 There is no question that Sheriff Medina twice attempted to serve the summons upon
each of petitioners in person at their office address, the first in the morning of
The significance of the proper service of the summons on the defendant in an action September 18, 2000 and the second in the afternoon of the same date. Each attempt
in personam cannot be overemphasized. The service of the summons fulfills two failed because Macasaet and Quijano were "always out and not available" and the
fundamental objectives, namely: (a) to vest in the court jurisdiction over the person of other petitioners were "always roving outside and gathering news." After Medina
the defendant; and (b) to afford to the defendant the opportunity to be heard on the learned from those present in the office address on his second attempt that there was
claim brought against him.19 As to the former, when jurisdiction in personam is not no likelihood of any of petitioners going to the office during the business hours of that
acquired in a civil action through the proper service of the summons or upon a valid or any other day, he concluded that further attempts to serve them in person within a
waiver of such proper service, the ensuing trial and judgment are void. 20 If the reasonable time would be futile. The circumstances fully warranted his conclusion. He
defendant knowingly does an act inconsistent with the right to object to the lack of was not expected or required as the serving officer to effect personal service by all
personal jurisdiction as to him, like voluntarily appearing in the action, he is deemed means and at all times, considering that he was expressly authorized to resort to
to have submitted himself to the jurisdiction of the court.21 As to the latter, the substituted service should he be unable to effect the personal service within a
essence of due process lies in the reasonable opportunity to be heard and to submit reasonable time. In that regard, what was a reasonable time was dependent on the
any evidence the defendant may have in support of his defense. With the proper circumstances obtaining. While we are strict in insisting on personal service on the
service of the summons being intended to afford to him the opportunity to be heard on defendant, we do not cling to such strictness should the circumstances already justify
the claim against him, he may also waive the process. 21 In other words, compliance

17
substituted service instead. It is the spirit of the procedural rules, not their letter, that
governs.30

In reality, petitioners’ insistence on personal service by the serving officer was


demonstrably superfluous. They had actually received the summonses served
through their substitutes, as borne out by their filing of several pleadings in the RTC,
including an answer with compulsory counterclaim ad cautelam and a pre-trial brief
ad cautelam. They had also availed themselves of the modes of discovery available
under the Rules of Court. Such acts evinced their voluntary appearance in the action.

Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a
defendant due to its not being either a natural or a juridical person. In rejecting their
contention, the CA categorized Abante Tonite as a corporation by estoppel as the
result of its having represented itself to the reading public as a corporation despite its
not being incorporated. Thereby, the CA concluded that the RTC did not gravely
abuse its discretion in holding that the non-incorporation of Abante Tonite with the
Securities and Exchange Commission was of no consequence, for, otherwise,
whoever of the public who would suffer any damage from the publication of articles in
the pages of its tabloids would be left without recourse. We cannot disagree with the
CA, considering that the editorial box of the daily tabloid disclosed that basis, nothing
in the box indicated that Monica Publishing Corporation had owned Abante Tonite.

WHEREFORE, the Court AFFIRMS the decision promulgated on March 8, 2002; and
ORDERS petitioners to pay the costs of suit.

18
i. Jurisdiction Over the Person branch clerk of court. On 16 March 2001, before the scheduled ex parte presentation
of evidence, Atty. Alcantara filed a motion to dismiss, citing the judgment of dismissal
G.R. No. 175334 March 26, 2008 issued by the Superior Court of the State of California, which allegedly dismissed
Case No. NC021205. The RTC held in abeyance the ex parte presentation of
SPS. DOMINGO M. BELEN and DOMINGA P. BELEN, herein represented by evidence of private respondents and the resolution of Atty. Alcantara’s motion
their attorney-in-fact NERY B. AVECILLA, Petitioners, pending the submission of a copy of the judgment of dismissal.
vs.
HON. PABLO R. CHAVEZ, Presiding Judge, RTC-Branch 87, Rosario, Batangas For failure to present a copy of the alleged judgment of dismissal, the RTC denied the
and all other persons acting under his orders and SPS. SILVESTRE N. PACLEB motion to dismiss in an Order dated 19 February 2002. Through a motion, Atty.
and PATRICIA A. PACLEB, represented herein by their attorney-in-fact Alcantara sought the reinstatement of the motion to dismiss by attaching a copy of the
JOSELITO RIOVEROS, Respondents. said foreign judgment.

DECISION For their part, private respondents filed a motion for the amendment of the complaint.
The amended complaint attached to the motion averred that private respondents
TINGA, J.: were constrained to withdraw their complaint against petitioners from the California
court because of the prohibitive cost of litigation, which withdrawal was favorably
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
considered by said court. The amended complaint prayed for judgment ordering
Procedure assailing the Decision1 and Resolution2 of the Court of Appeals in CA-G.R.
petitioners to satisfy their obligation to private respondents in the amount of
SP No. 88731. The appellate court’s decision dismissed the petition for certiorari
₱2,810,234.50.
which sought to nullify the orders of the Regional Trial Court (RTC) of Rosario,
Batangas, Branch 87, denying herein petitioners’ motion to quash writ of execution The answer to the amended complaint raised the defenses of lack of cause of action,
and their motion for reconsideration. The Court of Appeals’ resolution denied res judicata and lack of jurisdiction over the subject matter and over the persons of
petitioners’ motion for reconsideration of the decision. the defendants since the amended complaint had raised an entirely new cause of
action which should have been ventilated in another complaint.
The instant petition originated from the action for the enforcement of a foreign
judgment against herein petitioners, spouses Domingo and Dominga Belen, filed by Petitioners and Atty. Alcantara failed to appear at the rescheduled pre-trial
private respondent spouses Silvestre and Patricia Pacleb, represented by their conference. Thus, the RTC declared petitioners in default and allowed private
attorney-in-fact, Joselito Rioveros, before the RTC of Rosario, Batangas. respondents to present evidence ex parte. On 15 March 2003, Atty. Alcantara passed
away without the RTC being informed of such fact until much later.
The complaint alleged that private respondents secured a judgment by default in
Case No. NC021205 rendered by a certain Judge John W. Green of the Superior On 5 August 2003, the RTC rendered a Decision, the dispositive portion of which
Court of the State of California. The judgment ordered petitioners to pay private reads:
respondents the amount of $56,204.69 representing loan repayment and share in the
profits plus interest and costs of suit. The summons was served on petitioners’ WHEREFORE, in view of the foregoing, the defendants are hereby directed to pay
address in San Gregorio, Alaminos, Laguna, as was alleged in the complaint, and the plaintiffs the following, to wit:
received by a certain Marcelo M. Belen.
a) The amount of ₱656,688.00 (equivalent to $27,362.00) in an exchange ratio of
On 5 December 2000, Atty. Reynaldo Alcantara entered his appearance as counsel One (1) dollar is to ₱24.00 Philippine Currency;
for petitioners, stating that his legal services were retained at the instance of
petitioners’ relatives. Atty. Alcantara subsequently filed an answer, alleging that b) Plus 30% of ₱656,688.00 which is ₱197,006.40;
contrary to private respondents’ averment, petitioners were actually residents of
California, USA. The answer also claimed that petitioners’ liability had been c) Plus ₱1,576,051.20 (30% for eight (8) years, 1995-2003); and
extinguished via a release of abstract judgment issued in the same collection case.
d) Plus 12% per annum as interest of the principal obligation (₱656,688.00) from
In view of petitioners’ failure to attend the scheduled pre-trial conference, the RTC 1995 to 2003;
ordered the ex parte presentation of evidence for private respondents before the
SO ORDERED.3

19
A copy of the RTC decision intended for Atty. Alcantara was returned with the SAID COUNSEL WAS WITHOUT THEIR EXPRESS AUTHORITY BUT WAS DONE
notation "Addressee Deceased." A copy of the RTC decision was then sent to the BY THEIR ALLEGED RELATIVES.
purported address of petitioners in San Gregorio, Alaminos, Laguna and was
received by a certain Leopoldo Avecilla on 14 August 2003. Meanwhile, immediately THE COURT OF APPEALS COMMITTED SERIOUS ERRORS [OF] LAW WHEN IT
after the promulgation of the RTC decision, private respondents filed an ex-parte RULED THAT THE DECISION OF THE TRIAL COURT WAS DULY SERVED UPON
motion for preliminary attachment which the RTC granted in its Order dated 15 THE PETITIONERS THROUGH THEIR ALLEGED RELATIVES ALTHOUGH THE
September 2003. RECORDS OF THIS CASE CLEARLY SHOWS THAT THE SAID PETITIONERS
ARE RESIDENTS OF UNITED STATES OF AMERICA.5
On 24 November 2003, private respondents sought the execution of the RTC
decision. In its Order dated 10 December 2003, the RTC directed the issuance of a In a Resolution dated 22 January 2007, the Court denied the petition because it is not
writ of execution. Upon the issuance of a writ of execution, the real properties accompanied by a valid verification and certification of non-forum shopping.
belonging to petitioners were levied upon and the public auction scheduled on 15 Petitioners sought reconsideration, which the Court granted in a Resolution dated 16
January 2004. April 2007. The Court also ordered the reinstatement of the petition and the filing of a
comment.
On 16 December 2003, Atty. Carmelo B. Culvera entered his appearance as counsel
for petitioners. On 22 December 2003, Atty. Culvera filed a Motion to Quash Writ of The instant petition raises two issues, thus: (1) whether the RTC acquired jurisdiction
Execution (With Prayer to Defer Further Actions). On 6 January 2004, he filed a over the persons of petitioners through either the proper service of summons or the
Notice of Appeal from the RTC Decision averring that he received a copy thereof only appearance of the late Atty. Alcantara on behalf of petitioners and (2) whether there
on 29 December 2003. was a valid service of the copy of the RTC decision on petitioners.

In an Order dated 7 July 2004, the RTC denied the motion seeking the quashal of the On one hand, courts acquire jurisdiction over the plaintiffs upon the filing of the
writ of execution.4 Subsequently, the RTC denied Atty. Culvera’s motion for complaint. On the other hand, jurisdiction over the defendants in a civil case is
reconsideration of said order. acquired either through the service of summons upon them or through their voluntary
appearance in court and their submission to its authority. As a rule, if defendants
Thus, petitioners filed a Rule 65 petition before the Court of Appeals, imputing on the have not
RTC grave abuse of discretion tantamount to lack or excess of jurisdiction (1) in
rendering its decision although it had not yet acquired jurisdiction over their persons been summoned, the court acquires no jurisdiction over their person, and a judgment
in view of the improper service of summons; (2) in considering the decision final and rendered against them is null and void. To be bound by a decision, a party should first
executory although a copy thereof had not been properly served upon petitioners; (3) be subject to the court’s jurisdiction.6
in issuing the writ of execution before the decision had become final and executory
and despite private respondents’ failure to comply with the procedural requirements in In Asiavest Limited v. Court of Appeals,7 the Court underscored the necessity of
filing the motion for the issuance of the said writ; and (4) in denying petitioners’ determining first whether the action is in personam, in rem or quasi in rem because
motion to quash the writ of execution and notice of appeal despite sufficient legal the rules on service of summons under Rule 14 of the Rules of Court of the
bases in support thereof. Philippines apply according to the nature of the action. 8 The Court elaborated, thus:

On 31 July 2006, the Court of Appeals rendered the assailed Decision dismissing the In an action in personam, jurisdiction over the person of the defendant is necessary
petition for certiorari. On 3 November 2006, it issued the assailed Resolution denying for the court to validly try and decide the case. Jurisdiction over the person of a
petitioners’ motion for reconsideration. 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
Hence, the instant petition, attributing to the Court of Appeals the following errors: 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
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS [OF] LAW IN temporarily out of the country, any of the following modes of service may be resorted
RULING THAT THE TRIAL COURT ACTED WITHIN ITS JURISDICTION OR DID to: (1) substituted service set forth in Section 8; (2) personal service outside the
NOT COMMIT GRAVE ABUSE OF DISCRETION WHEN IT CONSIDERED THE country, with leave of court; (3) service by publication, also with leave of court; or (4)
APPEARANCE OF THE COUNSEL AS THEIR SUBMISSION TO THE any other manner the court may deem sufficient.
JURISDICTION OF THE TRIAL COURT ALTHOUGH SUCH APPEARANCE OF THE

20
However, in an action in personam wherein the defendant is a non-resident who If defendant cannot be served with summons because he is temporarily abroad, but
does not voluntarily submit himself to the authority of the court, personal otherwise he is a Philippine resident, service of summons may, by leave of court, be
service of summons within the state is essential to the acquisition of effected out of the Philippines under Rule 14, Section 15. In all of these cases, it
jurisdiction over her person. This method of service is possible if such should be noted, defendant must be a resident of the Philippines, otherwise an action
defendant is physically present in the country. If he is in personam cannot be brought because jurisdiction over his person is essential to
make a binding decision.12
not found therein, the court cannot acquire jurisdiction over his person and
therefore cannot validly try and decide the case against him. An exception was However, the records of the case reveal that herein petitioners have been permanent
laid down in Gemperle v. Schenker wherein a non-resident was served with residents of California, U.S.A. since the filing of the action up to the present. From the
summons through his wife, who was a resident of the Philippines and who was time Atty. Alcantara filed an answer purportedly at the instance of petitioners’
his representative and attorney-in-fact in a prior civil case filed by him; relatives, it has been consistently maintained that petitioners were not physically
moreover, the second case was a mere offshoot of the first case. present in the Philippines. In the answer, Atty. Alcantara had already averred that
petitioners were residents of California, U.S.A. and that he was appearing only upon
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person the instance of petitioners’ relatives.13 In addition, private respondents’ attorney-in-
of the defendant is not a prerequisite to confer jurisdiction on the court provided that fact, Joselito Rioveros, testified during the ex parte presentation of evidence that he
the court acquires jurisdiction over the res. Nonetheless, summons must be served knew petitioners to be former residents of Alaminos, Laguna but are now living in
upon the defendant not for the purpose of vesting the court with jurisdiction but California, U.S.A.14 That being the case, the service of summons on petitioners’
merely for satisfying the due process requirements. Thus, where the defendant is a purported address in San Gregorio, Alaminos, Laguna was defective and did not
non-resident who is not found in the Philippines and (1) the action affects the serve to vest in court jurisdiction over their persons.
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; Nevertheless, the Court of Appeals correctly concluded that the appearance of Atty.
(3) the action seeks the exclusion of the defendant from any interest in the property Alcantara and his filing of numerous pleadings were sufficient to vest jurisdiction over
located in the Philippines; or (4) the property of the defendant has been attached in the persons of petitioners. Through certain acts, Atty. Alcantara was impliedly
the Philippines— service of summons may be effected by (a) personal service out of authorized by petitioners to appear on their behalf. For instance, in support of the
the country, with leave of court; (b) publication, also with leave of court; or (c) any motion to dismiss the complaint, Atty. Alcantara attached thereto a duly authenticated
other manner the court may deem sufficient.9 copy of the judgment of dismissal and a photocopy

The action filed against petitioners, prior to the amendment of the complaint, is for the of the identification page of petitioner Domingo Belen’s U.S. passport. These
enforcement of a foreign judgment in a complaint for breach of contract whereby documents could have been supplied only by petitioners, indicating that they have
petitioners were ordered to pay private respondents the monetary award. It is in the consented to the appearance of Atty. Alcantara on their behalf. In sum, petitioners
nature of an action in personam because private respondents are suing to enforce voluntarily submitted themselves through Atty. Alcantara to the jurisdiction of the
their personal rights under said judgment. RTC.

Applying the foregoing rules on the service of summons to the instant case, in an We now come to the question of whether the service of a copy of the RTC decision
action in personam, jurisdiction over the person of the defendant who does not on a certain Teodoro Abecilla is the proper reckoning point in determining when the
voluntarily submit himself to the authority of the court is necessary for the court to RTC decision became final and executory.
validly try and decide the case through personal service or, if this is not possible and
he cannot be personally served, substituted service as provided in Rule 14, Sections The Court of Appeals arrived at its conclusion on the premise that Teodoro Abecilla
6-7.10 acted as petitioners’ agent when he received a copy of the RTC decision. For their
part, private respondents contend that the service of a copy of the RTC decision on
In an action strictly in personam, personal service on the defendant is the preferred Atty. Alcantara, notwithstanding his demise, is valid. On the other hand, petitioners
mode of service, that is, by handing a copy of the summons to the defendant in reiterate that they are residents of California, U.S.A. and thus, the service of the RTC
person. If the defendant, for justifiable reasons, cannot be served with the summons decision of a residence which is not theirs is not proper.
within a reasonable period, then substituted service can be resorted to. While
substituted service of summons is permitted, "it is extraordinary in character and in As a general rule, when a party is represented by counsel of record, service of orders
derogation of the usual method of service."11 and notices must be made upon said attorney and notice to the client and to any

21
other lawyer, not the counsel of record, is not notice in law. The exception to this rule known address in San Gregorio, Alaminos, Laguna," which was received by a certain
is when service upon the party himself has been ordered by the court. 15 In cases Leopoldo Avecilla.
where service was made on the counsel of record at his given address, notice sent to
petitioner itself is not even necessary.16 Undoubtedly, upon the death of Atty. Alcantara, the lawyer-client relationship between
him and petitioners has ceased, thus, the service of the RTC decision on him is
The following provisions under Rule 13 of the Rules of Court define the proper modes ineffective and did not bind petitioners.
of service of judgments:
The subsequent service on petitioners’ purported "last known address" by registered
SEC. 2. Filing and service, defined.—x x x mail is also defective because it does not comply with the requisites under the
aforequoted Section 7 of Rule 13 on service by registered mail. Section 7 of Rule 13
Service is the act of providing a party with a copy of the pleading or paper concerned. contemplates service at the present address of the party and not at any other address
xxx of the party. Service at the party’s former address or his last known address or any
address other than his present address does not qualify as substantial compliance
SEC. 5. Modes of service.—Service of pleadings, motions, notices, orders, judgments with the requirements of Section 7, Rule 13. Therefore, service by registered mail
and other papers shall be made either personally or by mail. presupposes that the present address of the party is known and if the person who
receives the same is not the addressee, he must be duly authorized by the former to
SEC. 9. Service of judgments, final orders or resolutions. —Judgments, final orders or
receive the paper on behalf of the party.
resolutions shall be served either personally or by registered mail. When a party
summoned by publication has failed to appear in the action, judgments, final orders or Since the filing of the complaint, petitioners could not be physically found in the
resolutions against him shall be served upon him also by publication at the expense country because they had already become permanent residents of California, U.S.A.
of the prevailing party. It has been established during the trial that petitioners are former residents of
Alaminos, Laguna, contrary to the averment in the complaint that they reside and may
SEC. 6. Personal service. —Service of the papers may be made by delivering
be served with court processes thereat. The service of the RTC decision at their
personally a copy to the party or his counsel, or by leaving it in his office with his clerk
former address in Alaminos, Laguna is defective and does not bind petitioners.
or with a person having charge thereof. If no person is found in his office, or his office
is not known, or he has no office, then by leaving the copy, between the hours of On many occasions,17 the Court has strictly construed the requirements of the proper
eight in the morning and six in the evening, at the party’s or counsel’s residence, if service of papers and judgments. Both in Heirs of Delos Santos v. Del Rosario18 and
known, with a person of sufficient age and discretion then residing therein. Tuazon v. Molina,19 the service of the trial court’s decision at an adjacent office and
the receipt thereof by a person not authorized by the counsel of record was held
SEC. 7. Service by mail. —Service by registered mail shall be made by depositing the
ineffective. Likewise, the service of the decision made at the ground floor instead of at
copy in the post office, in a sealed envelope, plainly addressed to the party or his
the 9th floor of a building in the address on record of petitioners’ counsel, was held
counsel at his office, if known, otherwise at his residence, if known, with postage fully
invalid in PLDT v. NLRC.20 In these cases, there was no constructive service of the
pre-paid, and with instructions to the postmaster to return the mail to the sender after
decision even if
ten (10) days if undelivered. If no registry service is available in the locality of either
the sender or the addressee, service may be done by ordinary mail.lavvphil the service was made at the offices adjacent to the address on record of the parties’
counsels and even if the copies eventually found their way to persons duly authorized
SEC. 8. Substituted service. —If service of pleadings, motions, notices, resolutions,
to receive them.
orders and other papers cannot be made under the two preceding sections, the office
and place of residence of the party or his counsel being unknown, service may be In view of the foregoing, the running of the fifteen-day period for appeal did not
made by delivering the copy to the clerk of court, with proof of failure of both personal commence upon the service of the RTC decision at the address on record of Atty.
service and service by mail. The service is complete at the time of such delivery. Alcantara or at the Laguna address. It is deemed served on petitioners only upon its
receipt by Atty. Culvera on 29 December 2003. Therefore, the filing of the Notice of
In the instant case, a copy of the RTC decision was sent first to Atty. Alcantara,
Appeal on 06 January 2004 is within the reglementary period and should be given
petitioners’ counsel of record. However, the same was returned unserved in view of
due course.
the demise of Atty. Alcantara. Thus, a copy was subsequently sent to petitioners’ "last

22
WHEREFORE, the instant petition for review on certiorari is GRANTED and the
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 88731 are
REVERSED and SET ASIDE. Accordingly, the orders dated 7 July 2004 and 2
February 2005 of the Regional Trial Court of Rosario. Batangas, Branch 87 are SET
ASIDE. The RTC is also ordered to GIVE DUE COURSE to the Notice of Appeal filed
by Atty. Culvera on 06 January 2004 . Costs against private respondents.

23
i. Jurisdiction Over the Person served personally upon her in the Philippines. It is urged by plaintiff that jurisdiction
over the person of Schenker has been secured through voluntary appearance on his
G.R. No. L-18164 January 23, 1967 part, he not having made a special appearance to assail the jurisdiction over his
person, and an answer having been filed in this case, stating that "the defendants, by
WILLIAM F. GEMPERLE, plaintiff-appellant, counsel, answering the plaintiff's complaint, respectfully aver", which is allegedly a
vs. general appearance amounting to a submission to the jurisdiction of the court,
HELEN SCHENKER and PAUL SCHENKER as her husband, defendants- confirmed, according to plaintiff, by a P225,000 counterclaim for damages set up in
appellees. said answer; but this counterclaim was set up by Mrs. Schenker alone, not including
her husband. Moreover, said answer contained several affirmative defenses, one of
Gamboa & Gamboa for plaintiff-appellant.
which was lack of jurisdiction over the person of Schenker, thus negating the alleged
A. R. Narvasa for defendants-appellees.
waiver of this defense. Nevertheless, We hold that the lower court had acquired
CONCEPCION, C. J.: jurisdiction over said defendant, through service of the summons addressed to him
upon Mrs. Schenker, it appearing from said answer that she is the representative and
Appeal, taken by plaintiff, William F. Gemperle, from a decision of the Court of First attorney-in-fact of her husband aforementioned civil case No. Q-2796, which
Instance of Rizal dismissing this case for lack of jurisdiction over the person of apparently was filed at her behest, in her aforementioned representative capacity. In
defendant Paul Schenker and for want of cause of action against his wife and co- other words, Mrs. Schenker had authority to sue, and had actually sued on behalf of
defendant, Helen Schenker said Paul Schenker "being in no position to be joined with her husband, so that she was, also, empowered to represent him in suits filed against
her as party defendant, because he is beyond the reach of the magistracy of the him, particularly in a case, like the of the one at bar, which is consequence of the
Philippine courts." action brought by her on his behalf.

The record shows that sometime in 1952, Paul Schenker-hereinafter referred to as Inasmuch as the alleged absence of a cause of action against Mrs. Schenker is
Schenker — acting through his wife and attorney-in-fact, Helen Schenker — herein- premised upon the alleged lack of jurisdiction over the person of Schenker, which
after referred to as Mrs. Schenker — filed with the Court of First Instance of Rizal, a cannot be sustained, it follows that the conclusion drawn therefore from is, likewise,
complaint — which was docketed as Civil Case No. Q-2796 thereof — against herein untenable.
plaintiff William F. Gemperle, for the enforcement of Schenker's allegedly initial
subscription to the shares of stock of the Philippines-Swiss Trading Co., Inc. and the Wherefore, the decision appealed from should be, is hereby, reversed, and the case
exercise of his alleged pre-emptive rights to the then unissued original capital stock of remanded to the lower court for proceedings, with the costs of this instance
said corporation and the increase thereof, as well as for an accounting and damages. defendants-appellees. It is so ordered.
Alleging that, in connection with said complaint, Mrs. Schenker had caused to be
published some allegations thereof and other matters, which were impertinent,
irrelevant and immaterial to said case No. Q-2796, aside from being false and
derogatory to the reputation, good name and credit of Gemperle, "with the only
purpose of attacking" his" honesty, integrity and reputation" and of bringing him "into
public hatred, discredit, disrepute and contempt as a man and a businessman",
Gemperle commenced the present action against the Schenkers for the recovery of
P300,000 as damages, P30,000 as attorney's fees, and costs, in addition to praying
for a judgment ordering Mrs. Schenker "to retract in writing the said defamatory
expressions". In due course, thereafter, the lower court, rendered the decision above
referred to. A reconsiderating thereof having been denied, Gemperle interposed the
present appeal.

The first question for determination therein is whether or not the lower court had
acquired jurisdiction over the person of Schenker. Admittedly, he, a Swiss citizen,
residing in Zurich, Switzerland, has not been actually served with summons in the
Philippines, although the summons address to him and Mrs. Schenker had been

24
i. Jurisdiction Over the Person 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
G.R. No. 168747 October 19, 2007 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
VICTORIA REGNER, Petitioner, February 1998, or three days before the death of Luis, and when he was already in
vs. comatose condition at the Cebu Doctors’ Hospital, Melinda, Teresa, and Cynthia
CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU COUNTRY CLUB, Inc., caused the preparation of an affidavit to the effect that Luis affirmed the Deed of
Respondents. Donation he allegedly executed earlier by lifting his hand to affix his thumbmark on
the said affidavit.
DECISION
Sheriff Melchor A. Solon served the summonses on Cynthia and Teresa at the Borja
CHICO-NAZARIO, J.:
Family Clinic in Tagbilaran City wherein Melinda worked as a doctor, but Melinda
This Petition for Review on Certiorari seeks to reverse the Decision 1 dated 6 May refused to receive the summonses for her sisters and informed the sheriff that their
2005 of the Court of Appeals in CA-G.R. CV No. 71028 entitled, "Victoria Regner v. lawyer, Atty. Francis Zosa, would be the one to receive the same.
Cynthia Logarta, Teresa R. Tormis and Cebu Country Club, Inc.," which affirmed the
Upon her arrival in the Philippines, on 1 June 2000, Teresa was personally served the
Order dated 9 November 2000 of the Regional Trial Court (RTC) of Cebu, granting
summons at Room 304, Regency Crest Condominium, Banilad, Cebu City. She filed
herein respondents’ motion to dismiss Civil Case No. CEB 23927. The Order dated 9
her Answer4 with counterclaim with the RTC on 6 June 2000.
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 Subsequently, on 12 September 2002, Teresa filed a motion to dismiss Civil Case
indispensable party therein. No. CEB 23927 because of petitioner’s failure to prosecute her action for an
unreasonable length of time.
Civil Case No. CEB. 23927 arose from the following factual antecedents:
Petitioner opposed5 the motion and filed her own motion to set the case for pre-trial,
Luis Regner (Luis) had three daughters with his first wife, Anicita C. Regner, namely,
to which Teresa filed her rejoinder on the ground that their sister, Cynthia, an
Cynthia Logarta (Cynthia) and Teresa Tormis (Teresa), the respondents herein, and
indispensable party, had not yet been served a summons. Thus, Teresa prayed for
Melinda Regner-Borja (Melinda).
the dismissal of petitioner’s complaint, as the case would not proceed without
Herein petitioner Victoria Regner (Victoria) is the second wife of Luis. Cynthia’s presence.

During the lifetime of Luis, he acquired several properties, among which is a share at On 9 November 2000, the RTC issued an Order 6 granting respondent Teresa’s
Cebu Country Club Inc., evidenced by Proprietary Ownership Certificate No. 0272. motion to dismiss, pertinent portions of which read:
On 15 May 1998, Luis executed a Deed2 of Donation in favor of respondents Cynthia
Considering that the donees in the Deed of Donation are Cynthia R. Logarta and
and Teresa covering Proprietary Ownership Certificate No. 0272 of the Cebu Country
Teresa R. Tormis, they are therefore an (sic) indispensable party (sic). In the case of
Club, Inc.
Quisumbing vs. Court of Appeals, 189 SCRA 325, indispensable parties are those
Luis passed away on 11 February 1999. 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
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 Wherefore, in view of the foregoing, the instant case is hereby dismissed without
Restraining Order against Cynthia and Teresa with the RTC, docketed as Civil Case prejudice.
No. CEB. 23927. Victoria alleged in her complaint that: on 17 March 1997, Luis made
A motion for reconsideration was filed by petitioner, but the same was denied in an
a written declaration wherein he stated that due to his illness and forgetfulness, he
Order dated 14 February 2001.
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 Aggrieved, petitioner appealed to the Court of Appeals. On 6 May 2005, the Court of
mind, Cynthia and Teresa , conspiring and confederating with each other, fraudulently Appeals rendered a Decision denying the appeal and affirming in toto the order of
made or caused to be fraudulently made a Deed of Donation whereby they made it

25
dismissal of the complaint by the RTC and the denial of the motion for reconsideration the defendants constitutes failure to prosecute that would warrant dismissal of the
thereof. The Court of Appeals ratiocinated that petitioner’s failure to move for an complaint.
extraterritorial service of summons constitutes failure to prosecute for an
unreasonable length of time, thus: A Court must acquire jurisdiction over the persons of indispensable parties before it
can validly pronounce judgments personal to the parties. Courts acquire jurisdiction
[T]he plaintiff-appellant [Victoria Regner] should have moved for the extraterritorial over a party plaintiff upon the filing of the complaint. On the other hand, jurisdiction
service of summons for both defendants-appellees Teresa R. Tormis and Cynthia R. over the person of a party defendant is assured upon the service of summons in the
Logarta as they were not residing and were not found in the Philippines when plaintiff- manner required by law or otherwise by his voluntary appearance. As a rule, if a
appellant [Victoria Regner] filed this case below. Although defendant-appellant defendant has not been summoned, the court acquires no jurisdiction over his
Teresa Tormis was personally served with summons on June 1, 2000 when she person, and a personal judgment rendered against such defendant is null and void.10
came to the Philippines but the same was only effected after a long wait or after the A decision that is null and void for want of jurisdiction on the part of the trial court is
lapse of almost one year from the date the complaint was filed on June 15, 1999. To not a decision in the contemplation of law and, hence, it can never become final and
allow this practice would be to make the continuation of like proceedings before the executory.11
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 Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-
the proceedings and clog the court dockets as well. The afore-cited rule was precisely interest without whom there can be no final determination of an action. As such, they
crafted to meet situations similar to the present case to avoid unnecessary delays. 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
It has to be emphasized that it is incumbent upon the plaintiff [Victoria Regner] to parties where possible, and the joinder of all indispensable parties under any and all
move with leave of court for the extraterritorial service of summons. Taking into conditions, their presence being a sine qua non for the exercise of judicial power. 12 It
account the considerable time that had elapsed from the filing of the complaint on is precisely "when an indispensable party is not before the court [that] the action
June 15, 1999 until defendant-appellee Teresa R. Tormis, through counsel, filed a should be dismissed."13 The absence of an indispensable party renders all
motion to dismiss on September 12, 2000, or approximately fifteen (15) months, subsequent actions of the court null and void for want of authority to act, not only as
without any act on the part of plaintiff-appellant [Victoria Regner] to move for to the absent parties but even as to those present. 14
extraterritorial service of summons upon the person of defendant-appellee Cynthia
Logarta renders plaintiff-appellant’s [Victoria Regner] complaint dismissible for failure As we ruled in Alberto v. Mananghala15 :
to prosecute her action for unreasonable length of time under Section 3, Rule 17,
Revised Rules of Court, x x x.7 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,
Hence, this appeal via petition8 for review on certiorari filed by petitioner raising the the predecessors of defendants are indispensable parties if the transfers, if not
following assignment of errors: voided, may bind plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In the latter case, this
Court held:
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DELAY IN SERVING
SUMMONS ON ONE OF THE DEFENDANTS CONSTITUTES A FAILURE TO In order to bring this suit duly to a close, it is imperative to determine the only
PROSECUTE NOTWITHSTANDING THAT THE REST OF THE CO-DEFENDANTS question raised in connection with the pending appeal, to wit, whether all the persons
WERE DULY SERVED WITH SUMMONSES 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
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE ANSWER transfers and donation be declared null and void – an indispensable declaration for
FILED BY ONE INDIVIDUAL DEFENDANT REDOUNDS TO THE BENEFIT OF THE the purpose, in a proper case, of concluding the plaintiff to be the sole owner of the
OTHER DEFENDANT WHO HAS NOT BEEN SERVED WITH SUMMONS, THE house in dispute.
NATURE OF ACTION BEING ADMITTEDLY COMMON AMONG ALL
DEFENDANTS.9 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
From the foregoing, this Court identifies the issues to be resolved in this petition as: hear them in the litigation, as parties interested in maintaining the validity of those
(1) Whether a co-donee is an indispensable party in an action to declare the nullity of transactions, and therefore, whatever be the nature of the judgment rendered,
the deed of donation, and (2) whether delay in the service of summons upon one of Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente Miranda, and Rafael

26
Sierra, besides the said minors, must be included in the case as defendants." (Garcia An indispensable party is one whose interest will be affected by the court’s action in
vs. Reyes, 17 Phil., 130-131.) 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
It takes no great degree of legal sophistication to realize that Cynthia and Teresa are inextricably intertwined with the other parties that his legal presence as a party to the
indispensable parties to Civil Case No. CEB 23927. Cynthia and Teresa allegedly proceeding is an absolute necessity. In his absence there cannot be a resolution of
derived their rights to the subject property by way of donation from their father Luis. the dispute of the parties before the court which is effective, complete, or equitable.
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 The rationale for treating all the co-owners of a property as indispensable parties in a
daughters Cynthia and Teresa, as Luis was already very ill and no longer of sound suit involving the co-owned property is explained in Arcelona v. Court of Appeals 18 :
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 As held by the Supreme Court, were the courts to permit an action in ejectment to be
Donation and to restrain the Cebu Country Club, Inc. from transferring title and maintained by a person having merely an undivided interest in any given tract of land,
ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa. 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
Thus, based on the Deed of Donation, Teresa and Cynthia are co-owners of property might be harassed by as many succeeding actions of ejectment, as there
Proprietary Membership Certificate No. 0272 of Cebu Country Club, Inc. The country might be co-owners of the title asserted against him. The purpose of this provision
club membership certificate is undivided and it is impossible to pinpoint which specific was to prevent multiplicity of suits by requiring the person asserting a right against the
portion of the property belongs to either Teresa or Cynthia. Indeed, both Teresa and defendant to include with him, either as co-plaintiffs or as co-defendants, all persons
Cynthia are indispensable parties in Civil Case No. CEB 23927. standing in the same position, so that the whole matter in dispute may be determined
once and for all in one litigation.
An indispensable party has been defined as follows:
Applying the foregoing definitions and principles to the present case, this Court finds
An indispensable party is a party who has such an interest in the controversy or that any decision in Civil Case No. CEB 23927 cannot bind Cynthia, and the Court
subject matter that a final adjudication cannot be made, in his absence, without cannot nullify the donation of the property she now co-owns with Teresa, even if
injuring or affecting that interest, a party who has not only an interest in the subject limited only to the portion belonging to Teresa, to whom summons was properly
matter of the controversy, but also has an interest of such nature that a final decree served, since ownership of the property is still pro indiviso. Obviously, Cynthia is an
cannot be made without affecting his interest or leaving the controversy in such a indispensable party in Civil Case No. CEB 23927 without whom the lower court is
condition that its final determination may be wholly inconsistent with equity and good barred from making a final adjudication as to the validity of the entire donation.
conscience. It has also been considered that an indispensable party is a person in Without the presence of indispensable parties to a suit or proceeding, a judgment
whose absence there cannot be a determination between the parties already before therein cannot attain finality.19
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. 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.
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 Based on the foregoing disquisitions, the issue of whether the answer filed by Teresa
necessarily be directly or injuriously affected by a decree which does complete justice should benefit Cynthia who was not served summons need not be discussed.
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 As to determine whether Cynthia was properly served a summons, it will be helpful to
if he has no interest in the subject matter of the action. It is not a sufficient reason to determine first the nature of the action filed against Cynthia and Teresa by petitioner
declare a person to be an indispensable party that his presence will avoid multiple Victoria, whether it is an action in personam, in rem or quasi in rem. This is because
litigation.16 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 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 In a personal action, the plaintiff seeks the recovery of personal property, the
present therein: 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

27
4 of the then Rules of Court, a real action is an action affecting title to real property or relief demanded in such action consists, wholly or in part, in excluding the defendant
for the recovery of possession, or for partition or condemnation of, or foreclosure of from any interest in property located in the Philippines; and (4) when the defendant
mortgage on, real property. An action in personam is an action against a person on non-resident’s property has been attached within the Philippines. In these instances,
the basis of his personal liability, while an action in rem is an action against the thing service of summons may be effected by (a) personal service out of the country, with
itself, instead of against the person.21 leave of court; (b) publication, also with leave of court; or (c) any other manner the
court may deem sufficient.25
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 In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is
of the Rules of Court,22 is essential for the acquisition by the court of jurisdiction over that it has jurisdiction over the res, i.e., the personal status of the plaintiff who is
the person of a defendant who does not voluntarily submit himself to the authority of domiciled in the Philippines or the property litigated or attached. Service of summons
the court.23 If defendant cannot be served a summons because he is temporarily in the manner provided in Section 15, Rule 14 of the Rules of Court is not for the
abroad, but is otherwise a Philippine resident, service of summons may, by leave of purpose of vesting the court with jurisdiction, but for complying with the requirements
court, be made by publication.24 Otherwise stated, a resident defendant in an action in of fair play or due process, so that the defendant will be informed of the pendency of
personam, who cannot be personally served a summons, may be summoned either the action against him; and the possibility that property in the Philippines belonging to
by means of substituted service in accordance with Section 7, Rule 14 of the Rules of him, or in which he has an interest, might be subjected to a judgment in favor of the
Court, or by publication as provided in Sections 15 and 16 of the same Rule. plaintiff and he can thereby take steps to protect his interest if he is so minded.26

In all of these cases, it should be noted, defendant must be a resident of the In petitioner’s Complaint in Civil Case No. CEB No. 23427, she alleged that Cynthia is
Philippines; otherwise an action in personam cannot be brought because jurisdiction residing at 462 West Vine No. 201, Glendale, California, 912041, U.S.A.; while
over his person is essential to make a binding decision. 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
On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person processes at the Borja Family Clinic, Bohol. Pertinent portions of the Complaint read:
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 2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married to Ramon Logarta,
in the country, summons may be served extraterritorially in accordance with Section resident (sic) 463 West Vine No.201, Glendale, California, 912041, USA. She
15, Rule 14 of the Rules of Court, which provides: 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;
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 3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age, married to Antonio
relates to, or the subject of which is, property within the Philippines, in which the Tormis, and a resident of 2408 South Hacienda Heights, California, 19745, U.S.A.
defendant has or claims a lien or interest, actual or contingent, or in which the relief She however usually visits in the Philippines and can be served with summons and
demanded consists, wholly or in part, in excluding the defendant from any interest other processes of this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol. 27
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 Petitioner prayed for a declaration of nullity of the deed of donation, to restrain Cebu
as under Section 6; or by publication in a newspaper of general circulation in such Country Club, Inc. from transferring title and ownership of Proprietary Ownership
places and for such time as the court may order, in which case a copy of the Certificate No. 0272 to Cynthia and Teresa, and for moral and exemplary damages.
summons and order of the court shall be sent by registered mail to the last known Civil Case No. CEB 23927 is evidently an action against Cynthia and Teresa on the
address of the defendant, or in any other manner the court may deem sufficient. Any basis of their personal liability for the alleged fraudulent transfer of the subject
order granting such leave shall specify a reasonable time, which shall not be less Country Club membership from Luis to their name. In this sense, petitioner questions
than sixty (60) days after notice, within which the defendant must answer. the participation and shares of Cynthia and Teresa in the transferred Country Club
membership. Moreover, the membership certificate from the Cebu Country Club, Inc.
As stated above, there are only four instances wherein a defendant who is a non- is a personal property. Thus, the action instituted by petitioner before the RTC is in
resident and is not found in the country may be served a summons by extraterritorial personam.
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

28
Being an action in personam, the general rule requires the personal service of purview of the above-quoted provision, the Court has ruled that it "depends upon the
summons on Cynthia within the Philippines, but this is not possible in the present circumstances of each particular case," and that "the sound discretion of the court" in
case because Cynthia is a non-resident and is not found within the Philippines. 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
As Cynthia is a nonresident who is not found in the Philippines, service of summons appellant since every presumption is in favor of the correctness of the court's
on her must be in accordance with Section 15, Rule 14 of the Rules of Court. Such action."31 Likewise, the concept of promptness is a relative term and must not
service, to be effective outside the Philippines, must be made either (1) by personal unnecessarily be an inflexible one. It connotes an action without hesitation and loss of
service; (2) by publication in a newspaper of general circulation in such places and for time. As to what constitutes the term is addressed to the consideration of the trial
such time as the court may order, in which case a copy of the summons and order of court, bearing in mind that while actions must be disposed of with dispatch, the
the court should be sent by registered mail to the last known address of the essential ingredient is the administration of justice and not mere speed. 32
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 It is well to quote the doctrine laid in Padua v. Ericta, 33 as accentuated in the
Philippine Embassy in the foreign country where Cynthia resides. subsequent case Marahay v. Melicor34 :

Since in the case at bar, the service of summons upon Cynthia was not done by any Courts should not brook undue delays in the ventilation and determination of causes.
of the authorized modes, the trial court was correct in dismissing petitioner’s It should be their constant effort to assure that litigations are prosecuted and resolved
complaint. 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
Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states – 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
SEC. 3. Dismissal due to fault of plaintiff. – If, for no justifiable cause, the plaintiff fails reasonable deferment of the proceedings may be allowed or tolerated to the end that
to appear on the date of the presentation of his evidence in chief on the complaint, or cases may be adjudged only after full and free presentation of evidence by all the
to prosecute his action for an unreasonable length of time, or to comply with these parties, especially where the deferment would cause no substantial prejudice to any
Rules or any order of the court, the complaint may be dismissed upon motion of the part. The desideratum of a speedy disposition of cases should not, if at all possible,
defendant or upon the court's own motion, without prejudice to the right of the result in the precipitate loss of a party’s right to present evidence and either in
defendant to prosecute his counterclaim in the same or in a separate action. This plaintiff's being non-suited or the defendant's being pronounced liable under an ex
dismissal shall have the effect of an adjudication upon the merits, unless otherwise parte judgment.
declared by the court.
"[T]rial courts have x x x the duty to dispose of controversies after trial on the merits
As can be gleaned from the rule, there are three instances when the complaint may whenever possible. It is deemed an abuse of discretion for them, on their own motion,
be dismissed due to the plaintiff's fault: (1) if he fails to appear during a scheduled ‘to enter a dismissal which is not warranted by the circumstances of the case’
trial, especially on the date for the presentation of his evidence in chief; (2) if he fails (Municipality of Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While it is true that the
to prosecute his action for an unreasonable length of time; and (3) if he fails to comply dismissal of an action on grounds specified under Section 3, Rule 17 of the Revised
with the rules or any order of the court.28 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];
Considering the circumstances of the case, it can be concluded that the petitioner
Adorable v. Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la
failed to prosecute the case for an unreasonable length of time. There is failure to
Gerna, L-17631, October 19, 1966, 18 SCRA 390), such discretion must be exercised
prosecute when the plaintiff, being present, is not ready or is unwilling to proceed with
soundly with a view to the circumstances surrounding each particular case (Vernus-
the scheduled trial or when postponements in the past were due to the plaintiff's own
Sanciangco v. Sanciangco, L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain
making, intended to be dilatory or caused substantial prejudice on the part of the
that serve as mitigating circumstances for the delay, the same should be considered
defendant.29
and dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672; Cervi v.
While a court can dismiss a case on the ground of failure to prosecute, the true test Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]), especially where the suit appears
for the exercise of such power is whether, under the prevailing circumstances, the to be meritorious and the plaintiff was not culpably negligent and no injury results to
plaintiff is culpable for want of due diligence in failing to proceed with reasonable defendant (27 C.J.S. 235-36; 15 ALR 3rd 680)." (Abinales vs. Court of First Instance
promptitude.30 As to what constitutes an "unreasonable length of time," within the of Zamboanga City, Br. I, 70 SCRA 590, 595).

29
"It is true that the allowance or denial of petitions for postponement and the setting Likewise, petitioner’s counsel inexplicably failed to diligently pursue the service of
aside of orders previously issued, rest principally upon the sound discretion of the summonses on respondents. These were acts of negligence, laxity and truancy which
judge to whom they are addressed, but always predicated on the consideration that the court could have very easily avoided or timely remedied. Petitioner and her
more than the mere convenience of the courts or of the parties of the case, the ends counsel could not avail themselves of this Court’s sympathy, considering their
of justice and fairness would be served thereby (Camara Vda. de Zubiri v. Zubiri, et apparent complacency, if not delinquency, in the conduct of their litigation.
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 Considering the foregoing, we sustain the dismissal by the trial court of the
having been filed accordingly, it is sound judicial discretion to allow them (Rexwell petitioner’s complaint for failure to prosecute for a period of more than one year (from
Corp. v. Canlas, L-16746, December 30, 1961)." x x x. the time of filing thereof on 15 June 1997 until Teresa’s filing of a motion to dismiss).

This Court recalls that the complaint herein was filed on 15 June 1999. The WHEREFORE, premises considered, the instant petition is DENIED for lack of merit
summonses for Cynthia and Teresa were served on their sister Melinda at the Borja and the assailed Decision dated 6 May 2005 of the Court of Appeals in CA-G.R. CV
Family Clinic in Tagbilaran City, but the latter refused to receive the same. It was only No. 71028 is hereby AFFIRMED. Costs against petitioner.
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 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

30
i. Jurisdiction Over the Person 1. The defendant admits the existence of the judgment dated December 28, 1984 as
well as its amendment dated April 13, 1987, but not necessarily the authenticity or
G.R. No. 128803 September 25, 1998 validity thereof;

ASIAVEST LIMITED, petitioner, 2. The plaintiff is not doing business and is not licensed to do business in the
vs. Philippines;
THE COURT OF APPEALS and ANTONIO HERAS, respondents.
3. The residence of defendant, Antonio Heras, is New Manila, Quezon City.

The only issue for this Court to determine is, whether or not the judgment of the Hong
DAVIDE, JR., J.: Kong Court has been repelled by evidence of want of jurisdiction, want of notice to
the party, collusion, fraud or clear mistake of law or fact, such as to overcome the
In issue is the enforceability in the Philippines of a foreign judgment. The antecedents presumption established in Section 50, Rule 39 of the Rules of Court in favor of
are summarized in the 24 August 1990 Decision1 of Branch 107 of the Regional Trial foreign judgments.
Court of Quezon City in Civil Case No. Q-52452; thus:
In view of the admission by the defendant of the existence of the aforementioned
The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the judgment (Pls. See Stipulations of Facts in the Order dated January 5, 1989 as
defendant Antonio Heras praying that said defendant be ordered to pay to the plaintiff amended by the Order of January 18, 1989), as well as the legal presumption in favor
the amounts awarded by the Hong Kong Court Judgment dated December 28, 1984 of the plaintiff as provided for in paragraph (b); Sec. 50, (Ibid.), the plaintiff presented
and amended on April 13, 1987, to wit: 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
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the time of payment
submarkings). In addition, the plaintiff presented testimonial and documentary
with legal interest from December 28, 1984 until fully paid;
evidence to show its entitlement to attorney's fees and other expenses of litigation. . .
2) interest on the sum of US$1,500.00 at 9.875% per annum from October 31, 1984 ..
to December 28, 1984; and
On the other hand, the defendant presented two witnesses, namely. Fortunata dela
3) HK$905.00 at fixed cost in the action; and Vega and Russel Warren Lousich.

4) at least $80,000.00 representing attorney's fees, litigation expenses and cost, with The gist of Ms. dela Vega's testimony is to the effect that no writ of summons or copy
interest thereon from the date of the judgment until fully paid. 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
On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court service of the writ of summons was either served on the defendant at his residence in
could resolve the said motion, a fire which partially razed the Quezon City Hall New Manila, Quezon City. Her knowledge is based on the fact that she was the
Building on June 11, 1988 totally destroyed the office of this Court, together with all its personal secretary of Mr. Heras during his JD Transit days up to the latter part of
records, equipment and properties. On July 26, 1988, the plaintiff, through counsel 1972 when he shifted or diversified to shipping business in Hong Kong; that she was
filed a Motion for Reconstitution of Case Records. The Court, after allowing the in-charge of all his letters and correspondence, business commitments, undertakings,
defendant to react thereto, granted the said Motion and admitted the annexes conferences and appointments, until October 1984 when Mr. Heras left Hong Kong
attached thereto as the reconstituted records of this case per Order dated September for good; that she was also the Officer-in-Charge or Office Manager of Navegante
6, 1988. Thereafter, the Motion to Dismiss, the resolution of which had been deferred; Shipping Agency LTD, a Hong Kong registered and based company acting as ships
was denied by the Court in its Order of October 4, 1988. 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-
On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial 35 Connaught Road, Central Hong Kong and later transferred to Carton House at
conference. At the conference, the parties could not arrive at any settlement. Duddel Street, Hong Kong, until the company closed shop in 1985; and that she was
However, they agreed on the following stipulations of facts: certain of such facts because she held office at Caxton House up to the first quarter
of 1985.

31
Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a of the firm Sycip Salazar on the 21st of December 1984, and stated in essence that
representative of the law office of the defendant's counsel who made a verification of "on Friday, the 23rd of November 1984 he served the 4th defendant at No. 6 First
the record of the case filed by the plaintiff in Hong Kong against the defendant, as Street, Quezon City by leaving it at that address with Mr. Dionisio Lopez, the son-in-
well as the procedure in serving Court processes in Hong Kong. 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.
In his affidavit (Exh. "2") which constitutes his direct testimony, the said witness 11-12, ibid.); that upon filing of that affidavit, the Court was asked and granted
stated that: 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
The defendant was sued on the basis of his personal guarantee of the obligations of complaint or present evidence under oath of the claim in order to obtain judgment;
Compania Hermanos de Navegacion S.A. There is no record that a writ of summons and that such judgment can be enforced in the same manner as a judgment rendered
was served on the person of the defendant in Hong Kong, or that any such attempt at after full hearing.
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 The trial court held that since the Hong Kong court judgment had been duly proved, it
requirement to do so under Hong Kong laws; 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
a) The writ of summons or claim can be served by the solicitor (lawyer) of the failed to discharge that burden. He did not testify to state categorically and under oath
claimant or plaintiff. In Hong Kong there are no Court personnel who serve writs of that he never received summons. Even his own witness Lousich admitted that
summons and/or most other processes. HERAS was served with summons in his Quezon City residence. As to De la Vega's
testimony regarding non-service of summons, the same was hearsay and had no
b) If the writ of summons or claim (or complaint) is not contested, the claimant or the
probative value.
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. 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
c) There is no legal requirement that such a Judgment or decision rendered by the
facts and the law on which it was based, the trial court ruled that since the issue
Court in Hong Kong [to] make a recitation of the facts or the law upon which the claim
relate to procedural matters, the law of the forum, i.e., Hong Kong laws, should
is based.
govern. As testified by the expert witness Lousich, such legalities were not required
d) There is no necessity to furnish the defendant with a copy of the Judgment or under Hong Kong laws. The trial Court also debunked HERAS' contention that the
decision rendered against him. 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
e) In an action based on a guarantee, there is no established legal requirement or where the transaction occurred; in this case, Hong Kong laws must govern.
obligation under Hong Kong laws that the creditor must first bring proceedings against
the principal debtor. The creditor can immediately go against the guarantor. 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
On cross examination, Mr. Lousich stated that before he was commissioned by the presumption in favor of the foreign judgment. It then decreed; thus:
law firm of the defendant's 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 WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff
commercial matters; that there was an application for service of summons upon the the following sums or their equivalents in Philippine currency at the time of payment:
defendant outside the jurisdiction of Hong Kong; that there was an order of the Court US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875% per annum
authorizing service upon Heras outside of Hong Kong, particularly in Manila or any from October 31, 1984 to December 28, 1984, and HK$905 as fixed cost, with legal
other place in the Philippines (p. 9, TSN, 2/14/90); that there must be adequate proof interests on the aggregate amount from December 28, 1984, and to pay attorney's
of service of summons, otherwise the Hong Kong Court will refuse to render judgment fees in the sum of P80,000.00.
(p. 10, ibid); that the mere fact that the Hong Kong Court rendered judgment, it can be
ASIAVEST moved for the reconsideration of the decision. It sought an award of
presumed that there was service of summons; that in this case, it is not just a
judicial costs and an increase in attorney's fees in the amount of US$19,346.45 with
presumption because there was an affidavit stating that service was effected in [sic] a
interest until full payment of the said obligations. On the other hand, HERAS no
particular man here in Manila; that such affidavit was filed by one Jose R. Fernandez

32
longer opposed the motion and instead appealed the decision to the Court of findings of the lower court in the interest of justice and fair play. This, however, is
Appeals, which docketed the appeal as CA-G.R. CV No. 29513. without prejudice to whatever action [ASIAVEST] might deem proper in order to
enforce its claims against [HERAS].
In its order2 of 2 November 1990, the trial court granted ASIAVEST's motion for
reconsideration by increasing the award of attorney's fees to "US$19,345.65 OR ITS Finally, the Court of Appeals also agreed with HERAS that it was necessary that
EQUIVALENT IN PHILIPPINE CURRENCY, AND TO PAY THE COSTS OF THIS evidence supporting the validity of the foreign judgment be submitted, and that our
SUIT," provided that ASIAVEST would pay the corresponding filing fees for the courts are not bound to give effect to foreign judgments which contravene our laws
increase. ASIAVEST appealed the order requiring prior payment of filing fees. and the principle of sound morality and public policy.
However, it later withdrew its appeal and paid the additional filing fees.
ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred
On 3 April 1997, the Court of Appeals rendered its decision3 reversing the decision of in ruling that
the trial court and dismissing ASIAVEST's complaint without prejudice. It underscored
the fact that a foreign judgment does not of itself have any extraterritorial application. I.
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 . . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE
judgment is void. "SUPPORTING THE VALIDITY OF THE JUDGMENT";

The Court of Appeals agreed with the trial court that matters of remedy and II.
procedure, such as those relating to service of summons upon the defendant are
. . . THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER
governed by the lex fori, which was, in this case, the law of Hong Kong. Relative
PHILIPPINES LAW;
thereto, it gave weight to Lousich's testimony that under the Hong Kong law, the
substituted service of summons upon HERAS effected in the Philippines by the clerk III.
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 . . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN
personam and the defendant is in the Philippines, the summons should be personally HONG KONG;
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 IV.
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 . . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE
directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan law office, who OF PHILIPPINE COURTS;
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 V.
sheriff or other court officer of the place where service was to be made, or for special
. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THE
reasons by any person authorized by the judge.
PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE
The Court of Appeals agreed with HERAS that "notice sent outside the state to a non- PHILIPPINES.
resident is unavailing to give jurisdiction in an action against him personally for money
Being interrelated, we shall take up together the assigned errors.
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
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court,5 which was the
nearly 14 years. Since there was not even an attempt to serve summons on HERAS
governing law at the time this case was decided by the trial court and respondent
in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over
Court of Appeals, a foreign judgment against a person rendered by a court having
HERAS. Nonetheless it did not totally foreclose the claim of ASIAVEST; thus:
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
While We are not fully convinced that [HERAS] has a meritorious defense against
judgment may be repelled by evidence of want of jurisdiction, want of notice to the
[ASIAVEST's] claims or that [HERAS] ought to be absolved of any liability,
party, collusion, fraud, or clear mistake of law or fact.
nevertheless, in view of the foregoing discussion, there is a need to deviate front the

33
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the We note that there was no objection on the part of ASIAVEST on the qualification of
absence of proof to the contrary, a court, or judge acting as such, whether in the Mr. Lousich as an expert on the Hong Kong law. Under Sections 24 and 25, Rule 132
Philippines or elsewhere, is presumed to have acted in the lawful exercise of of the New Rules of Evidence, the record of public documents of a sovereign
jurisdiction. 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
Hence, once the authenticity of the foreign judgment is proved, the burden to repel it thereof, which must be accompanied, if the record is not kept in the Philippines, with a
on grounds provided for in paragraph (b) of Section 50, Rule 39 of the Rules of Court certificate that such officer has the custody. The certificate may be issued by a
is on the party challenging the foreign judgment — HERAS in this case. 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
At the pre-trial conference, HERAS admitted the existence of the Hong Kong country in which the record is kept, and authenticated by the seal of his office. The
judgment. On the other hand, ASIAVEST presented evidence to prove rendition, attestation must state, in substance, that the copy is a correct copy of the original, or
existence, and authentication of the judgment by the proper officials. The judgment is a specific part thereof, as the case may be, and must be under the official seal of the
thus presumed to be valid and binding in the country from which it comes, until the attesting officer.
contrary is shown. 6 Consequently, the first ground relied upon by ASIAVEST has
merit. The presumption of validity accorded foreign judgment would be rendered Nevertheless, the testimony of an expert witness may be allowed to prove a foreign
meaningless were the party seeking to enforce it be required to first establish its law. An authority 12 on private international law thus noted:
validity.
Although it is desirable that foreign law be proved in accordance with the above rule,
The main argument raised against the Hong Kong judgment is that the Hong Kong however, the Supreme Court held in the case of Willamette Iron and Steel Works v.
Supreme Court did not acquire jurisdiction over the person of HERAS. This involves Muzzal, 13 that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of
the issue of whether summons was properly and validly served on HERAS. It is Court) does not exclude the presentation of other competent evidence to prove the
settled that matters of remedy and procedure such as those relating to the service of existence of a foreign law. In that case, the Supreme Court considered the testimony
process upon the defendant are governed by the lex fori or the law of the forum, 7 under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a
i.e., the law of Hong Kong in this case. HERAS insisted that according to his witness section of California Civil Code and who stated that the same was in force at the time
Mr. Lousich, who was presented as an expert on Hong Kong laws, there was no valid the obligations were contracted, as sufficient evidence to establish the existence of
service of summons on him. 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
In his counter-affidavit,8 which served as his direct testimony per agreement of the law of California as proved by the respondents' witness. In that case, the counsel for
parties,9 Lousich declared that the record of the Hong Kong case failed to show that respondent "testified that as an active member of the California Bar since 1951, he is
a writ of summons was served upon HERAS in Hong Kong or that any such attempt familiar with the revenue and taxation laws of the State of California. When asked by
was made. Neither did the record show that a copy of the judgment of the court was the lower court to state the pertinent California law as regards exemption of intangible
served on HERAS. He stated further that under Hong Kong laws (a) a writ of personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California
summons could be served by the solicitor of the claimant or plaintiff; and (b) where Internal and Revenue Code as published in Derring's California Code, a publication of
the said writ or claim was not contested, the claimant or plaintiff was not required to Bancroft-Whitney Co., Inc. And as part of his testimony, a full quotation of the cited
present proof under oath in order to obtain judgment. 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
On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong
reciprocity regarding the acquisition of citizenship, although not meeting the
Kong court authorized service of summons on HERAS outside of its jurisdiction,
prescribed rule of practice, may be allowed and used as basis for favorable action, if,
particularly in the Philippines. He admitted also the existence of an affidavit of one
in the light of all the circumstances, the Court is "satisfied of the authenticity of the
Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law firm stating that
written proof offered." 15 Thus, in, a number of decisions, mere authentication of the
he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St.,
Chinese Naturalization Law by the Chinese Consulate General of Manila was held to
Quezon City, by leaving a copy with HERAS's son-in-law Dionisio Lopez. 10 On
be competent proof of that law. 16
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 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

34
in personam, and where the defendant is either a resident or nonresident of Hong is property in the Philippines in which the defendant has or claims a lien or interest;
Kong. In view of the absence of proof of the Hong Kong law on this particular issue, (3) the action seeks the exclusion of the defendant from any interest in the property
the presumption of identity or similarity or the so-called processual presumption shall located in the Philippines; or (4) the property of the defendant has been attached in
come into play. It will thus be presumed that the Hong Kong law on the matter is the Philippines — service of summons may be effected by (a) personal service out of
similar to the Philippine law. 17 the country, with leave of court; (b) publication, also with leave of court, or (c) any
other manner the court may deem sufficient. 28
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 In the case at bar, the action filed in Hong Kong against HERAS was in personam,
service of summons under Rule 14 of the Rules of Court of the Philippines apply since it was based on his personal guarantee of the obligation of the principal debtor.
according to the nature of the action. Before we can apply the foregoing rules, we must determine first whether HERAS
was a resident of Hong Kong.
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 Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until
person. 19 An action quasi in rem is one wherein an individual is named as defendant 1985, 29 testified that HERAS was the President and part owner of a shipping
and the purpose of the proceeding is to subject his interest therein to the obligation or company in Hong Kong during all those times that she served as his secretary. He
lien burdening the property. 20 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
In an action in personam, jurisdiction over the person of the defendant is necessary good," 31 HERAS's other witness, Russel Warren Lousich, testified that he had acted
for the court to validly try and decide the case. Jurisdiction over the person of a as counsel for HERAS "for a number of commercial matters." 32 ASIAVEST then
resident defendant who does not voluntarily appear in court can be acquired by infers that HERAS was a resident of Hong Kong because he maintained a business
personal service of summons as provided under Section 7, Rule 14 of the Rules of there.
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 It must be noted that in his Motion to Dismiss, 33 as well as in his
temporarily out of the country, any of the following modes of service may be resorted Answer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court
to: (1) substituted service set forth in Section 8; 21 (2) personal service outside the judgment, HERAS maintained that the Hong Kong court did not have jurisdiction over
country, with leave of court; (3) service by publication, also with leave of court; 22 or him because the fundamental rule is that jurisdiction in personam over non-resident
(4) any other manner the court may deem sufficient. 23 defendants, so as to sustain a money judgment, must be based upon personal
service of summons within the state which renders the judgment. 35
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 For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36 contended: "The
summons within the state is essential to the acquisition of jurisdiction over her person. question of Hong Kong court's 'want of jurisdiction' is therefore a triable issue if it is to
24 This method of service is possible if such defendant is physically present in the be pleaded by the defendant to 'repel' the foreign judgment. Facts showing
country. If he is not found therein, the court cannot acquire jurisdiction over his person jurisdictional lack (e.g. that the Hong Kong suit was in personam, that defendant was
and therefore cannot validly try and decide the case against him. 25 An exception not a resident of Hong Kong when the suit was filed or that he did not voluntarily
was laid down in Gemperle v. Schenker 26 wherein a non-resident was served with submit to the Hong Kong court's jurisdiction) should be alleged and proved by the
summons through his wife, who was a resident of the Philippines and who was his defendant." 37
representatives and attorney-in-fact in a prior civil case filed by him; moreover, the
second case was a mere offshoot of the first case. In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS argued that the lack
of jurisdiction over his person was corroborated by ASIAVEST's allegation in the
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person complaint that he "has his residence at No. 6, 1st St., New Manila, Quezon City,
of the defendant is not a prerequisite to confer jurisdiction on the court provided that Philippines." He then concluded that such judicial admission amounted to evidence
the court acquires jurisdiction over the res. Nonetheless summons must be served that he was and is not a resident of Hong Kong.
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 Significantly, in the pre-trial conference, the parties came up with stipulations of facts,
a non-resident who is not found in the Philippines and (1) the action affects the among which was that "the residence of defendant, Antonio Heras, is New Manila,
personal status of the plaintiff; (2) the action relates to, or the subject matter of which Quezon City." 39

35
We note that the residence of HERAS insofar as the action for the enforcement of the the undisputed fact remains that he left Hong Kong not only "temporarily" but "for
Hong Kong court judgment is concerned, was never in issue. He never challenged good."
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 IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the
question the jurisdiction of the Philippine court over his person on the ground of petition in this case and AFFIRMING the assailed judgment of the Court of Appeals in
invalid service of summons. What was in issue was his residence as far as the Hong CA-G.R. CV No. 29513.
Kong suit was concerned. We therefore conclude that the stipulated fact that HERAS
"is a resident of New 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 defendant's attorney-in-fact at the
latter's 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,

36
ii. Jurisdiction Over the Subject Matter and Issues of the Case that it is a personal one and therefore transferable, his successors in interest have
failed to secure the substitution of said deceased by his legal representative under
G.R. No. L-1403 October 29, 1948 section 17, Rule 3. These reasons or grounds do not deserve any serious
consideration, not only because they are without merits, but because the Court of
VICENTE CALUAG and JULIANA GARCIA, petitioners, First Instance of Bulacan, having jurisdiction to render that judgment, the latter cannot
vs. be disobeyed however erroneous it may be (Compañia General de Tabacos vs.
POTENCIANO PECSON and ANGEL H. MOJICA, Judges of the Court of First Alhambra Cigar & Cigarette Mfg. Co., 33 Phil., 503; Golding vs. Balatbat, 36 Phil.,
Instance of Bulacan, and LEON ALEJO, respondents. 941). And this Court cannot in this proceeding correct any error which may have been
committed by the lower court.
Marcial G. Mendiola for petitioners.
Antonio Gonzalez for respondent L. Alejo. However, although not alleged, we may properly take judicial notice of the fact that
The respondent Judge Pecson in his own behalf. the respondent Judges have acted without jurisdiction in proceeding against and
declaring the petitioners guilty of contempt of court.
FERIA, J.:
The contempt supposed to have been committed by the petitioners is not a direct
This is a petition for certiorari and prohibition filed by the petitioners on the ground
contempt under section 1, Rule 64, for it is not a misbehavior in the presence of or so
that the respondent judge acted without or in excess of the jurisdiction of the court in
near a court or judge as to interrupt the administration of justice. It is an indirect
rendering the resolution dated April 1, 1947, which declares the petitioners guilty of
contempt or disobedience of a lawful order of the court, under section 3, Rule 64, of
contempt of court for not complying or performing the order of the court of January 7,
the Rules of Court. According to sections 4 and 5 of said rule, where a contempt
1947, in case No. 5486 of the Court of First Instance of Bulacan, requiring the
under section 3 has been committed against a superior court or judge the charge may
petitioners to execute a deed of sale in favor of plaintiff over one-half of the land pro
be filed with such superior court, and the accused put under custody; but if the
indiviso in question, within ten days from the receipt of copy of said resolution, and
hearing is ordered to be had forthwith, the accused may be released from custody
which orders that the petitioners be imprisoned until they perform the said act.
upon filing a bond in an amount to be fixed by the court for his appearance to answer
The first ground on which the petition is based is that the judgment of the court which the charge. From the record it appears that no charge for contempt was filed against
the petitioners are ordered to perform has not yet become final. This ground is the petitioners nor was a trial held. The only proceeding had in this case which led to
unfounded. From the pleadings and annexes it appears that the judgment of the lower the conviction of the defendants are: the order of January 7, 1947, issued by the
against the petitioners was appealed to the Court of Appeals and was affirmed by the lower court requiring the defendants to execute the deed of conveyance as direct in
latter in its decision promulgated on May 30, 1944; that the petition to appeal to the the judgment within ten days from the receipt of the copy of said order, with the
Supreme Court by certiorari filed by the petitioners was denied on July 24, 1944; that admonition that upon failure to do so said petitioners will be dealt with for contempt of
a motion for reconsideration filed by the petitioners was also denied on August 21, court; the motion of March 21, 1947, filed by the attorney for the respondent Leon
1944; that the record of the case, having been destroyed during the liberation, was Alejo, administrator of the estate of Fortunato Alejo, that the petitioners be punished
reconstituted; that on September 24, 1945, the Deputy Clerk of this Court wrote a for contempt; and the resolution of the court of April 1, 1947, denying the second
letter to and notified the petitioners of the resolution of the Court declaring said record motion for reconsideration of March 17, 1947, of the order of January 7, 1947, filed by
reconstituted, together with the copies of the decision of the Court of Appeals and the petitioners, and ordering the petitioners to be imprisoned in the provincial jail until
resolutions of the Supreme Court during Japanese occupation of June 24 and August they have complied with the order of the court above mentioned.
21, 1944; and that on October 23, 1946, the clerk of Court of First Instance of
It is well settled that jurisdiction of the subject matter of a particular case is something
Bulacan notified the attorneys for both parties of the said decision of the Court of
more than the general power conferred by law upon a court to take cognizance of
Appeals and resolutions of the Supreme Court. There can be no question, therefore,
cases of the general class to which the particular case belongs. It is not enough that a
that the judgment of the Court of First Instance above-mentioned, as affirmed by the
court has power in abstract to try and decide the class of litigations to which a case
Court of Appeals, has become final and executory.
belongs; it is necessary that said power be properly invoked, or called into activity, by
The other two grounds alleged by the petitioners in support of the present petition for the filing of a petition, complaint or other appropriate pleading. A Court of First
certiorari are: that plaintiff's action abated or was extinguished upon the death of the Instance has an abstract jurisdiction or power to try and decide criminal cases for
plaintiff Fortunato Alejo, because his right of legal redemption was a personal one, homicide committed within its territorial jurisdiction; but it has no power to try and
and therefore not transferable to his successors in interest; and that, even assuming decide a criminal case against a person for homicide committed within its territory,

37
unless a complaint or information against him be filed with the said court. And it has render. A sentence which imposes upon the defendant in a criminal prosecution a
also power to try civil cases involving title to real estate situated within its district; but penalty different from or in excess of the maximum which the court is authorized by
it has no jurisdiction to take cognizance of a dispute or controversy between two law to impose for the offense of which the defendant was convicted, is void for want
persons over title of real property located in his province, unless a proper complaint or excess of jurisdiction, as to the excess in the latter case. And a judgment of
be filed with its court. So, although the Court of First Instance of Bulacan has power imprisonment which the court has no constitutional or statutory power to impose, as in
conferred by law to punish as guilty of indirect contempt a party who disobeys its the present case, may also be collaterally attacked for want or rather in excess of
order or judgment, it did not have or acquire jurisdiction of the particular case under jurisdiction.
consideration to declare the petitioners guilty of indirect contempt, and order their
confinement until they have executed the deed of conveyance in question, because In Cruz vs. Director of Prisons (17 Phil., 269, 272, 273), this Court said the following
neither a charge has been filed against them nor a hearing thereof held as required applicable to punishment imposed for contempt of court:
by law.
. . . The courts uniformly hold that where a sentence imposes a punishment in excess
The respondent Judge Angel Mojica acted not only without jurisdiction in proceeding of the power of the court to impose, such sentence is void as to the excess, and some
against and declaring the petitioners guilty of contempt, but also in excess of of the courts hold that the sentence is void in toto; but the weight of authority sustains
jurisdiction in ordering the confinement of the petitioners, because it had no power to the proposition that such a sentence is void only as to the excess imposed in case the
impose such punishment upon the latter. parts are separable, the rule being that the petitioner is not entitled to his discharge
on a writ of habeas corpus unless he has served out so much of the sentence as was
The respondent judge has no power under the law to order the confinement of the valid. (Ex parte Erdmann, 88 Cal., 579; Lowrey vs. Hogue, 85 Cal., 600; Armstrong
petitioners until they have compiled with the order of the court. Section 9, Rule 39, in vs. People, 37 Ill., 459; State vs. Brannon, 34 La Ann., 942; People vs. Liscomb, 19
connection with section 7 of Rule 64, provides that if a person is required by a Am. Rep., 211; In re Taylor, 7 S. D., 382, 45 L. R. A., 136; Ex parte Mooney, 26 W.
judgment or order of the court to perform any other act than the payment of money or Va., 36, 53 Am. Rep., 59; U. S. vs. Pridgeon, 153 U. S., 48; In re Graham, 138 U. S.,
sale or delivery of real or personal property, and said person disobeys such judgment 461.)
or order while it is yet in his power to perform it, he may be punished for contempt
and imprisoned until he performs said order. This provision is applicable only to In the present case, in view of the failure of the petitioners to execute the deed of
specific acts other than those provided for or covered by section 10 of the same Rule, conveyance directed in the judgment of the court, the respondent may, under section
that is, it refers to a specific act which the party or person must personally do, 10, Rule 39, either order its execution by some other person appointed or designated
because his personal qualification and circumstances have been taken into by the court at the expense of the petitioners, or enter a judgment divesting the title of
consideration in accordance with the provision of article 1161 of the Civil Code. But if the petitioner over the property in question and vesting it in Leon Alejo, administrator
a judgment directs a party to execute a conveyance of land or to deliver deeds or of estate of the deceased Fortunato Alejo, and such judgment has the force and
other documents or to perform any specific act which may be performed by some effect of a conveyance executed in due form of law.
other person, or in some other way provided by law with the same effect, as in the
present case, section 10, and not said section 9 of Rule 39 applies; and under the In view of the foregoing, the order of the court of April 7, 1947, ordering the
provision of said section 10, the court may direct the act to be done at the cost of the confinement of the petitioners in the provincial jail until they have complied with the
disobedient party, by some other person appointed or designated by the court, and order of the court, is set aside without costs. So ordered.
the act when so done shall have like effect as if done by the party himself.

It is also well settled by the authorities that a judgment may be void for want of power
to render the particular judgment, though the court may have had jurisdiction over the
subject matter and the parties. A wrong decision made within the limits of the court's
authority is erroneous and may be corrected on appeal or other direct review, but a
wrong, or for that matter a correct, decision is void, and may be set aside either
directly or collaterally, where the court exceeds its jurisdiction and power in rendering
it. Hence though the court has acquired jurisdiction over the subject matter and the
particular case has been submitted properly to it for hearing and decision, it will
overstep its jurisdiction if it renders a judgment which it has no power under the law to

38
ii. Jurisdiction Over the Subject Matter and Issues of the Case Arthur Perkins, filed a reply and an answer in which he sets up several defenses to
the enforcement in this jurisdiction of the judgment of the Supreme Court of the State
G.R. No. 47517 June 27, 1941 of New York above alluded to. Instead of demurring to the reply on either of the two
grounds specified in section 100 of the Code of Civil Procedure, petitioner, Idonah
IDONAH SLADE PERKINS, petitioner, Slade Perkins, on June 5, 1940, filed a demurrer thereto on the ground that "the court
vs. has no jurisdiction of the subject of the action," because the alleged judgment of the
MAMERTO ROXAS, ET AL., respondents. Supreme Court of the State of New York is res judicata.

Alva J. Hill for petitioner. Petitioner's demurrer having been overruled, she now filed in this court a petition
DeWitt, Perkins & Ponce Enrile for respondent Judge and respondent Perkins. entitled "Certiorari, Prohibition and Mandamus," alleging that "the respondent judge is
Ross, Lawrence, Selph & Carrascoso, Jr., for respondent Benguet Consolidated about to and will render judgment in the above-mentioned case disregarding the
Mining Co. constitutional rights of this petitioner; contrary to and annulling the final, subsisting,
valid judgment rendered and entered in this petitioner's favor by the courts of the
LAUREL, J.:
State of New York, ... which decision is res judicata on all the questions constituting
On July 5, 1938, the respondent Eugene Arthur Perkins, filed a complaint in the Court the subject matter of civil case No. 53317, of the Court of First Instance of Manila;
of First Instance of Manila against the Benguet Consolidated Mining Company for the and which New York judgment the Court of First Instance of Manila is without
recovery of the sum of P71,379.90, consisting of dividends which have been declared jurisdiction to annul, amend, reverse, or modify in any respect whatsoever"; and
and made payable on 52,874 shares of stock registered in his name, payment of praying that the order of the respondent judge overruling the demurrer be annulled,
which was being withheld by the company, and for the recognition of his right to the and that he and his successors be permanently prohibited from taking any action on
control and disposal of said shares, to the exclusion of all others. To the complaint, the case, except to dismiss the same.
the company filed its answer, alleging, by way of defense, that the withholding of
The only question here to be determined, therefore, is whether or not, in view of the
plaintiff's right to the disposal and control of the shares was due to certain demands
alleged judgment entered in favor of the petitioner by the Supreme Court of New
made with respect to said shares by the petitioner herein. Idonah Slade Perkins, and
York, and which is claimed by her to be res judicata on all questions raised by the
by one George H. Engelhard. The answer prays that the adverse claimants be made
respondent, Eugene Arthur Perkins, in civil case No. 53317 of the Court of First
parties to the action and served with notice thereof by publication, and that thereafter
Instace of Manila, the local court has jurisdiction over the subject matter of the action
all such parties be required to interplead and settle the rights among themselves.
in the said case. By jurisdiction over the subject matter is meant the nature of the
On September 5, 1938, the trial court ordered the respondent, Eugene Arthur cause of action and of the relief sought, and this is conferred by the sovereign
Perkins, to include in his complaint as parties defendants petitioner, Idonah Slade authority which organizes the court, and is to be sought for in general nature of its
Perkins, and George H. Engelhard. The complaint was accordingly amended and in powers, or in authority specially conferred. In the present case, the amended
addition to the relief prayed for in the original complaint, respondent Perkins prayed complaint filed by the respondent, Eugene Arthur Perkins, in the court below alleged
that petitioner Idonah Slade Perkins and George H. Engelhard be adjudged without the ownership in himself of the conjugal partnership between him and his wife, Idonah
interest in the shares of stock in question and excluded from any claim they assert Slade Perkins; that the petitioner, Idonah Slade Perkins, and George H. Engelhard
thereon. Thereafter, summons by publication were served upon the non-resident assert claims to and interests in the said stock adverse to Eugene Arthur Perkins; that
defendants, Idonah Slade Perkins and George H. Engelhard, pursuant to the order of such claims are invalid, unfounded, and made only for the purpose of vexing,
the trial court. On December 9, 1938, Engelhard filed his answer to the amended hindering and delaying Eugene Arthur Perkins in the exercise of the lawful control
complaint, and on January 8, 1940, petitioner's objection to the court's jurisdiction over and use of said shares and dividends accorded to him and by law and by
over her person having been overruled by the trial court and by this court in G. R. No. previous orders and decrees of this court; and the said amended complaint prays,
46831, petitioner filed her answer with a cross-complaint in which she sets up a inter alia, "that defendant Benguet Consolidated Mining Company be required and
judgment allegedly obtained by her against respondent, Eugene Arthur Perkins, from ordered to recognize the right of the plaintiff to the control and disposal of said shares
the Supreme Court of the State of New York, wherein it is declared that she is the so standing in his name to the exclusion of all others; that the additional defendants,
sole legal owner and entitled to the possession and control of the shares of stock in Idonah Slade Perkins and George H. Engelhard, be each held to have no interest or
question together with all the cash dividends declared thereon by the Benguet claim in the subject matter of the controversy between plaintiff and defendant
Consolidated Mining Company, and prays for various affirmative reliefs against the Benguet Consolidated Mining Company, or in or under the judgment to be rendered
respondent. To the answer and cross-complaint thus filed, the respondent, Eugene herein and that by said judgment they, and each of them be excluded therefrom; and

39
that the plaintiff be awarded the costs of this suit and general relief." The respondent's alleged judgment of the Supreme Court of the State of New York and asked the court
action, therefore, calls for the adjudication of title to certain shares of stock of the below to render judgment enforcing that New York judgment, and to issue execution
Benguet Consolidated Mining Company, and the granting of affirmative reliefs, which thereon. This is a form of action recognized by section 309 of the Code of Civil
fall within the general jurisdiction of the Court of First Instance of Manila. (Vide: sec. Procedure (now section 47, Rule 39, Rules of Court) and which falls within the
146, et seq., Adm. Code, as amended by Commonwealth Act No. 145; sec. 56, Act general jurisdiction of the Court of First Instance of Manila, to adjudicate, settled and
No. 136, as amended by Act No. 400.) determine.

Similarly, the Court of First Instance of Manila is empowered to adjudicate the several The petitioner expresses the fear that the respondent judge may render judgment
demands contained in petitioner's cross-complaint. The cross-complaint sets up a "annulling the final, subsisting, valid judgment rendered and entered in this
judgment allegedly recovered by Idonah Slade Perkins against Eugene Arthur petitioner's favor by the courts of the State of New York, ... which decision is res
Perkins in the Supreme Court of New York and by way of relief prays: judicata on all the questions constituting the subject matter of civil case No. 53317,"
and argues on the assumption that the respondent judge is without jurisdiction to take
(1) Judgment against the plaintiff Eugene Arthur Perkins in the sum of one hundred cognizance of the cause. Whether or not the respondent judge in the course of the
eighty-five thousand and four hundred dollars ($185,400), representing cash proceedings will give validity and efficacy to the New York judgment set up by the
dividends paid to him by defendant Benguet Consolidated Mining Co. from February, petitioner in her cross-complaint is a question that goes to the merits of the
1930, up to and including the dividend of March 30, 1937. controversy and relates to the rights of the parties as between each other, and not to
the jurisdiction or power of the court. The test of jurisdiction is whether or not the
(2) That plaintiff Eugene Arthur Perkins be required to deliver to this defendant the tribunal has power to enter upon the inquiry, not whether its conclusion in the course
certificates representing the 48,000 shares of capital stock of Benguet Consolidated of it is right or wrong. If its decision is erroneous, its judgment case be reversed on
Mining Co. issued as a stock dividend on the 24,000 shares owned by this defendant appeal; but its determination of the question, which the petitioner here anticipates and
as described in the judgment Exhibit 1-A. seeks to prevent, is the exercise by that court — and the rightful exercise — of its
jurisdiction.
(3) That this defendant recover under that judgment Exhibit 1-A interest upon the
amount of each cash dividend referred to in that judgment received by plaintiff The petition is, therefore, hereby denied, with costs against the petitioner. So ordered.
Eugene Arthur Perkins from February, 1930, to and including the dividend of March
30, 1937, from the date of payment of each of such dividends at the rate of 7 per cent
per annum until paid.

(4) That this defendant recover of plaintiff her costs and disbursements in that New
York action amounting to the sum of one thousand five hundred eighty-four and 20/00
dollars ($1,584.20), and the further sum of two thousand dollars ($2,000) granted her
in that judgment Exhibit 1-A as an extra allowance, together with interest.

(5) For an order directing an execution to be issued in favor of this defendant and
against the plaintiff for amounts sufficient to satisfy the New York judgment Exhibit 1-
A in its entirety, and against the plaintiff and the defendant Benguet Consolidated
Mining Co. for such other amounts prayed for herein as this court may find to be due
and payable by each of them; and ordering them to comply with all other orders which
this court may issue in favor of the defendant in this case.

(6) For the costs of this action, and

(7) For such other relief as may be appropriate and proper in the premises.

In other words, Idonah Slade Perkins in her cross-complaint brought suit against
Eugene Arthur Perkins and the Benguet Consolidated Mining Company upon the

40
ii. Jurisdiction Over the Subject Matter and Issues of the Case On May 16, 2005, summons, together with a copy of the complaint, was served on
the respondent through Violeta Echevarria, General Manager of Euro-Philippine
G.R. No. 171092 March 15, 2010 Airline Services, Inc.3

EDNA DIAGO LHUILLIER, Petitioner, On May 30, 2005, respondent, by way of special appearance through counsel, filed a
vs. Motion to Dismiss4 on grounds of lack of jurisdiction over the case and over the
BRITISH AIRWAYS, Respondent. person of the respondent. Respondent alleged that only the courts of London, United
Kingdom or Rome, Italy, have jurisdiction over the complaint for damages pursuant to
DECISION the Warsaw Convention,5 Article 28(1) of which provides:
DEL CASTILLO, J.: An action for damages must be brought at the option of the plaintiff, either before the
court of domicile of the carrier or his principal place of business, or where he has a
Jurisdictio est potestas de publico introducta cum necessitate juris dicendi.
place of business through which the contract has been made, or before the court of
Jurisdiction is a power introduced for the public good, on account of the necessity of
the place of destination.
dispensing justice.1
Thus, since a) respondent is domiciled in London; b) respondent’s principal place of
Factual Antecedents
business is in London; c) petitioner bought her ticket in Italy (through Jeepney Travel
On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint2 for damages S.A.S, in Rome);6 and d) Rome, Italy is petitioner’s place of destination, then it follows
against respondent British Airways before the Regional Trial Court (RTC) of Makati that the complaint should only be filed in the proper courts of London, United
City. She alleged that on February 28, 2005, she took respondent’s flight 548 from Kingdom or Rome, Italy.
London, United Kingdom to Rome, Italy. Once on board, she allegedly requested
Likewise, it was alleged that the case must be dismissed for lack of jurisdiction over
Julian Halliday (Halliday), one of the respondent’s flight attendants, to assist her in
the person of the respondent because the summons was erroneously served on
placing her hand-carried luggage in the overhead bin. However, Halliday allegedly
Euro-Philippine Airline Services, Inc. which is not its resident agent in the Philippines.
refused to help and assist her, and even sarcastically remarked that "If I were to help
all 300 passengers in this flight, I would have a broken back!" On June 3, 2005, the trial court issued an Order requiring herein petitioner to file her
Comment/Opposition on the Motion to Dismiss within 10 days from notice thereof,
Petitioner further alleged that when the plane was about to land in Rome, Italy,
and for respondent to file a Reply thereon.7 Instead of filing a Comment/Opposition,
another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out from among all
petitioner filed on June 27, 2005, an Urgent Ex-Parte Motion to Admit Formal
the passengers in the business class section to lecture on plane safety. Allegedly,
Amendment to the Complaint and Issuance of Alias Summons.8 Petitioner alleged
Kerrigan made her appear to the other passengers to be ignorant, uneducated,
that upon verification with the Securities and Exchange Commission, she found out
stupid, and in need of lecturing on the safety rules and regulations of the plane.
that the resident agent of respondent in the Philippines is Alonzo Q. Ancheta.
Affronted, petitioner assured Kerrigan that she knew the plane’s safety regulations
Subsequently, on September 9, 2005, petitioner filed a Motion to Resolve Pending
being a frequent traveler. Thereupon, Kerrigan allegedly thrust his face a mere few
Incident and Opposition to Motion to Dismiss.9
centimeters away from that of the petitioner and menacingly told her that "We don’t
like your attitude." Ruling of the Regional Trial Court

Upon arrival in Rome, petitioner complained to respondent’s ground manager and On October 14, 2005, the RTC of Makati City, Branch 132, issued an Order 10 granting
demanded an apology. However, the latter declared that the flight stewards were respondent’s Motion to Dismiss. It ruled that:
"only doing their job."
The Court sympathizes with the alleged ill-treatment suffered by the plaintiff.
Thus, petitioner filed the complaint for damages, praying that respondent be ordered However, our Courts have to apply the principles of international law, and are bound
to pay ₱5 million as moral damages, ₱2 million as nominal damages, ₱1 million as by treaty stipulations entered into by the Philippines which form part of the law of the
exemplary damages, ₱300,000.00 as attorney’s fees, ₱200,000.00 as litigation land. One of this is the Warsaw Convention. Being a signatory thereto, the Philippines
expenses, and cost of the suit. adheres to its stipulations and is bound by its provisions including the place where
actions involving damages to plaintiff is to be instituted, as provided for under Article

41
28(1) thereof. The Court finds no justifiable reason to deviate from the indicated not predicated on the contract of carriage, petitioner asserts that she has the option to
limitations as it will only run counter to the provisions of the Warsaw Convention. Said pursue this case in this jurisdiction pursuant to Philippine laws.
adherence is in consonance with the comity of nations and deviation from it can only
be effected through proper denunciation as enunciated in the Santos case (ibid). Respondent’s Arguments
Since the Philippines is not the place of domicile of the defendant nor is it the
principal place of business, our courts are thus divested of jurisdiction over cases for In contrast, respondent maintains that petitioner’s claim for damages fell within the
damages. Neither was plaintiff’s ticket issued in this country nor was her destination ambit of Article 28(1) of the Warsaw Convention. As such, the same can only be filed
Manila but Rome in Italy. It bears stressing however, that referral to the court of before the courts of London, United Kingdom or Rome, Italy.
proper jurisdiction does not constitute constructive denial of plaintiff’s right to have
Our Ruling
access to our courts since the Warsaw Convention itself provided for jurisdiction over
cases arising from international transportation. Said treaty stipulations must be The petition is without merit.
complied with in good faith following the time honored principle of pacta sunt
servanda. The Warsaw Convention has the force and effect of law in this country.

The resolution of the propriety of service of summons is rendered moot by the Court’s It is settled that the Warsaw Convention has the force and effect of law in this country.
want of jurisdiction over the instant case. In Santos III v. Northwest Orient Airlines,12 we held that:

WHEREFORE, premises considered, the present Motion to Dismiss is hereby The Republic of the Philippines is a party to the Convention for the Unification of
GRANTED and this case is hereby ordered DISMISSED. Certain Rules Relating to International Transportation by Air, otherwise known as the
Warsaw Convention. It took effect on February 13, 1933. The Convention was
Petitioner filed a Motion for Reconsideration but the motion was denied in an Order11 concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The
dated January 4, 2006. Philippine instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on November 9,
Petitioner now comes directly before us on a Petition for Review on Certiorari on pure
1950. The Convention became applicable to the Philippines on February 9, 1951. On
questions of law, raising the following issues:
September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201,
Issues declaring our formal adherence thereto, "to the end that the same and every article
and clause thereof may be observed and fulfilled in good faith by the Republic of the
I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A Philippines and the citizens thereof."
TORTIOUS CONDUCT COMMITTED AGAINST A FILIPINO CITIZEN AND
RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER TRAVELLING The Convention is thus a treaty commitment voluntarily assumed by the Philippine
BEYOND THE TERRITORIAL LIMIT OF ANY FOREIGN COUNTRY; AND THUS IS government and, as such, has the force and effect of law in this country. 13
OUTSIDE THE AMBIT OF THE WARSAW CONVENTION.
The Warsaw Convention applies because the air travel, where the alleged tortious
II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN FILING conduct occurred, was between the United Kingdom and Italy, which are both
ITS MOTION TO DISMISS BASED ON LACK OF JURISDICTION OVER THE signatories to the Warsaw Convention.
SUBJECT MATTER OF THE CASE AND OVER ITS PERSON MAY BE DEEMED AS
Article 1 of the Warsaw Convention provides:
HAVING IN FACT AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF
THE LOWER COURT, ESPECIALLY SO, WHEN THE VERY LAWYER ARGUING 1. This Convention applies to all international carriage of persons, luggage or goods
FOR IT IS HIMSELF THE RESIDENT AGENT OF THE CARRIER. performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft
performed by an air transport undertaking.
Petitioner’s Arguments
2. For the purposes of this Convention the expression "international carriage" means
Petitioner argues that her cause of action arose not from the contract of carriage, but
any carriage in which, according to the contract made by the parties, the place of
from the tortious conduct committed by airline personnel of respondent in violation of
departure and the place of destination, whether or not there be a break in the carriage
the provisions of the Civil Code on Human Relations. Since her cause of action was
or a transhipment, are situated either within the territories of two High Contracting

42
Parties, or within the territory of a single High Contracting Party, if there is an agreed We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction
stopping place within a territory subject to the sovereignty, suzerainty, mandate or over the case filed by the petitioner.
authority of another Power, even though that Power is not a party to this Convention.
A carriage without such an agreed stopping place between territories subject to the Santos III v. Northwest Orient Airlines18 applies in this case.
sovereignty, suzerainty, mandate or authority of the same High Contracting Party is
not deemed to be international for the purposes of this Convention. (Emphasis Petitioner contends that Santos III v. Northwest Orient Airlines 19 cited by the trial court
supplied) is inapplicable to the present controversy since the facts thereof are not similar with
the instant case.
Thus, when the place of departure and the place of destination in a contract of
carriage are situated within the territories of two High Contracting Parties, said We are not persuaded.
carriage is deemed an "international carriage". The High Contracting Parties referred
In Santos III v. Northwest Orient Airlines,20 Augusto Santos III, a resident of the
to herein were the signatories to the Warsaw Convention and those which
Philippines, purchased a ticket from Northwest Orient Airlines in San Francisco, for
subsequently adhered to it.14
transport between San Francisco and Manila via Tokyo and back to San Francisco.
In the case at bench, petitioner’s place of departure was London, United Kingdom He was wait-listed in the Tokyo to Manila segment of his ticket, despite his prior
while her place of destination was Rome, Italy.15 Both the United Kingdom16 and reservation. Contending that Northwest Orient Airlines acted in bad faith and
Italy17 signed and ratified the Warsaw Convention. As such, the transport of the discriminated against him when it canceled his confirmed reservation and gave his
petitioner is deemed to be an "international carriage" within the contemplation of the seat to someone who had no better right to it, Augusto Santos III sued the carrier for
Warsaw Convention. damages before the RTC. Northwest Orient Airlines moved to dismiss the complaint
on ground of lack of jurisdiction citing Article 28(1) of the Warsaw Convention. The
Since the Warsaw Convention applies in the instant case, then the jurisdiction over trial court granted the motion which ruling was affirmed by the Court of Appeals.
the subject matter of the action is governed by the provisions of the Warsaw When the case was brought before us, we denied the petition holding that under
Convention. Article 28(1) of the Warsaw Convention, Augusto Santos III must prosecute his claim
in the United States, that place being the (1) domicile of the Northwest Orient Airlines;
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for (2) principal office of the carrier; (3) place where contract had been made (San
damages before – Francisco); and (4) place of destination (San Francisco).21

1. the court where the carrier is domiciled; We further held that Article 28(1) of the Warsaw Convention is jurisdictional in
character. Thus:
2. the court where the carrier has its principal place of business;
A number of reasons tends to support the characterization of Article 28(1) as a
3. the court where the carrier has an establishment by which the contract has been jurisdiction and not a venue provision. First, the wording of Article 32, which indicates
made; or the places where the action for damages "must" be brought, underscores the
mandatory nature of Article 28(1). Second, this characterization is consistent with one
4. the court of the place of destination. of the objectives of the Convention, which is to "regulate in a uniform manner the
conditions of international transportation by air." Third, the Convention does not
In this case, it is not disputed that respondent is a British corporation domiciled in
contain any provision prescribing rules of jurisdiction other than Article 28(1), which
London, United Kingdom with London as its principal place of business. Hence, under
means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to
the first and second jurisdictional rules, the petitioner may bring her case before the
Article 28(1). In fact, the last sentence of Article 32 specifically deals with the
courts of London in the United Kingdom. In the passenger ticket and baggage check
exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left
presented by both the petitioner and respondent, it appears that the ticket was issued
to the will of the parties regardless of the time when the damage occurred.
in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the
option to bring her case before the courts of Rome in Italy. Finally, both the petitioner xxxx
and respondent aver that the place of destination is Rome, Italy, which is properly
designated given the routing presented in the said passenger ticket and baggage In other words, where the matter is governed by the Warsaw Convention, jurisdiction
check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. takes on a dual concept. Jurisdiction in the international sense must be established in

43
accordance with Article 28(1) of the Warsaw Convention, following which the former and the airline’s flight attendant during an international flight resulting to a
jurisdiction of a particular court must be established pursuant to the applicable heated exchange which included insults and profanity. The United States Court of
domestic law. Only after the question of which court has jurisdiction is determined will Appeals (9th Circuit) held that the "passenger's action against the airline carrier
the issue of venue be taken up. This second question shall be governed by the law of arising from alleged confrontational incident between passenger and flight attendant
the court to which the case is submitted.22 on international flight was governed exclusively by the Warsaw Convention, even
though the incident allegedly involved intentional misconduct by the flight
Contrary to the contention of petitioner, Santos III v. Northwest Orient Airlines 23 is attendant."41
analogous to the instant case because (1) the domicile of respondent is London,
United Kingdom;24 (2) the principal office of respondent airline is likewise in London, In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action against the
United Kingdom;25 (3) the ticket was purchased in Rome, Italy;26 and (4) the place of airline in the state court, arising from a confrontation with the flight attendant during
destination is Rome, Italy.27 In addition, petitioner based her complaint on Article an international flight to Mexico. The United States Court of Appeals (9th Circuit) held
217628 of the Civil Code on quasi-delict and Articles 1929 and 2130 of the Civil Code that the "Warsaw Convention governs actions arising from international air travel and
on Human Relations. In Santos III v. Northwest Orient Airlines, 31 Augusto Santos III provides the exclusive remedy for conduct which falls within its provisions." It further
similarly posited that Article 28 (1) of the Warsaw Convention did not apply if the held that the said Convention "created no exception for an injury suffered as a result
action is based on tort. Hence, contrary to the contention of the petitioner, the factual of intentional conduct" 43 which in that case involved a claim for intentional infliction of
setting of Santos III v. Northwest Orient Airlines32 and the instant case are parallel on emotional distress.
the material points.
It is thus settled that allegations of tortious conduct committed against an airline
Tortious conduct as ground for the petitioner’s complaint is within the purview of the passenger during the course of the international carriage do not bring the case
Warsaw Convention. outside the ambit of the Warsaw Convention.

Petitioner contends that in Santos III v. Northwest Orient Airlines, 33 the cause of Respondent, in seeking remedies from the trial court through special appearance of
action was based on a breach of contract while her cause of action arose from the counsel, is not deemed to have voluntarily submitted itself to the jurisdiction of the
tortious conduct of the airline personnel and violation of the Civil Code provisions on trial court.
Human Relations.34 In addition, she claims that our pronouncement in Santos III v.
Northwest Orient Airlines35 that "the allegation of willful misconduct resulting in a tort Petitioner argues that respondent has effectively submitted itself to the jurisdiction of
is insufficient to exclude the case from the comprehension of the Warsaw the trial court when the latter stated in its Comment/Opposition to the Motion for
Convention," is more of an obiter dictum rather than the ratio decidendi.36 She Reconsideration that "Defendant [is at a loss] x x x how the plaintiff arrived at her
maintains that the fact that said acts occurred aboard a plane is merely incidental, if erroneous impression that it is/was Euro-Philippines Airlines Services, Inc. that has
not irrelevant.37 been making a special appearance since x x x British Airways x x x has been clearly
specifying in all the pleadings that it has filed with this Honorable Court that it is the
We disagree with the position taken by the petitioner. Black defines obiter dictum as one making a special appearance."44
"an opinion entirely unnecessary for the decision of the case" and thus "are not
binding as precedent."38 In Santos III v. Northwest Orient Airlines,39 Augusto Santos In refuting the contention of petitioner, respondent cited La Naval Drug Corporation v.
III categorically put in issue the applicability of Article 28(1) of the Warsaw Convention Court of Appeals45 where we held that even if a party "challenges the jurisdiction of
if the action is based on tort. the court over his person, as by reason of absence or defective service of summons,
and he also invokes other grounds for the dismissal of the action under Rule 16, he is
In the said case, we held that the allegation of willful misconduct resulting in a tort is not deemed to be in estoppel or to have waived his objection to the jurisdiction over
insufficient to exclude the case from the realm of the Warsaw Convention. In fact, our his person."46
ruling that a cause of action based on tort did not bring the case outside the sphere of
the Warsaw Convention was our ratio decidendi in disposing of the specific issue This issue has been squarely passed upon in the recent case of Garcia v.
presented by Augusto Santos III. Clearly, the contention of the herein petitioner that Sandiganbayan,47 where we reiterated our ruling in La Naval Drug Corporation v.
the said ruling is an obiter dictum is without basis. Court of Appeals48 and elucidated thus:

Relevant to this particular issue is the case of Carey v. United Airlines, 40 where the Special Appearance to Question a Court’s Jurisdiction Is Not
passenger filed an action against the airline arising from an incident involving the

44
Voluntary Appearance such is not constitutive of a voluntary submission to the jurisdiction of the
court.1avvphi1
The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure
clearly provides: Thus, it cannot be said that petitioner and her three children voluntarily appeared
before the SB to cure the defective substituted services of summons. They are,
Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action therefore, not estopped from questioning the jurisdiction of the SB over their persons
shall be equivalent to service of summons. The inclusion in a motion to dismiss of nor are they deemed to have waived such defense of lack of jurisdiction.
other grounds aside from lack of jurisdiction over the person of the defendant shall Consequently, there being no valid substituted services of summons made, the SB
not be deemed a voluntary appearance. did not acquire jurisdiction over the persons of petitioner and her children. And
perforce, the proceedings in the subject forfeiture cases, insofar as petitioner and her
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court three children are concerned, are null and void for lack of jurisdiction. (Emphasis
over his person, together with other grounds raised therein, is not deemed to have supplied)
appeared voluntarily before the court. What the rule on voluntary appearance – the
first sentence of the above-quoted rule – means is that the voluntary appearance of In this case, the special appearance of the counsel of respondent in filing the Motion
the defendant in court is without qualification, in which case he is deemed to have to Dismiss and other pleadings before the trial court cannot be deemed to be
waived his defense of lack of jurisdiction over his person due to improper service of voluntary submission to the jurisdiction of the said trial court. We hence disagree with
summons. the contention of the petitioner and rule that there was no voluntary appearance
before the trial court that could constitute estoppel or a waiver of respondent’s
The pleadings filed by petitioner in the subject forfeiture cases, however, do not show objection to jurisdiction over its person.
that she voluntarily appeared without qualification. Petitioner filed the following
pleadings in Forfeiture I: (a) motion to dismiss; (b) motion for reconsideration and/or WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the Regional
to admit answer; (c) second motion for reconsideration; (d) motion to consolidate Trial Court of Makati City, Branch 132, dismissing the complaint for lack of
forfeiture case with plunder case; and (e) motion to dismiss and/or to quash Forfeiture jurisdiction, is AFFIRMED.
I. And in Forfeiture II: (a) motion to dismiss and/or to quash Forfeiture II; and (b)
motion for partial reconsideration.

The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner
solely for special appearance with the purpose of challenging the jurisdiction of the
SB over her person and that of her three children. Petitioner asserts therein that SB
did not acquire jurisdiction over her person and of her three children for lack of valid
service of summons through improvident substituted service of summons in both
Forfeiture I and Forfeiture II. This stance the petitioner never abandoned when she
filed her motions for reconsideration, even with a prayer to admit their attached
Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth affirmative
defenses with a claim for damages. And the other subsequent pleadings, likewise, did
not abandon her stance and defense of lack of jurisdiction due to improper substituted
services of summons in the forfeiture cases. Evidently, from the foregoing Sec. 20,
Rule 14 of the 1997 Revised Rules on Civil Procedure, petitioner and her sons did not
voluntarily appear before the SB constitutive of or equivalent to service of summons.

Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the instant
case. Said case elucidates the current view in our jurisdiction that a special
appearance before the court––challenging its jurisdiction over the person through a
motion to dismiss even if the movant invokes other grounds––is not tantamount to
estoppel or a waiver by the movant of his objection to jurisdiction over his person; and

45
ii. Jurisdiction Over the Subject Matter and Issues of the Case However, gleaned from the Certificate4 executed by the parties on January 22, 1998,
after the installation of the plant, the initial operation could not be conducted as
G.R. No. 143581 January 7, 2008 PGSMC encountered financial difficulties affecting the supply of materials, thus
forcing the parties to agree that KOGIES would be deemed to have completely
KOREA TECHNOLOGIES CO., LTD., petitioner, complied with the terms and conditions of the March 5, 1997 contract.
vs.
HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of For the remaining balance of USD306,000 for the installation and initial operation of
Regional Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL the plant, PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated
MANUFACTURING CORPORATION, respondents. January 30, 1998 for PhP 4,500,000; and (2) BPI Check No. 0316413 dated March
30, 1998 for PhP 4,500,000.5
DECISION
When KOGIES deposited the checks, these were dishonored for the reason
VELASCO, JR., J.: "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES sent a demand letter6 to
PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of
In our jurisdiction, the policy is to favor alternative methods of resolving disputes,
nonpayment. On the same date, the wife of PGSMC’s President faxed a letter dated
particularly in civil and commercial disputes. Arbitration along with mediation,
May 7, 1998 to KOGIES’ President who was then staying at a Makati City hotel. She
conciliation, and negotiation, being inexpensive, speedy and less hostile methods
complained that not only did KOGIES deliver a different brand of hydraulic press from
have long been favored by this Court. The petition before us puts at issue an
that agreed upon but it had not delivered several equipment parts already paid for.
arbitration clause in a contract mutually agreed upon by the parties stipulating that
they would submit themselves to arbitration in a foreign country. Regrettably, instead On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully
of hastening the resolution of their dispute, the parties wittingly or unwittingly funded but the payments were stopped for reasons previously made known to
prolonged the controversy. KOGIES.7

Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their
engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity
manufacturing plants, while private respondent Pacific General Steel Manufacturing and lowered the quality of the machineries and equipment it delivered to PGSMC,
Corp. (PGSMC) is a domestic corporation. and that PGSMC would dismantle and transfer the machineries, equipment, and
facilities installed in the Carmona plant. Five days later, PGSMC filed before the
On March 5, 1997, PGSMC and KOGIES executed a Contract 1 whereby KOGIES
Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No.
would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract
98-03813 against Mr. Dae Hyun Kang, President of KOGIES.
was executed in the Philippines. On April 7, 1997, the parties executed, in Korea, an
Amendment for Contract No. KLP-970301 dated March 5, 19972 amending the terms On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not
of payment. The contract and its amendment stipulated that KOGIES will ship the unilaterally rescind their contract nor dismantle and transfer the machineries and
machinery and facilities necessary for manufacturing LPG cylinders for which equipment on mere imagined violations by KOGIES. It also insisted that their disputes
PGSMC would pay USD 1,224,000. KOGIES would install and initiate the operation should be settled by arbitration as agreed upon in Article 15, the arbitration clause of
of the plant for which PGSMC bound itself to pay USD 306,000 upon the plant’s their contract.
production of the 11-kg. LPG cylinder samples. Thus, the total contract price
amounted to USD 1,530,000. On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June
1, 1998 letter threatening that the machineries, equipment, and facilities installed in
On October 14, 1997, PGSMC entered into a Contract of Lease 3 with Worth the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998,
Properties, Inc. (Worth) for use of Worth’s 5,079-square meter property with a 4,032- KOGIES instituted an Application for Arbitration before the Korean Commercial
square meter warehouse building to house the LPG manufacturing plant. The monthly Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as
rental was PhP 322,560 commencing on January 1, 1998 with a 10% annual amended.
increment clause. Subsequently, the machineries, equipment, and facilities for the
manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as
plant. PGSMC paid KOGIES USD 1,224,000. Civil Case No. 98-1178 against PGSMC before the Muntinlupa City Regional Trial

46
Court (RTC). The RTC granted a temporary restraining order (TRO) on July 4, 1998, On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. 11
which was subsequently extended until July 22, 1998. In its complaint, KOGIES KOGIES denied it had altered the quantity and lowered the quality of the machinery,
alleged that PGSMC had initially admitted that the checks that were stopped were not equipment, and facilities it delivered to the plant. It claimed that it had performed all
funded but later on claimed that it stopped payment of the checks for the reason that the undertakings under the contract and had already produced certified samples of
"their value was not received" as the former allegedly breached their contract by LPG cylinders. It averred that whatever was unfinished was PGSMC’s fault since it
"altering the quantity and lowering the quality of the machinery and equipment" failed to procure raw materials due to lack of funds. KOGIES, relying on Chung Fu
installed in the plant and failed to make the plant operational although it earlier Industries (Phils.), Inc. v. Court of Appeals,12 insisted that the arbitration clause was
certified to the contrary as shown in a January 22, 1998 Certificate. Likewise, without question valid.
KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by
unilaterally rescinding the contract without resorting to arbitration. KOGIES also After KOGIES filed a Supplemental Memorandum with Motion to Dismiss 13 answering
asked that PGSMC be restrained from dismantling and transferring the machinery PGSMC’s memorandum of July 22, 1998 and seeking dismissal of PGSMC’s
and equipment installed in the plant which the latter threatened to do on July 4, 1998. counterclaims, KOGIES, on August 4, 1998, filed its Motion for Reconsideration14 of
the July 23, 1998 Order denying its application for an injunctive writ claiming that the
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was contract was not merely for machinery and facilities worth USD 1,224,000 but was for
not entitled to the TRO since Art. 15, the arbitration clause, was null and void for the sale of an "LPG manufacturing plant" consisting of "supply of all the machinery
being against public policy as it ousts the local courts of jurisdiction over the instant and facilities" and "transfer of technology" for a total contract price of USD 1,530,000
controversy. such that the dismantling and transfer of the machinery and facilities would result in
the dismantling and transfer of the very plant itself to the great prejudice of KOGIES
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim9 asserting as the still unpaid owner/seller of the plant. Moreover, KOGIES points out that the
that it had the full right to dismantle and transfer the machineries and equipment arbitration clause under Art. 15 of the Contract as amended was a valid arbitration
because it had paid for them in full as stipulated in the contract; that KOGIES was not stipulation under Art. 2044 of the Civil Code and as held by this Court in Chung Fu
entitled to the PhP 9,000,000 covered by the checks for failing to completely install Industries (Phils.), Inc.15
and make the plant operational; and that KOGIES was liable for damages amounting
to PhP 4,500,000 for altering the quantity and lowering the quality of the machineries In the meantime, PGSMC filed a Motion for Inspection of Things16 to determine
and equipment. Moreover, PGSMC averred that it has already paid PhP 2,257,920 in whether there was indeed alteration of the quantity and lowering of quality of the
rent (covering January to July 1998) to Worth and it was not willing to further shoulder machineries and equipment, and whether these were properly installed. KOGIES
the cost of renting the premises of the plant considering that the LPG cylinder opposed the motion positing that the queries and issues raised in the motion for
manufacturing plant never became operational. inspection fell under the coverage of the arbitration clause in their contract.

After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an On September 21, 1998, the trial court issued an Order (1) granting PGSMC’s motion
Order denying the application for a writ of preliminary injunction, reasoning that for inspection; (2) denying KOGIES’ motion for reconsideration of the July 23, 1998
PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and RTC Order; and (3) denying KOGIES’ motion to dismiss PGSMC’s compulsory
equipment as shown in the contract such that KOGIES no longer had proprietary counterclaims as these counterclaims fell within the requisites of compulsory
rights over them. And finally, the RTC held that Art. 15 of the Contract as amended counterclaims.
was invalid as it tended to oust the trial court or any other court jurisdiction over any
dispute that may arise between the parties. KOGIES’ prayer for an injunctive writ was On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration17 of the
denied.10 The dispositive portion of the Order stated: September 21, 1998 RTC Order granting inspection of the plant and denying
dismissal of PGSMC’s compulsory counterclaims.
WHEREFORE, in view of the foregoing consideration, this Court believes and so
holds that no cogent reason exists for this Court to grant the writ of preliminary Ten days after, on October 12, 1998, without waiting for the resolution of its October
injunction to restrain and refrain defendant from dismantling the machineries and 2, 1998 urgent motion for reconsideration, KOGIES filed before the Court of Appeals
facilities at the lot and building of Worth Properties, Incorporated at Carmona, Cavite (CA) a petition for certiorari18 docketed as CA-G.R. SP No. 49249, seeking annulment
and transfer the same to another site: and therefore denies plaintiff’s application for a of the July 23, 1998 and September 21, 1998 RTC Orders and praying for the
writ of preliminary injunction. issuance of writs of prohibition, mandamus, and preliminary injunction to enjoin the
RTC and PGSMC from inspecting, dismantling, and transferring the machineries and

47
equipment in the Carmona plant, and to direct the RTC to enforce the specific Hence, we have this Petition for Review on Certiorari under Rule 45.
agreement on arbitration to resolve the dispute.
The Issues
In the meantime, on October 19, 1998, the RTC denied KOGIES’ urgent motion for
reconsideration and directed the Branch Sheriff to proceed with the inspection of the Petitioner posits that the appellate court committed the following errors:
machineries and equipment in the plant on October 28, 1998.19
a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY
Thereafter, KOGIES filed a Supplement to the Petition 20 in CA-G.R. SP No. 49249 AND FACILITIES AS "A QUESTION OF FACT" "BEYOND THE AMBIT OF A
informing the CA about the October 19, 1998 RTC Order. It also reiterated its prayer PETITION FOR CERTIORARI" INTENDED ONLY FOR CORRECTION OF ERRORS
for the issuance of the writs of prohibition, mandamus and preliminary injunction OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
which was not acted upon by the CA. KOGIES asserted that the Branch Sheriff did OF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL
not have the technical expertise to ascertain whether or not the machineries and COURT’S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN
equipment conformed to the specifications in the contract and were properly installed. THE PETITION BELOW;

On November 11, 1998, the Branch Sheriff filed his Sheriff’s Report 21 finding that the b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15
enumerated machineries and equipment were not fully and properly installed. OF THE CONTRACT BETWEEN THE PARTIES FOR BEING "CONTRARY TO
PUBLIC POLICY" AND FOR OUSTING THE COURTS OF JURISDICTION;
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy c. DECREEING PRIVATE RESPONDENT’S COUNTERCLAIMS TO BE ALL
COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND
On May 30, 2000, the CA rendered the assailed Decision 22 affirming the RTC Orders CERTIFICATION OF NON-FORUM SHOPPING;
and dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC
did not gravely abuse its discretion in issuing the assailed July 23, 1998 and d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING
September 21, 1998 Orders. Moreover, the CA reasoned that KOGIES’ contention FOR THE RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE
that the total contract price for USD 1,530,000 was for the whole plant and had not ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT
been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price AN OPPORTUNITY TO CORRECT ITSELF;
of USD 1,224,000, which was for all the machineries and equipment. According to the
CA, this determination by the RTC was a factual finding beyond the ambit of a petition e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21,
for certiorari. 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR
BEING "INTERLOCUTORY IN NATURE;"
On the issue of the validity of the arbitration clause, the CA agreed with the lower
court that an arbitration clause which provided for a final determination of the legal f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC)
rights of the parties to the contract by arbitration was against public policy. PETITION AND, INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY "WITHOUT
MERIT."23
On the issue of nonpayment of docket fees and non-attachment of a certificate of
non-forum shopping by PGSMC, the CA held that the counterclaims of PGSMC were The Court’s Ruling
compulsory ones and payment of docket fees was not required since the Answer with
The petition is partly meritorious.
counterclaim was not an initiatory pleading. For the same reason, the CA said a
certificate of non-forum shopping was also not required. Before we delve into the substantive issues, we shall first tackle the procedural
issues.
Furthermore, the CA held that the petition for certiorari had been filed prematurely
since KOGIES did not wait for the resolution of its urgent motion for reconsideration of The rules on the payment of docket fees for counterclaims
the September 21, 1998 RTC Order which was the plain, speedy, and adequate and cross claims were amended effective August 16, 2004
remedy available. According to the CA, the RTC must be given the opportunity to
correct any alleged error it has committed, and that since the assailed orders were
interlocutory, these cannot be the subject of a petition for certiorari.

48
KOGIES strongly argues that when PGSMC filed the counterclaims, it should have afford adequate and expeditious relief, the Court allows certiorari as a mode of
paid docket fees and filed a certificate of non-forum shopping, and that its failure to do redress.28
so was a fatal defect.
Also, appeals from interlocutory orders would open the floodgates to endless
We disagree with KOGIES. occasions for dilatory motions. Thus, where the interlocutory order was issued without
or in excess of jurisdiction or with grave abuse of discretion, the remedy is certiorari.29
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its
Answer with Compulsory Counterclaim dated July 17, 1998 in accordance with The alleged grave abuse of discretion of the respondent court equivalent to lack of
Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was jurisdiction in the issuance of the two assailed orders coupled with the fact that there
effective at the time the Answer with Counterclaim was filed. Sec. 8 on existing is no plain, speedy, and adequate remedy in the ordinary course of law amply
counterclaim or cross-claim states, "A compulsory counterclaim or a cross-claim that provides the basis for allowing the resort to a petition for certiorari under Rule 65.
a defending party has at the time he files his answer shall be contained therein."
Prematurity of the petition before the CA
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims
against KOGIES, it was not liable to pay filing fees for said counterclaims being Neither do we think that KOGIES was guilty of forum shopping in filing the petition for
compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. certiorari. Note that KOGIES’ motion for reconsideration of the July 23, 1998 RTC
7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now required to Order which denied the issuance of the injunctive writ had already been denied. Thus,
be paid in compulsory counterclaim or cross-claims. KOGIES’ only remedy was to assail the RTC’s interlocutory order via a petition for
certiorari under Rule 65.
As to the failure to submit a certificate of forum shopping, PGSMC’s Answer is not an
initiatory pleading which requires a certification against forum shopping under Sec. While the October 2, 1998 motion for reconsideration of KOGIES of the September
524 of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive pleading, 21, 1998 RTC Order relating to the inspection of things, and the allowance of the
hence, the courts a quo did not commit reversible error in denying KOGIES’ motion to compulsory counterclaims has not yet been resolved, the circumstances in this case
dismiss PGSMC’s compulsory counterclaims. would allow an exception to the rule that before certiorari may be availed of, the
petitioner must have filed a motion for reconsideration and said motion should have
Interlocutory orders proper subject of certiorari been first resolved by the court a quo. The reason behind the rule is "to enable the
lower court, in the first instance, to pass upon and correct its mistakes without the
Citing Gamboa v. Cruz,25 the CA also pronounced that "certiorari and Prohibition are intervention of the higher court."30
neither the remedies to question the propriety of an interlocutory order of the trial
court."26 The CA erred on its reliance on Gamboa. Gamboa involved the denial of a The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant,
motion to acquit in a criminal case which was not assailable in an action for certiorari equipment, and facilities when he is not competent and knowledgeable on said
since the denial of a motion to quash required the accused to plead and to continue matters is evidently flawed and devoid of any legal support. Moreover, there is an
with the trial, and whatever objections the accused had in his motion to quash can urgent necessity to resolve the issue on the dismantling of the facilities and any
then be used as part of his defense and subsequently can be raised as errors on his further delay would prejudice the interests of KOGIES. Indeed, there is real and
appeal if the judgment of the trial court is adverse to him. The general rule is that imminent threat of irreparable destruction or substantial damage to KOGIES’
interlocutory orders cannot be challenged by an appeal. 27 Thus, in Yamaoka v. equipment and machineries. We find the resort to certiorari based on the gravely
Pescarich Manufacturing Corporation, we held: abusive orders of the trial court sans the ruling on the October 2, 1998 motion for
reconsideration to be proper.
The proper remedy in such cases is an ordinary appeal from an adverse judgment on
the merits, incorporating in said appeal the grounds for assailing the interlocutory The Core Issue: Article 15 of the Contract
orders. Allowing appeals from interlocutory orders would result in the ‘sorry spectacle’
of a case being subject of a counterproductive ping-pong to and from the appellate We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration
court as often as a trial court is perceived to have made an error in any of its clause. It provides:
interlocutory rulings. However, where the assailed interlocutory order was issued with
grave abuse of discretion or patently erroneous and the remedy of appeal would not Article 15. Arbitration.—All disputes, controversies, or differences which may arise
between the parties, out of or in relation to or in connection with this Contract or for

49
the breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared
with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. that:
The award rendered by the arbitration(s) shall be final and binding upon both
parties concerned. (Emphasis supplied.) Being an inexpensive, speedy and amicable method of settling disputes, arbitration––
along with mediation, conciliation and negotiation––is encouraged by the Supreme
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution
and void. of disputes, especially of the commercial kind. It is thus regarded as the "wave of the
future" in international civil and commercial disputes. Brushing aside a contractual
Petitioner is correct. agreement calling for arbitration between the parties would be a step backward.

Established in this jurisdiction is the rule that the law of the place where the contract Consistent with the above-mentioned policy of encouraging alternative dispute
is made governs. Lex loci contractus. The contract in this case was perfected here in resolution methods, courts should liberally construe arbitration clauses. Provided
the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the such clause is susceptible of an interpretation that covers the asserted dispute, an
Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and order to arbitrate should be granted. Any doubt should be resolved in favor of
binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that the arbitration.40
arbitrators’ award or decision shall be final, is valid, without prejudice to Articles
2038, 2039 and 2040." (Emphasis supplied.) Having said that the instant arbitration clause is not against public policy, we come to
the question on what governs an arbitration clause specifying that in case of any
Arts. 2038,31 2039,32 and 204033 abovecited refer to instances where a compromise dispute arising from the contract, an arbitral panel will be constituted in a foreign
or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043, 34 may be voided, country and the arbitration rules of the foreign country would govern and its award
rescinded, or annulled, but these would not denigrate the finality of the arbitral award. shall be final and binding.

The arbitration clause was mutually and voluntarily agreed upon by the parties. It has RA 9285 incorporated the UNCITRAL Model law
not been shown to be contrary to any law, or against morals, good customs, public to which we are a signatory
order, or public policy. There has been no showing that the parties have not dealt with
each other on equal footing. We find no reason why the arbitration clause should not For domestic arbitration proceedings, we have particular agencies to arbitrate
be respected and complied with by both parties. In Gonzales v. Climax Mining Ltd.,35 disputes arising from contractual relations. In case a foreign arbitral body is chosen
we held that submission to arbitration is a contract and that a clause in a contract by the parties, the arbitration rules of our domestic arbitration bodies would not be
providing that all matters in dispute between the parties shall be referred to arbitration applied. As signatory to the Arbitration Rules of the UNCITRAL Model Law on
is a contract.36 Again in Del Monte Corporation-USA v. Court of Appeals, we likewise International Commercial Arbitration41 of the United Nations Commission on
ruled that "[t]he provision to submit to arbitration any dispute arising therefrom and the International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985,
relationship of the parties is part of that contract and is itself a contract." 37 the Philippines committed itself to be bound by the Model Law. We have even
incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the
Arbitration clause not contrary to public policy Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use
of an Alternative Dispute Resolution System in the Philippines and to Establish the
The arbitration clause which stipulates that the arbitration must be done in Seoul, Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on
Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent
arbitral award is final and binding, is not contrary to public policy. This Court has provisions:
sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case of
Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,38 this Court had occasion to CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION
rule that an arbitration clause to resolve differences and breaches of mutually agreed
contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this SEC. 19. Adoption of the Model Law on International Commercial Arbitration.––
jurisdiction, arbitration has been held valid and constitutional. Even before the International commercial arbitration shall be governed by the Model Law on
approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the International Commercial Arbitration (the "Model Law") adopted by the United Nations
settlement of disputes through arbitration. Republic Act No. 876 was adopted to Commission on International Trade Law on June 21, 1985 (United Nations Document
supplement the New Civil Code’s provisions on arbitration." 39 And in LM Power A/40/17) and recommended for enactment by the General Assembly in Resolution

50
No. 40/72 approved on December 11, 1985, copy of which is hereto attached as SEC. 42. Application of the New York Convention.––The New York Convention shall
Appendix "A". govern the recognition and enforcement of arbitral awards covered by said
Convention.
SEC. 20. Interpretation of Model Law.––In interpreting the Model Law, regard shall be
had to its international origin and to the need for uniformity in its interpretation and The recognition and enforcement of such arbitral awards shall be filed with the
resort may be made to the travaux preparatories and the report of the Secretary Regional Trial Court in accordance with the rules of procedure to be promulgated by
General of the United Nations Commission on International Trade Law dated March the Supreme Court. Said procedural rules shall provide that the party relying on the
25, 1985 entitled, "International Commercial Arbitration: Analytical Commentary on award or applying for its enforcement shall file with the court the original or
Draft Trade identified by reference number A/CN. 9/264." authenticated copy of the award and the arbitration agreement. If the award or
agreement is not made in any of the official languages, the party shall supply a duly
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case certified translation thereof into any of such languages.
since it is a procedural law which has a retroactive effect. Likewise, KOGIES filed its
application for arbitration before the KCAB on July 1, 1998 and it is still pending The applicant shall establish that the country in which foreign arbitration award was
because no arbitral award has yet been rendered. Thus, RA 9285 is applicable to the made in party to the New York Convention.
instant case. Well-settled is the rule that procedural laws are construed to be
applicable to actions pending and undetermined at the time of their passage, and are xxxx
deemed retroactive in that sense and to that extent. As a general rule, the retroactive
application of procedural laws does not violate any personal rights because no vested SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by
right has yet attached nor arisen from them.42 the New York Convention.––The recognition and enforcement of foreign arbitral
awards not covered by the New York Convention shall be done in accordance with
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL procedural rules to be promulgated by the Supreme Court. The Court may, on
Model Law are the following: grounds of comity and reciprocity, recognize and enforce a non-convention award as
a convention award.
(1) The RTC must refer to arbitration in proper cases
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.––A foreign arbitral award
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the when confirmed by a court of a foreign country, shall be recognized and enforced as
subject of arbitration pursuant to an arbitration clause, and mandates the referral to a foreign arbitral award and not as a judgment of a foreign court.
arbitration in such cases, thus:
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be
SEC. 24. Referral to Arbitration.––A court before which an action is brought in a enforced in the same manner as final and executory decisions of courts of law of the
matter which is the subject matter of an arbitration agreement shall, if at least one Philippines
party so requests not later than the pre-trial conference, or upon the request of both
parties thereafter, refer the parties to arbitration unless it finds that the arbitration xxxx
agreement is null and void, inoperative or incapable of being performed.
SEC. 47. Venue and Jurisdiction.––Proceedings for recognition and enforcement of
(2) Foreign arbitral awards must be confirmed by the RTC an arbitration agreement or for vacations, setting aside, correction or modification of
an arbitral award, and any application with a court for arbitration assistance and
Foreign arbitral awards while mutually stipulated by the parties in the arbitration supervision shall be deemed as special proceedings and shall be filed with the
clause to be final and binding are not immediately enforceable or cannot be Regional Trial Court (i) where arbitration proceedings are conducted; (ii) where the
implemented immediately. Sec. 3543 of the UNCITRAL Model Law stipulates the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where
requirement for the arbitral award to be recognized by a competent court for any of the parties to the dispute resides or has his place of business; or (iv) in the
enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse National Judicial Capital Region, at the option of the applicant.
recognition or enforcement on the grounds provided for. RA 9285 incorporated these
provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus: SEC. 48. Notice of Proceeding to Parties.––In a special proceeding for recognition
and enforcement of an arbitral award, the Court shall send notice to the parties at
their address of record in the arbitration, or if any part cannot be served notice at such

51
address, at such party’s last known address. The notice shall be sent al least fifteen Supreme Court only on those grounds enumerated under Article V of the New York
(15) days before the date set for the initial hearing of the application. Convention. Any other ground raised shall be disregarded by the Regional Trial
Court.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed
not as a judgment of a foreign court but as a foreign arbitral award, and when Thus, while the RTC does not have jurisdiction over disputes governed by arbitration
confirmed, are enforced as final and executory decisions of our courts of law. mutually agreed upon by the parties, still the foreign arbitral award is subject to
judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar this Court held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is
to judgments or awards given by some of our quasi-judicial bodies, like the National applicable insofar as the foreign arbitral awards, while final and binding, do not oust
Labor Relations Commission and Mines Adjudication Board, whose final judgments courts of jurisdiction since these arbitral awards are not absolute and without
are stipulated to be final and binding, but not immediately executory in the sense that exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it
they may still be judicially reviewed, upon the instance of any party. Therefore, the clear that all arbitral awards, whether domestic or foreign, are subject to judicial
final foreign arbitral awards are similarly situated in that they need first to be review on specific grounds provided for.
confirmed by the RTC.
(4) Grounds for judicial review different in domestic and foreign arbitral awards
(3) The RTC has jurisdiction to review foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral
Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with tribunal and an award given by a local arbitral tribunal are the specific grounds or
specific authority and jurisdiction to set aside, reject, or vacate a foreign arbitral award conditions that vest jurisdiction over our courts to review the awards.
on grounds provided under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45
provide: For foreign or international arbitral awards which must first be confirmed by the RTC,
the grounds for setting aside, rejecting or vacating the award by the RTC are provided
SEC. 42. Application of the New York Convention.––The New York Convention shall under Art. 34(2) of the UNCITRAL Model Law.
govern the recognition and enforcement of arbitral awards covered by said
Convention. For final domestic arbitral awards, which also need confirmation by the RTC pursuant
to Sec. 23 of RA 87644 and shall be recognized as final and executory decisions of
The recognition and enforcement of such arbitral awards shall be filed with the the RTC,45 they may only be assailed before the RTC and vacated on the grounds
Regional Trial Court in accordance with the rules of procedure to be promulgated by provided under Sec. 25 of RA 876.46
the Supreme Court. Said procedural rules shall provide that the party relying on the
award or applying for its enforcement shall file with the court the original or (5) RTC decision of assailed foreign arbitral award appealable
authenticated copy of the award and the arbitration agreement. If the award or
agreement is not made in any of the official languages, the party shall supply a duly Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an
certified translation thereof into any of such languages. aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or
corrects an arbitral award, thus:
The applicant shall establish that the country in which foreign arbitration award was
made is party to the New York Convention. SEC. 46. Appeal from Court Decision or Arbitral Awards.—A decision of the Regional
Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral
If the application for rejection or suspension of enforcement of an award has been award may be appealed to the Court of Appeals in accordance with the rules and
made, the Regional Trial Court may, if it considers it proper, vacate its decision and procedure to be promulgated by the Supreme Court.
may also, on the application of the party claiming recognition or enforcement of the
award, order the party to provide appropriate security. The losing party who appeals from the judgment of the court confirming an arbitral
award shall be required by the appellate court to post a counterbond executed in
xxxx favor of the prevailing party equal to the amount of the award in accordance with the
rules to be promulgated by the Supreme Court.
SEC. 45. Rejection of a Foreign Arbitral Award.––A party to a foreign arbitration
proceeding may oppose an application for recognition and enforcement of the arbitral Thereafter, the CA decision may further be appealed or reviewed before this Court
award in accordance with the procedures and rules to be promulgated by the through a petition for review under Rule 45 of the Rules of Court.

52
PGSMC has remedies to protect its interests Corollarily, the trial court gravely abused its discretion in granting PGSMC’s Motion
for Inspection of Things on September 21, 1998, as the subject matter of the motion
Thus, based on the foregoing features of RA 9285, PGSMC must submit to the is under the primary jurisdiction of the mutually agreed arbitral body, the KCAB in
foreign arbitration as it bound itself through the subject contract. While it may have Korea.
misgivings on the foreign arbitration done in Korea by the KCAB, it has available
remedies under RA 9285. Its interests are duly protected by the law which requires In addition, whatever findings and conclusions made by the RTC Branch Sheriff from
that the arbitral award that may be rendered by KCAB must be confirmed here by the the inspection made on October 28, 1998, as ordered by the trial court on October 19,
RTC before it can be enforced. 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual
status of the equipment and machineries as installed in the plant.
With our disquisition above, petitioner is correct in its contention that an arbitration
clause, stipulating that the arbitral award is final and binding, does not oust our courts For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders
of jurisdiction as the international arbitral award, the award of which is not absolute pertaining to the grant of the inspection of the equipment and machineries have to be
and without exceptions, is still judicially reviewable under certain conditions provided recalled and nullified.
for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285.
Issue on ownership of plant proper for arbitration
Finally, it must be noted that there is nothing in the subject Contract which provides
that the parties may dispense with the arbitration clause. Petitioner assails the CA ruling that the issue petitioner raised on whether the total
contract price of USD 1,530,000 was for the whole plant and its installation is beyond
Unilateral rescission improper and illegal the ambit of a Petition for Certiorari.

Having ruled that the arbitration clause of the subject contract is valid and binding on Petitioner’s position is untenable.
the parties, and not contrary to public policy; consequently, being bound to the
contract of arbitration, a party may not unilaterally rescind or terminate the contract for It is settled that questions of fact cannot be raised in an original action for certiorari. 49
whatever cause without first resorting to arbitration. Whether or not there was full payment for the machineries and equipment and
installation is indeed a factual issue prohibited by Rule 65.
What this Court held in University of the Philippines v. De Los Angeles47 and
reiterated in succeeding cases,48 that the act of treating a contract as rescinded on However, what appears to constitute a grave abuse of discretion is the order of the
account of infractions by the other contracting party is valid albeit provisional as it can RTC in resolving the issue on the ownership of the plant when it is the arbitral body
be judicially assailed, is not applicable to the instant case on account of a valid (KCAB) and not the RTC which has jurisdiction and authority over the said issue. The
stipulation on arbitration. Where an arbitration clause in a contract is availing, neither RTC’s determination of such factual issue constitutes grave abuse of discretion and
of the parties can unilaterally treat the contract as rescinded since whatever must be reversed and set aside.
infractions or breaches by a party or differences arising from the contract must be
brought first and resolved by arbitration, and not through an extrajudicial rescission or RTC has interim jurisdiction to protect the rights of the parties
judicial action.
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the
The issues arising from the contract between PGSMC and KOGIES on whether the way for PGSMC to dismantle and transfer the equipment and machineries, we find it
equipment and machineries delivered and installed were properly installed and to be in order considering the factual milieu of the instant case.
operational in the plant in Carmona, Cavite; the ownership of equipment and payment
Firstly, while the issue of the proper installation of the equipment and machineries
of the contract price; and whether there was substantial compliance by KOGIES in
might well be under the primary jurisdiction of the arbitral body to decide, yet the RTC
the production of the samples, given the alleged fact that PGSMC could not supply
under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to
the raw materials required to produce the sample LPG cylinders, are matters proper
protect vested rights of the parties. Sec. 28 pertinently provides:
for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an Application
for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as SEC. 28. Grant of interim Measure of Protection.—(a) It is not incompatible with an
amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate. arbitration agreement for a party to request, before constitution of the tribunal,
from a Court to grant such measure. After constitution of the arbitral tribunal and
during arbitral proceedings, a request for an interim measure of protection, or

53
modification thereof, may be made with the arbitral or to the extent that the arbitral (2) An interim measure is any temporary measure, whether in the form of an award
tribunal has no power to act or is unable to act effectivity, the request may be or in another form, by which, at any time prior to the issuance of the award by which
made with the Court. The arbitral tribunal is deemed constituted when the sole the dispute is finally decided, the arbitral tribunal orders a party to:
arbitrator or the third arbitrator, who has been nominated, has accepted the
nomination and written communication of said nomination and acceptance has been (a) Maintain or restore the status quo pending determination of the dispute;
received by the party making the request.
(b) Take action that would prevent, or refrain from taking action that is likely to cause,
(b) The following rules on interim or provisional relief shall be observed: current or imminent harm or prejudice to the arbitral process itself;

Any party may request that provisional relief be granted against the adverse party. (c) Provide a means of preserving assets out of which a subsequent award may be
satisfied; or
Such relief may be granted:
(d) Preserve evidence that may be relevant and material to the resolution of the
(i) to prevent irreparable loss or injury; dispute.

(ii) to provide security for the performance of any obligation; Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to
issue interim measures:
(iii) to produce or preserve any evidence; or
Article 17 J. Court-ordered interim measures
(iv) to compel any other appropriate act or omission.
A court shall have the same power of issuing an interim measure in relation to
(c) The order granting provisional relief may be conditioned upon the provision of arbitration proceedings, irrespective of whether their place is in the territory of this
security or any act or omission specified in the order. State, as it has in relation to proceedings in courts. The court shall exercise such
power in accordance with its own procedures in consideration of the specific features
(d) Interim or provisional relief is requested by written application transmitted by of international arbitration.
reasonable means to the Court or arbitral tribunal as the case may be and the party
against whom the relief is sought, describing in appropriate detail the precise relief, In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we
the party against whom the relief is requested, the grounds for the relief, and the were explicit that even "the pendency of an arbitral proceeding does not foreclose
evidence supporting the request. resort to the courts for provisional reliefs." We explicated this way:

(e) The order shall be binding upon the parties. As a fundamental point, the pendency of arbitral proceedings does not foreclose
resort to the courts for provisional reliefs. The Rules of the ICC, which governs the
(f) Either party may apply with the Court for assistance in implementing or enforcing parties’ arbitral dispute, allows the application of a party to a judicial authority for
an interim measure ordered by an arbitral tribunal. interim or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No.
876 (The Arbitration Law) recognizes the rights of any party to petition the court to
(g) A party who does not comply with the order shall be liable for all damages
take measures to safeguard and/or conserve any matter which is the subject of the
resulting from noncompliance, including all expenses, and reasonable attorney's fees,
dispute in arbitration. In addition, R.A. 9285, otherwise known as the "Alternative
paid in obtaining the order’s judicial enforcement. (Emphasis ours.)
Dispute Resolution Act of 2004," allows the filing of provisional or interim measures
Art. 17(2) of the UNCITRAL Model Law on ICA defines an "interim measure" of with the regular courts whenever the arbitral tribunal has no power to act or to act
protection as: effectively.50

Article 17. Power of arbitral tribunal to order interim measures It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim
measures of protection.
xxx xxx xxx
Secondly, considering that the equipment and machineries are in the possession of
PGSMC, it has the right to protect and preserve the equipment and machineries in
the best way it can. Considering that the LPG plant was non-operational, PGSMC has

54
the right to dismantle and transfer the equipment and machineries either for their
protection and preservation or for the better way to make good use of them which is
ineluctably within the management discretion of PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment and
machineries in Worth’s property is not to the best interest of PGSMC due to the
prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing
PhP322,560 as monthly rentals or PhP3.87M for 1998 alone without considering the
10% annual rent increment in maintaining the plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to
the preservation or transfer of the equipment and machineries as an interim measure,
yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the
equipment and machineries given the non-recognition by the lower courts of the
arbitral clause, has accorded an interim measure of protection to PGSMC which
would otherwise been irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial
amount based on the contract. Moreover, KOGIES is amply protected by the arbitral
action it has instituted before the KCAB, the award of which can be enforced in our
jurisdiction through the RTC. Besides, by our decision, PGSMC is compelled to
submit to arbitration pursuant to the valid arbitration clause of its contract with
KOGIES.

PGSMC to preserve the subject equipment and machineries

Finally, while PGSMC may have been granted the right to dismantle and transfer the
subject equipment and machineries, it does not have the right to convey or dispose of
the same considering the pending arbitral proceedings to settle the differences of the
parties. PGSMC therefore must preserve and maintain the subject equipment and
machineries with the diligence of a good father of a family51 until final resolution of the
arbitral proceedings and enforcement of the award, if any.

WHEREFORE, this petition is PARTLY GRANTED, in that:

(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET
ASIDE;

(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-
117 are REVERSED and SET ASIDE;

(3) The parties are hereby ORDERED to submit themselves to the arbitration of their
dispute and differences arising from the subject Contract before the KCAB; and

(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and
machineries, if it had not done so, and ORDERED to preserve and maintain them
until the finality of whatever arbitral award is given in the arbitration proceedings.

55
ii. Jurisdiction Over the Subject Matter and Issues of the Case Any dispute which the Buyer and Seller may not be able to settle by mutual
agreement shall be settled by arbitration in the City of New York before the American
G.R. No. 175404 January 31, 2011 Arbitration Association. The Arbitration Award shall be final and binding on both
parties.5
CARGILL PHILIPPINES, INC., Petitioner,
vs. that respondent must first comply with the arbitration clause before resorting to court,
SAN FERNANDO REGALA TRADING, INC., Respondent. thus, the RTC must either dismiss the case or suspend the proceedings and direct
the parties to proceed with arbitration, pursuant to Sections 66 and 77 of Republic Act
DECISION (R.A.) No. 876, or the Arbitration Law.
PERALTA, J.: Respondent filed an Opposition, wherein it argued that the RTC has jurisdiction over
the action for rescission of contract and could not be changed by the subject
Before us is a petition for review on certiorari seeking to reverse and set aside the
arbitration clause. It cited cases wherein arbitration clauses, such as the subject
Decision1 dated July 31, 2006 and the Resolution2 dated November 13, 2006 of the
clause in the contract, had been struck down as void for being contrary to public
Court of Appeals (CA) in CA G.R. SP No. 50304.
policy since it provided that the arbitration award shall be final and binding on both
The factual antecedents are as follows: parties, thus, ousting the courts of jurisdiction.

On June 18, 1998, respondent San Fernando Regala Trading, Inc. filed with the In its Reply, petitioner maintained that the cited decisions were already inapplicable,
Regional Trial Court (RTC) of Makati City a Complaint for Rescission of Contract with having been rendered prior to the effectivity of the New Civil Code in 1950 and the
Damages3 against petitioner Cargill Philippines, Inc. In its Complaint, respondent Arbitration Law in 1953.
alleged that it was engaged in buying and selling of molasses and petitioner was one
In its Rejoinder, respondent argued that the arbitration clause relied upon by
of its various sources from whom it purchased molasses. Respondent alleged that it
petitioner is invalid and unenforceable, considering that the requirements imposed by
entered into a contract dated July 11, 1996 with petitioner, wherein it was agreed
the provisions of the Arbitration Law had not been complied with.
upon that respondent would purchase from petitioner 12,000 metric tons of Thailand
origin cane blackstrap molasses at the price of US$192 per metric ton; that the By way of Sur-Rejoinder, petitioner contended that respondent had even clarified that
delivery of the molasses was to be made in January/February 1997 and payment was the issue boiled down to whether the arbitration clause contained in the contract
to be made by means of an Irrevocable Letter of Credit payable at sight, to be opened subject of the complaint is valid and enforceable; that the arbitration clause did not
by September 15, 1996; that sometime prior to September 15, 1996, the parties violate any of the cited provisions of the Arbitration Law.
agreed that instead of January/February 1997, the delivery would be made in
April/May 1997 and that payment would be by an Irrevocable Letter of Credit payable On September 17, 1998, the RTC rendered an Order,8 the dispositive portion of
at sight, to be opened upon petitioner's advice. Petitioner, as seller, failed to comply which reads:
with its obligations under the contract, despite demands from respondent, thus, the
latter prayed for rescission of the contract and payment of damages. Premises considered, defendant's "Motion To Dismiss/Suspend Proceedings and To
Refer Controversy To Voluntary Arbitration" is hereby DENIED. Defendant is directed
On July 24, 1998, petitioner filed a Motion to Dismiss/Suspend Proceedings and To to file its answer within ten (10) days from receipt of a copy of this order. 9
Refer Controversy to Voluntary Arbitration,4 wherein it argued that the alleged
contract between the parties, dated July 11, 1996, was never consummated because In denying the motion, the RTC found that there was no clear basis for petitioner's
respondent never returned the proposed agreement bearing its written acceptance or plea to dismiss the case, pursuant to Section 7 of the Arbitration Law. The RTC said
conformity nor did respondent open the Irrevocable Letter of Credit at sight. Petitioner that the provision directed the court concerned only to stay the action or proceeding
contended that the controversy between the parties was whether or not the alleged brought upon an issue arising out of an agreement providing for the arbitration
contract between the parties was legally in existence and the RTC was not the proper thereof, but did not impose the sanction of dismissal. However, the RTC did not find
forum to ventilate such issue. It claimed that the contract contained an arbitration the suspension of the proceedings warranted, since the Arbitration Law contemplates
clause, to wit: an arbitration proceeding that must be conducted in the Philippines under the
jurisdiction and control of the RTC; and before an arbitrator who resides in the
ARBITRATION country; and that the arbitral award is subject to court approval, disapproval and

56
modification, and that there must be an appeal from the judgment of the RTC. The Petitioner's motion for reconsideration was denied in a Resolution dated November
RTC found that the arbitration clause in question contravened these procedures, i.e., 13, 2006.
the arbitration clause contemplated an arbitration proceeding in New York before a
non-resident arbitrator (American Arbitration Association); that the arbitral award shall Hence, this petition.
be final and binding on both parties. The RTC said that to apply Section 7 of the
Arbitration Law to such an agreement would result in disregarding the other sections Petitioner alleges that the CA committed an error of law in ruling that arbitration
of the same law and rendered them useless and mere surplusages. cannot proceed despite the fact that: (a) it had ruled, in its assailed decision, that the
arbitration clause is valid, enforceable and binding on the parties; (b) the case of
Petitioner filed its Motion for Reconsideration, which the RTC denied in an Order 10 Gonzales v. Climax Mining Ltd.11 is inapplicable here; (c) parties are generally
dated November 25, 1998. allowed, under the Rules of Court, to adopt several defenses, alternatively or
hypothetically, even if such
Petitioner filed a petition for certiorari with the CA raising the sole issue that the RTC
acted in excess of jurisdiction or with grave abuse of discretion in refusing to dismiss defenses are inconsistent with each other; and (d) the complaint filed by respondent
or at least suspend the proceedings a quo, despite the fact that the party's agreement with the trial court is premature.
to arbitrate had not been complied with.
Petitioner alleges that the CA adopted inconsistent positions when it found the
Respondent filed its Comment and Reply. The parties were then required to file their arbitration clause between the parties as valid and enforceable and yet in the same
respective Memoranda. breath decreed that the arbitration cannot proceed because petitioner assailed the
existence of the entire agreement containing the arbitration clause. Petitioner claims
On July 31, 2006, the CA rendered its assailed Decision denying the petition and the inapplicability of the cited Gonzales case decided in 2005, because in the present
affirming the RTC Orders. case, it was respondent who had filed the complaint for rescission and damages with
the RTC, which based its cause of action against petitioner on the alleged agreement
In denying the petition, the CA found that stipulation providing for arbitration in dated July 11, 2006 between the parties; and that the same agreement contained the
contractual obligation is both valid and constitutional; that arbitration as an alternative arbitration clause sought to be enforced by petitioner in this case. Thus, whether
mode of dispute resolution has long been accepted in our jurisdiction and expressly petitioner assails the genuineness and due execution of the agreement, the fact
provided for in the Civil Code; that R.A. No. 876 (the Arbitration Law) also expressly remains that the agreement sued upon provides for an arbitration clause; that
authorized the arbitration of domestic disputes. The CA found error in the RTC's respondent cannot use the provisions favorable to him and completely disregard
holding that Section 7 of R.A. No. 876 was inapplicable to arbitration clause simply those that are unfavorable, such as the arbitration clause.
because the clause failed to comply with the requirements prescribed by the law. The
CA found that there was nothing in the Civil Code, or R.A. No. 876, that require that Petitioner contends that as the defendant in the RTC, it presented two alternative
arbitration proceedings must be conducted only in the Philippines and the arbitrators defenses, i.e., the parties had not entered into any agreement upon which respondent
should be Philippine residents. It also found that the RTC ruling effectively invalidated as plaintiff can sue upon; and, assuming that such agreement existed, there was an
not only the disputed arbitration clause, but all other agreements which provide for arbitration clause that should be enforced, thus, the dispute must first be submitted to
foreign arbitration. The CA did not find illegal or against public policy the arbitration arbitration before an action can be instituted in court. Petitioner argues that under
clause so as to render it null and void or ineffectual. Section 1(j) of Rule 16 of the Rules of Court, included as a ground to dismiss a
complaint is when a condition precedent for filing the complaint has not been
Notwithstanding such findings, the CA still held that the case cannot be brought under complied with; and that submission to arbitration when such has been agreed upon is
the Arbitration Law for the purpose of suspending the proceedings before the RTC, one such condition precedent. Petitioner submits that the proceedings in the RTC
since in its Motion to Dismiss/Suspend proceedings, petitioner alleged, as one of the must be dismissed, or at least suspended, and the parties be ordered to proceed with
grounds thereof, that the subject contract between the parties did not exist or it was arbitration.
invalid; that the said contract bearing the arbitration clause was never consummated
by the parties, thus, it was proper that such issue be first resolved by the court On March 12, 2007, petitioner filed a Manifestation 12 saying that the CA's rationale in
through an appropriate trial; that the issue involved a question of fact that the RTC declining to order arbitration based on the 2005 Gonzales ruling had been modified
should first resolve. Arbitration is not proper when one of the parties repudiated the upon a motion for reconsideration decided in 2007; that the CA decision lost its legal
existence or validity of the contract. basis, because it had been ruled that the arbitration agreement can be implemented

57
notwithstanding that one of the parties thereto repudiated the contract which x x x An appeal may be taken from an order made in a proceeding under this Act, or
contained such agreement based on the doctrine of separability. from a judgment entered upon an award through certiorari proceedings, but such
appeals shall be limited to question of law. x x x.
In its Comment, respondent argues that certiorari under Rule 65 is not the remedy
against an order denying a Motion to Dismiss/Suspend Proceedings and To Refer To support its argument, respondent cites the case of Gonzales v. Climax Mining
Controversy to Voluntary Arbitration. It claims that the Arbitration Law which petitioner Ltd.13 (Gonzales case), wherein we ruled the impropriety of a petition for certiorari
invoked as basis for its Motion prescribed, under its Section 29, a remedy, i.e., appeal under Rule 65 as a mode of appeal from an RTC Order directing the parties to
by a petition for review on certiorari under Rule 45. Respondent contends that the arbitration.
Gonzales case, which was decided in 2007, is inapplicable in this case, especially as
to the doctrine of separability enunciated therein. Respondent argues that even if the We find the cited case not in point.
existence of the contract and the arbitration clause is conceded, the decisions of the
RTC and the CA declining referral of the dispute between the parties to arbitration In the Gonzales case, Climax-Arimco filed before the RTC of Makati a petition to
would still be correct. This is so because respondent's complaint filed in Civil Case compel arbitration under R.A. No. 876, pursuant to the arbitration clause found in the
No. 98-1376 presents the principal issue of whether under the facts alleged in the Addendum Contract it entered with Gonzales. Judge Oscar Pimentel of the RTC of
complaint, respondent is entitled to rescind its contract with petitioner and for the Makati then directed the parties to arbitration proceedings. Gonzales filed a petition
latter to pay damages; that such issue constitutes a judicial question or one that for certiorari with Us contending that Judge Pimentel acted with grave abuse of
requires the exercise of judicial function and cannot be the subject of arbitration. discretion in immediately ordering the parties to proceed with arbitration despite the
proper, valid and timely raised argument in his Answer with counterclaim that the
Respondent contends that Section 8 of the Rules of Court, which allowed a defendant Addendum Contract containing the arbitration clause was null and void. Climax-
to adopt in the same action several defenses, alternatively or hypothetically, even if Arimco assailed the mode of review availed of by Gonzales, citing Section 29 of R.A.
such defenses are inconsistent with each other refers to allegations in the pleadings, No. 876 contending that certiorari under Rule 65 can be availed of only if there was
such as complaint, counterclaim, cross-claim, third-party complaint, answer, but not to no appeal or any adequate remedy in the ordinary course of law; that R.A. No. 876
a motion to dismiss. Finally, respondent claims that petitioner's argument is premised provides for an appeal from such order. We then ruled that Gonzales' petition for
on the existence of a contract with respondent containing a provision for arbitration. certiorari should be dismissed as it was filed in lieu of an appeal by certiorari which
However, its reliance on the contract, which it repudiates, is inappropriate. was the prescribed remedy under R.A. No. 876 and the petition was filed far beyond
the reglementary period.
In its Reply, petitioner insists that respondent filed an action for rescission and
damages on the basis of the contract, thus, respondent admitted the existence of all We found that Gonzales’ petition for certiorari raises a question of law, but not a
the provisions contained thereunder, including the arbitration clause; that if question of jurisdiction; that Judge Pimentel acted in accordance with the procedure
respondent relies on said contract for its cause of action against petitioner, it must prescribed in R.A. No. 876 when he ordered Gonzales to proceed with arbitration and
also consider itself bound by the rest of the terms and conditions contained appointed a sole arbitrator after making the determination that there was indeed an
thereunder notwithstanding that respondent may find some provisions to be adverse arbitration agreement. It had been held that as long as a court acts within its
to its position; that respondent’s citation of the Gonzales case, decided in 2005, to jurisdiction and does not gravely abuse its discretion in the exercise thereof, any
show that the validity of the contract cannot be the subject of the arbitration supposed error committed by it will amount to nothing more than an error of judgment
proceeding and that it is the RTC which has the jurisdiction to resolve the situation reviewable by a timely appeal and not assailable by a special civil action of
between the parties herein, is not correct since in the resolution of the Gonzales' certiorari.14
motion for reconsideration in 2007, it had been ruled that an arbitration agreement is
effective notwithstanding the fact that one of the parties thereto repudiated the main In this case, petitioner raises before the CA the issue that the respondent Judge
contract which contained it. acted in excess of jurisdiction or with grave abuse of discretion in refusing to dismiss,
or at least suspend, the proceedings a quo, despite the fact that the party’s
We first address the procedural issue raised by respondent that petitioner’s petition agreement to arbitrate had not been complied with. Notably, the RTC found the
for certiorari under Rule 65 filed in the CA against an RTC Order denying a Motion to existence of the arbitration clause, since it said in its decision that "hardly disputed is
Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration was the fact that the arbitration clause in question contravenes several provisions of the
a wrong remedy invoking Section 29 of R.A. No. 876, which provides: Arbitration Law x x x and to apply Section 7 of the Arbitration Law to such an
agreement would result in the disregard of the afore-cited sections of the Arbitration
Section 29. Law and render them useless and mere surplusages." However, notwithstanding the

58
finding that an arbitration agreement existed, the RTC denied petitioner's motion and The CA ruled that arbitration cannot be ordered in this case, since petitioner alleged
directed petitioner to file an answer. that the contract between the parties did not exist or was invalid and arbitration is not
proper when one of the parties repudiates the existence or validity of the contract.
In La Naval Drug Corporation v. Court of Appeals,15 it was held that R.A. No. 876 Thus, said the CA:
explicitly confines the court’s authority only to the determination of whether or not
there is an agreement in writing providing for arbitration. In the affirmative, the statute Notwithstanding our ruling on the validity and enforceability of the assailed arbitration
ordains that the court shall issue an order summarily directing the parties to proceed clause providing for foreign arbitration, it is our considered opinion that the case at
with the arbitration in accordance with the terms thereof. If the court, upon the other bench still cannot be brought under the Arbitration Law for the purpose of suspending
hand, finds that no such agreement exists, the proceedings shall be dismissed. the proceedings before the trial court. We note that in its Motion to Dismiss/Suspend
Proceedings, etc, petitioner Cargill alleged, as one of the grounds thereof, that the
In issuing the Order which denied petitioner's Motion to Dismiss/Suspend alleged contract between the parties do not legally exist or is invalid. As posited by
Proceedings and to Refer Controversy to Voluntary Arbitration, the RTC went beyond petitioner, it is their contention that the said contract, bearing the arbitration clause,
its authority of determining only the issue of whether or not there is an agreement in was never consummated by the parties. That being the case, it is but proper that such
writing providing for arbitration by directing petitioner to file an answer, instead of issue be first resolved by the court through an appropriate trial. The issue involves a
ordering the parties to proceed to arbitration. In so doing, it acted in excess of its question of fact that the trial court should first resolve.
jurisdiction and since there is no plain, speedy, and adequate remedy in the ordinary
course of law, petitioner’s resort to a petition for certiorari is the proper remedy. Arbitration is not proper when one of the parties repudiates the existence or validity of
the contract. Apropos is Gonzales v. Climax Mining Ltd., 452 SCRA 607,
We now proceed to the substantive issue of whether the CA erred in finding that this (G.R.No.161957), where the Supreme Court held that:
case cannot be brought under the arbitration law for the purpose of suspending the
proceedings in the RTC. The question of validity of the contract containing the agreement to submit to
arbitration will affect the applicability of the arbitration clause itself. A party
We find merit in the petition. cannot rely on the contract and claim rights or obligations under it and at the
same time impugn its existence or validity. Indeed, litigants are enjoined from
Arbitration, as an alternative mode of settling disputes, has long been recognized and taking inconsistent positions....
accepted in our jurisdiction.16 R.A. No. 87617 authorizes arbitration of domestic
disputes. Foreign arbitration, as a system of settling commercial disputes of an Consequently, the petitioner herein cannot claim that the contract was never
international character, is likewise recognized.18 The enactment of R.A. No. 9285 on consummated and, at the same time, invokes the arbitration clause provided for
April 2, 2004 further institutionalized the use of alternative dispute resolution systems, under the contract which it alleges to be non-existent or invalid. Petitioner claims that
including arbitration, in the settlement of disputes.19 private respondent's complaint lacks a cause of action due to the absence of any
valid contract between the parties. Apparently, the arbitration clause is being invoked
A contract is required for arbitration to take place and to be binding. 20 Submission to merely as a fallback position. The petitioner must first adduce evidence in support of
arbitration is a contract 21 and a clause in a contract providing that all matters in its claim that there is no valid contract between them and should the court a quo find
dispute between the parties shall be referred to arbitration is a contract.22 The the claim to be meritorious, the parties may then be spared the rigors and expenses
provision to submit to arbitration any dispute arising therefrom and the relationship of that arbitration in a foreign land would surely entail. 24
the parties is part of the contract and is itself a contract.23
However, the Gonzales case,25 which the CA relied upon for not ordering arbitration,
In this case, the contract sued upon by respondent provides for an arbitration clause, had been modified upon a motion for reconsideration in this wise:
to wit:
x x x The adjudication of the petition in G.R. No. 167994 effectively modifies part
ARBITRATION of the Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold
that the validity of the contract containing the agreement to submit to
Any dispute which the Buyer and Seller may not be able to settle by mutual
arbitration does not affect the applicability of the arbitration clause itself. A
agreement shall be settled by arbitration in the City of New York before the American
contrary ruling would suggest that a party's mere repudiation of the main
Arbitration Association, The Arbitration Award shall be final and binding on both
contract is sufficient to avoid arbitration. That is exactly the situation that the
parties.
separability doctrine, as well as jurisprudence applying it, seeks to avoid. We

59
add that when it was declared in G.R. No. 161957 that the case should not be Moreover, it is worthy to note that respondent filed a complaint for rescission of
brought for arbitration, it should be clarified that the case referred to is the case contract and damages with the RTC. In so doing, respondent alleged that a contract
actually filed by Gonzales before the DENR Panel of Arbitrators, which was for the exists between respondent and petitioner. It is that contract which provides for an
nullification of the main contract on the ground of fraud, as it had already been arbitration clause which states that "any dispute which the Buyer and Seller may not
determined that the case should have been brought before the regular courts be able to settle by mutual agreement shall be settled before the City of New York by
involving as it did judicial issues.26 the American Arbitration Association. The arbitration agreement clearly expressed the
parties' intention that any dispute between them as buyer and seller should be
In so ruling that the validity of the contract containing the arbitration agreement does referred to arbitration. It is for the arbitrator and not the courts to decide whether a
not affect the applicability of the arbitration clause itself, we then applied the doctrine contract between the parties exists or is valid.
of separability, thus:
Respondent contends that assuming that the existence of the contract and the
The doctrine of separability, or severability as other writers call it, enunciates that an arbitration clause is conceded, the CA's decision declining referral of the parties'
arbitration agreement is independent of the main contract. The arbitration agreement dispute to arbitration is still correct. It claims that its complaint in the RTC presents the
is to be treated as a separate agreement and the arbitration agreement does not issue of whether under the facts alleged, it is entitled to rescind the contract with
automatically terminate when the contract of which it is a part comes to an end. damages; and that issue constitutes a judicial question or one that requires the
exercise of judicial function and cannot be the subject of an arbitration proceeding.
The separability of the arbitration agreement is especially significant to the Respondent cites our ruling in Gonzales, wherein we held that a panel of arbitrator is
determination of whether the invalidity of the main contract also nullifies the arbitration bereft of jurisdiction over the complaint for declaration of nullity/or termination of the
clause. Indeed, the doctrine denotes that the invalidity of the main contract, also subject contracts on the grounds of fraud and oppression attendant to the execution
referred to as the "container" contract, does not affect the validity of the arbitration of the addendum contract and the other contracts emanating from it, and that the
agreement. Irrespective of the fact that the main contract is invalid, the arbitration complaint should have been filed with the regular courts as it involved issues which
clause/agreement still remains valid and enforceable.27 are judicial in nature.

Respondent argues that the separability doctrine is not applicable in petitioner's case, Such argument is misplaced and respondent cannot rely on the Gonzales case to
since in the Gonzales case, Climax-Arimco sought to enforce the arbitration clause of support its argument.
its contract with Gonzales and the former's move was premised on the existence of a
valid contract; while Gonzales, who resisted the move of Climax-Arimco for In Gonzales, petitioner Gonzales filed a complaint before the Panel of Arbitrators,
arbitration, did not deny the existence of the contract but merely assailed the validity Region II, Mines and Geosciences Bureau, of the Department of Environment and
thereof on the ground of fraud and oppression. Respondent claims that in the case Natural Resources (DENR) against respondents Climax- Mining Ltd, Climax-Arimco
before Us, petitioner who is the party insistent on arbitration also claimed in their and Australasian Philippines Mining Inc, seeking the declaration of nullity or
Motion to Dismiss/Suspend Proceedings that the contract sought by respondent to be termination of the addendum contract and the other contracts emanating from it on
rescinded did not exist or was not consummated; thus, there is no room for the the grounds of fraud and oppression. The Panel dismissed the complaint for lack of
application of the separability doctrine, since there is no container or main contract or jurisdiction. However, the Panel, upon petitioner's motion for reconsideration, ruled
an arbitration clause to speak of. that it had jurisdiction over the dispute maintaining that it was a mining dispute, since
the subject complaint arose from a contract between the parties which involved the
We are not persuaded. exploration and exploitation of minerals over the disputed area.1âwphi1 Respondents
assailed the order of the Panel of Arbitrators via a petition for certiorari before the CA.
Applying the Gonzales ruling, an arbitration agreement which forms part of the main
The CA granted the petition and declared that the Panel of Arbitrators did not have
contract shall not be regarded as invalid or non-existent just because the main
jurisdiction over the complaint, since its jurisdiction was limited to the resolution of
contract is invalid or did not come into existence, since the arbitration agreement shall
mining disputes, such as those which raised a question of fact or matter requiring the
be treated as a separate agreement independent of the main contract. To reiterate. a
technical knowledge and experience of mining authorities and not when the complaint
contrary ruling would suggest that a party's mere repudiation of the main contract is
alleged fraud and oppression which called for the interpretation and application of
sufficient to avoid arbitration and that is exactly the situation that the separability
laws. The CA further ruled that the petition should have been settled through
doctrine sought to avoid. Thus, we find that even the party who has repudiated the
arbitration under R.A. No. 876 − the Arbitration Law − as provided under the
main contract is not prevented from enforcing its arbitration clause.
addendum contract.

60
On a review on certiorari, we affirmed the CA’s finding that the Panel of Arbitrators brought before the regular courts involving as it did judicial issues." We made such
who, under R.A. No. 7942 of the Philippine Mining Act of 1995, has exclusive and clarification in our resolution of the motion for reconsideration after ruling that the
original jurisdiction to hear and decide mining disputes, such as mining areas, mineral parties in that case can proceed to arbitration under the Arbitration Law, as provided
agreements, FTAAs or permits and surface owners, occupants and under the Arbitration Clause in their Addendum Contract.
claimholders/concessionaires, is bereft of jurisdiction over the complaint for
declaration of nullity of the addendum contract; thus, the Panels' jurisdiction is limited WHEREFORE, the petition is GRANTED. The Decision dated July 31, 2006 and the
only to those mining disputes which raised question of facts or matters requiring the Resolution dated November 13, 2006 of the Court of Appeals in CA-G.R. SP No.
technical knowledge and experience of mining authorities. We then said: 50304 are REVERSED and SET ASIDE. The parties are hereby ORDERED to
SUBMIT themselves to the arbitration of their dispute, pursuant to their July 11, 1996
In Pearson v. Intermediate Appellate Court, this Court observed that the trend has agreement.
been to make the adjudication of mining cases a purely administrative matter.
Decisions of the Supreme Court on mining disputes have recognized a distinction
between (1) the primary powers granted by pertinent provisions of law to the then
Secretary of Agriculture and Natural Resources (and the bureau directors) of an
executive or administrative nature, such as granting of license, permits, lease and
contracts, or approving, rejecting, reinstating or canceling applications, or deciding
conflicting applications, and (2) controversies or disagreements of civil or contractual
nature between litigants which are questions of a judicial nature that may be
adjudicated only by the courts of justice. This distinction is carried on even in Rep. Act
No. 7942.28

We found that since the complaint filed before the DENR Panel of Arbitrators charged
respondents with disregarding and ignoring the addendum contract, and acting in a
fraudulent and oppressive manner against petitioner, the complaint filed before the
Panel was not a dispute involving rights to mining areas, or was it a dispute involving
claimholders or concessionaires, but essentially judicial issues. We then said that the
Panel of Arbitrators did not have jurisdiction over such issue, since it does not involve
the application of technical knowledge and expertise relating to mining. It is in this
context that we said that:

Arbitration before the Panel of Arbitrators is proper only when there is a disagreement
between the parties as to some provisions of the contract between them, which needs
the interpretation and the application of that particular knowledge and expertise
possessed by members of that Panel. It is not proper when one of the parties
repudiates the existence or validity of such contract or agreement on the ground of
fraud or oppression as in this case. The validity of the contract cannot be subject of
arbitration proceedings. Allegations of fraud and duress in the execution of a contract
are matters within the jurisdiction of the ordinary courts of law. These questions are
legal in nature and require the application and interpretation of laws and
jurisprudence which is necessarily a judicial function.29

In fact, We even clarified in our resolution on Gonzales’ motion for reconsideration


that "when we declared that the case should not be brought for arbitration, it should
be clarified that the case referred to is the case actually filed by Gonzales before the
DENR Panel of Arbitrators, which was for the nullification of the main contract on the
ground of fraud, as it had already been determined that the case should have been

61
ii. Jurisdiction Over the Subject Matter and Issues of the Case "The President of the Bank was impressed with the credentials of Florence O.
Cabansag that he approved the recommendation of Ruben C. Tobias. She then filed
G.R. No. 157010 June 21, 2005 an ‘Application,’ with the Ministry of Manpower of the Government of Singapore, for
the issuance of an ‘Employment Pass’ as an employee of the Singapore PNB Branch.
PHILIPPINE NATIONAL BANK, petitioner, Her application was approved for a period of two (2) years.
vs.
FLORENCE O. CABANSAG, respondent. "On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag
offering her a temporary appointment, as Credit Officer, at a basic salary of Singapore
DECISION Dollars 4,500.00, a month and, upon her successful completion of her probation to be
determined solely, by the Bank, she may be extended at the discretion of the Bank, a
PANGANIBAN, J.:
permanent appointment and that her temporary appointment was subject to the
The Court reiterates the basic policy that all Filipino workers, whether employed following terms and conditions:
locally or overseas, enjoy the protective mantle of Philippine labor and social
‘1. You will be on probation for a period of three (3) consecutive months from the date
legislations. Our labor statutes may not be rendered ineffective by laws or judgments
of your assumption of duty.
promulgated, or stipulations agreed upon, in a foreign country.
‘2. You will observe the Bank’s rules and regulations and those that may be adopted
The Case
from time to time.
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court,
‘3. You will keep in strictest confidence all matters related to transactions between the
seeking to reverse and set aside the July 16, 2002 Decision 2 and the January 29,
Bank and its clients.
2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68403. The assailed
Decision dismissed the CA Petition (filed by herein petitioner), which had sought to ‘4. You will devote your full time during business hours in promoting the business and
reverse the National Labor Relations Commission (NLRC)’s June 29, 2001 interest of the Bank.
Resolution,4 affirming Labor Arbiter Joel S. Lustria’s January 18, 2000 Decision. 5
‘5. You will not, without prior written consent of the Bank, be employed in anyway for
The assailed CA Resolution denied herein petitioner’s Motion for Reconsideration. any purpose whatsoever outside business hours by any person, firm or company.
The Facts ‘6. Termination of your employment with the Bank may be made by either party after
notice of one (1) day in writing during probation, one month notice upon confirmation
The facts are narrated by the Court of Appeals as follows:
or the equivalent of one (1) day’s or month’s salary in lieu of notice.’
"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a
"Florence O. Cabansag accepted the position and assumed office. In the meantime,
tourist. She applied for employment, with the Singapore Branch of the Philippine
the Philippine Embassy in Singapore processed the employment contract of Florence
National Bank, a private banking corporation organized and existing under the laws of
O. Cabansag and, on March 8, 1999, she was issued by the Philippine Overseas
the Philippines, with principal offices at the PNB Financial Center, Roxas Boulevard,
Employment Administration, an ‘Overseas Employment Certificate,’ certifying that she
Manila. At the time, the Singapore PNB Branch was under the helm of Ruben C.
was a bona fide contract worker for Singapore.
Tobias, a lawyer, as General Manager, with the rank of Vice-President of the Bank. At
the time, too, the Branch Office had two (2) types of employees: (a) expatriates or the xxxxxxxxx
regular employees, hired in Manila and assigned abroad including Singapore, and (b)
locally (direct) hired. She applied for employment as Branch Credit Officer, at a total "Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C.
monthly package of $SG4,500.00, effective upon assumption of duties after approval. Tobias, on March 9, 1999, her initial ‘Performance Report.’ Ruben C. Tobias was so
Ruben C. Tobias found her eminently qualified and wrote on October 26, 1998, a impressed with the ‘Report’ that he made a notation and, on said ‘Report’: ‘GOOD
letter to the President of the Bank in Manila, recommending the appointment of WORK.’ However, in the evening of April 14, 1999, while Florence O. Cabansag was
Florence O. Cabansag, for the position. in the flat, which she and Cecilia Aquino, the Assistant Vice-President and Deputy
General Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of the said
xxxxxxxxx Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to

62
tell Florence O. Cabansag to resign from her job. Florence O. Cabansag was amounted to SGD 40,500.00 or its equivalent in Philippine Currency at the time of
perplexed at the sudden turn of events and the runabout way Ruben C. Tobias payment;
procured her resignation from the Bank. The next day, Florence O. Cabansag talked
to Ruben C. Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento had b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine
told her was true. Ruben C. Tobias confirmed the veracity of the information, with the Currency at the time of payment;
explanation that her resignation was imperative as a ‘cost-cutting measure’ of the
Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in
Branch will be sold or transformed into a remittance office and that, in either way, Philippine Currency at the time of payment;
Florence O. Cabansag had to resign from her employment. The more Florence O.
d) Monetary equivalent of leave credits earned on Sunday banking in the amount of
Cabansag was perplexed. She then asked Ruben C. Tobias that she be furnished
SGD 1,557.67 or its equivalent in Philippine Currency at the time of payment;
with a ‘Formal Advice’ from the PNB Head Office in Manila. However, Ruben C.
Tobias flatly refused. Florence O. Cabansag did not submit any letter of resignation. e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60
or its equivalent in Philippine Currency at the time of payment.
"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his
office and demanded that she submit her letter of resignation, with the pretext that he f) Monetary equivalent of unused vacation leave benefits in the amount of SGD
needed a Chinese-speaking Credit Officer to penetrate the local market, with the 319.85 or its equivalent in Philippine Currency at the time of payment.
information that a Chinese-speaking Credit Officer had already been hired and will be
reporting for work soon. She was warned that, unless she submitted her letter of g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine
resignation, her employment record will be blemished with the notation ‘DISMISSED’ Currency at the time of payment;
spread thereon. Without giving any definitive answer, Florence O. Cabansag asked
Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. 3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its
Tobias told her that she should be ‘out’ of her employment by May 15, 1999. equivalent in Philippine Currency at the time of payment, and moral damages in the
amount of PhP 200,000.00, exemplary damages in the amount of PhP 100,000.00;
"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O.
Cabansag and adamantly ordered her to submit her letter of resignation. She refused. 4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine
On April 20, 1999, she received a letter from Ruben C. Tobias terminating her Currency at the time of payment, representing attorney’s fees.
employment with the Bank.
SO ORDERED." 6 [Emphasis in the original.]
xxxxxxxxx
PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution dated June
"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the 29, 2001, the Commission affirmed that Decision, but reduced the moral damages to
Complainant and against the Respondents, the decretal portion of which reads as ₱100,000 and the exemplary damages to ₱50,000. In a subsequent Resolution, the
follows: NLRC denied PNB’s Motion for Reconsideration.

‘WHEREFORE, considering the foregoing premises, judgment is hereby rendered Ruling of the Court of Appeals
finding respondents guilty of Illegal dismissal and devoid of due process, and are
hereby ordered: In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed
to adduce in evidence the Singaporean law supposedly governing the latter’s
1. To reinstate complainant to her former or substantially equivalent position without employment Contract with respondent. The appellate court found that the Contract
loss of seniority rights, benefits and privileges; had actually been processed by the Philippine Embassy in Singapore and approved
by the Philippine Overseas Employment Administration (POEA), which then used that
2. Solidarily liable to pay complainant as follows: Contract as a basis for issuing an Overseas Employment Certificate in favor of
respondent.
a) To pay complainant her backwages from 16 April 1999 up to her actual
reinstatement. Her backwages as of the date of the promulgation of this decision According to the CA, even though respondent secured an employment pass from the
Singapore Ministry of Employment, she did not thereby waive Philippine labor laws, or

63
the jurisdiction of the labor arbiter or the NLRC over her Complaint for illegal factual issues. Their findings, which are supported by substantial evidence, were
dismissal. In so doing, neither did she submit herself solely to the Ministry of affirmed by the CA. Thus, they are entitled to great respect and are rendered
Manpower of Singapore’s jurisdiction over disputes arising from her employment. The conclusive upon this Court, absent a clear showing of palpable error or arbitrary
appellate court further noted that a cursory reading of the Ministry’s letter will readily disregard of evidence.14
show that no such waiver or submission is stated or implied.
The Court’s Ruling
Finally, the CA held that petitioner had failed to establish a just cause for the
dismissal of respondent. The bank had also failed to give her sufficient notice and an The Petition has no merit.
opportunity to be heard and to defend herself. The CA ruled that she was
consequently entitled to reinstatement and back wages, computed from the time of First Issue:
her dismissal up to the time of her reinstatement.
Jurisdiction
Hence, this Petition.7
The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor
Issues Code as follows:

Petitioner submits the following issues for our consideration: "ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as
otherwise provided under this Code the Labor Arbiters shall have original and
"1. Whether or not the arbitration branch of the NLRC in the National Capital Region exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
has jurisdiction over the instant controversy; submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
"2. Whether or not the arbitration of the NLRC in the National Capital Region is the agricultural or non-agricultural:
most convenient venue or forum to hear and decide the instant controversy; and
1. Unfair labor practice cases;
"3. Whether or not the respondent was illegally dismissed, and therefore, entitled to
recover moral and exemplary damages and attorney’s fees."8 2. Termination disputes;

In addition, respondent assails, in her Comment,9 the propriety of Rule 45 as the 3. If accompanied with a claim for reinstatement, those cases that workers may file
procedural mode for seeking a review of the CA Decision affirming the NLRC involving wage, rates of pay, hours of work and other terms and conditions of
Resolution. Such issue deserves scant consideration. Respondent miscomprehends employment
the Court’s discourse in St. Martin Funeral Home v. NLRC,10 which has indeed
affirmed that the proper mode of review of NLRC decisions, resolutions or orders is 4. Claims for actual, moral, exemplary and other forms of damages arising from the
by a special civil action for certiorari under Rule 65 of the Rules of Court. The employer-employee relations;
Supreme Court and the Court of Appeals have concurrent original jurisdiction over
5. Cases arising from any violation of Article 264 of this Code, including questions
such petitions for certiorari. Thus, in observance of the doctrine on the hierarchy of
involving the legality of strikes and lockouts; and
courts, these petitions should be initially filed with the CA. 11
6. Except claims for Employees Compensation, Social Security, Medicare and
Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for
maternity benefits, all other claims, arising from employer-employee relations,
Certiorari. In seeking a review by this Court of the CA Decision -- on questions of
including those of persons in domestic or household service, involving an amount of
jurisdiction, venue and validity of employment termination -- petitioner is likewise
exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with
correct in invoking Rule 45.12
a claim for reinstatement.
It is true, however, that in a petition for review on certiorari, the scope of the Supreme
(b) The commission shall have exclusive appellate jurisdiction over all cases decided
Court’s judicial review of decisions of the Court of Appeals is generally confined only
by Labor Arbiters.
to errors of law. It does not extend to questions of fact. This doctrine applies with
greater force in labor cases. Factual questions are for the labor tribunals to resolve. 13 x x x x x x x x x."
In the present case, the labor arbiter and the NLRC have already determined the

64
More specifically, Section 10 of RA 8042 reads in part: president of the bank whose principal offices were in Manila. This circumstance
militates against petitioner’s contention that respondent was "locally hired"; and totally
"SECTION 10. Money Claims. — Notwithstanding any provision of law to the "governed by and subject to the laws, common practices and customs" of Singapore,
contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall not of the Philippines. Instead, with more reason does this fact reinforce the
have the original and exclusive jurisdiction to hear and decide, within ninety (90) presumption that respondent falls under the legal definition of migrant worker, in this
calendar days after the filing of the complaint, the claims arising out of an employer- case one deployed in Singapore. Hence, petitioner cannot escape the application of
employee relationship or by virtue of any law or contract involving Filipino workers for Philippine laws or the jurisdiction of the NLRC and the labor arbiter.
overseas deployment including claims for actual, moral, exemplary and other forms of
damages. In any event, we recall the following policy pronouncement of the Court in Royal
Crown Internationale v. NLRC:20
x x x x x x x x x"
"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective
Based on the foregoing provisions, labor arbiters clearly have original and exclusive mantle of Philippine labor and social legislation, contract stipulations to the contrary
jurisdiction over claims arising from employer-employee relations, including notwithstanding. This pronouncement is in keeping with the basic public policy of the
termination disputes involving all workers, among whom are overseas Filipino State to afford protection to labor, promote full employment, ensure equal work
workers (OFW).15 opportunities regardless of sex, race or creed, and regulate the relations between
workers and employers.1awphi1.net For the State assures the basic rights of all
We are not unmindful of the fact that respondent was directly hired, while on a tourist workers to self-organization, collective bargaining, security of tenure, and just and
status in Singapore, by the PNB branch in that city state. Prior to employing humane conditions of work [Article 3 of the Labor Code of the Philippines; See also
respondent, petitioner had to obtain an employment pass for her from the Singapore Section 18, Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is
Ministry of Manpower. Securing the pass was a regulatory requirement pursuant to likewise rendered imperative by Article 17 of the Civil Code which states that laws
the immigration regulations of that country.16 ‘which have for their object public order, public policy and good customs shall not be
rendered ineffective by laws or judgments promulgated, or by determination or
Similarly, the Philippine government requires non-Filipinos working in the country to
conventions agreed upon in a foreign country.’"
first obtain a local work permit in order to be legally employed here. That permit,
however, does not automatically mean that the non-citizen is thereby bound by local Second Issue:
laws only, as averred by petitioner. It does not at all imply a waiver of one’s national
laws on labor. Absent any clear and convincing evidence to the contrary, such permit Proper Venue
simply means that its holder has a legal status as a worker in the issuing
country.1avvphil.zw+ Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

Noteworthy is the fact that respondent likewise applied for and secured an Overseas "Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear and
Employment Certificate from the POEA through the Philippine Embassy in Singapore. decide may be filed in the Regional Arbitration Branch having jurisdiction over the
The Certificate, issued on March 8, 1999, declared her a bona fide contract worker for workplace of the complainant/petitioner; Provided, however that cases of Overseas
Singapore. Under Philippine law, this document authorized her working status in a Filipino Worker (OFW) shall be filed before the Regional Arbitration Branch where the
foreign country and entitled her to all benefits and processes under our statutes. complainant resides or where the principal office of the respondent/employer is
Thus, even assuming arguendo that she was considered at the start of her situated, at the option of the complainant.
employment as a "direct hire" governed by and subject to the laws, common practices
and customs prevailing in Singapore17 she subsequently became a contract worker or "For purposes of venue, workplace shall be understood as the place or locality where
an OFW who was covered by Philippine labor laws and policies upon certification by the employee is regularly assigned when the cause of action arose. It shall include
the POEA. At the time her employment was illegally terminated, she already the place where the employee is supposed to report back after a temporary detail,
possessed the POEA employment Certificate. assignment or travel. In the case of field employees, as well as ambulant or itinerant
workers, their workplace is where they are regularly assigned, or where they are
Moreover, petitioner admits that it is a Philippine corporation doing business through supposed to regularly receive their salaries/wages or work instructions from, and
a branch office in Singapore.18 Significantly, respondent’s employment by the report the results of their assignment to their employers."
Singapore branch office had to be approved by Benjamin P. Palma Gil, 19 the

65
Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a All that petitioner tendered to respondent was a notice of her employment termination
migrant worker "refers to a person who is to be engaged, is engaged or has been effective the very same day, together with the equivalent of a one-month pay. This
engaged in a remunerated activity in a state of which he or she is not a legal resident; Court has already held that nothing in the law gives an employer the option to
to be used interchangeably with overseas Filipino worker." 21 Undeniably, respondent substitute the required prior notice and opportunity to be heard with the mere
was employed by petitioner in its branch office in Singapore. Admittedly, she is a payment of 30 days’ salary.24
Filipino and not a legal resident of that state. She thus falls within the category of
"migrant worker" or "overseas Filipino worker." Well-settled is the rule that the employer shall be sanctioned for noncompliance with
the requirements of, or for failure to observe, due process that must be observed in
As such, it is her option to choose the venue of her Complaint against petitioner for dismissing an employee.25
illegal dismissal. The law gives her two choices: (1) at the Regional Arbitration Branch
(RAB) where she resides or (2) at the RAB where the principal office of her employer No Valid Cause for Dismissal
is situated. Since her dismissal by petitioner, respondent has returned to the
Philippines -- specifically to her residence at Filinvest II, Quezon City. Thus, in filing Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid
her Complaint before the RAB office in Quezon City, she has made a valid choice of grounds or causes for an employee’s dismissal. The employer has the burden of
proper venue. proving that it was done for any of those just or authorized causes. The failure to
discharge this burden means that the dismissal was not justified, and that the
Third Issue: employee is entitled to reinstatement and back wages. 29

Illegal Dismissal Notably, petitioner has not asserted any of the grounds provided by law as a valid
reason for terminating the employment of respondent. It merely insists that her
The appellate court was correct in holding that respondent was already a regular dismissal was validly effected pursuant to the provisions of her employment Contract,
employee at the time of her dismissal, because her three-month probationary period which she had voluntarily agreed to be bound to.
of employment had already ended. This ruling is in accordance with Article 281 of the
Labor Code: "An employee who is allowed to work after a probationary period shall be Truly, the contracting parties may establish such stipulations, clauses, terms and
considered a regular employee." Indeed, petitioner recognized respondent as such at conditions as they want, and their agreement would have the force of law between
the time it dismissed her, by giving her one month’s salary in lieu of a one-month them. However, petitioner overlooks the qualification that those terms and conditions
notice, consistent with provision No. 6 of her employment Contract. agreed upon must not be contrary to law, morals, customs, public policy or public
order.30 As explained earlier, the employment Contract between petitioner and
Notice and Hearing Not Complied With respondent is governed by Philippine labor laws. Hence, the stipulations, clauses,
and terms and conditions of the Contract must not contravene our labor law
As a regular employee, respondent was entitled to all rights, benefits and privileges provisions.
provided under our labor laws. One of her fundamental rights is that she may not be
dismissed without due process of law. The twin requirements of notice and hearing Moreover, a contract of employment is imbued with public interest. The Court has
constitute the essential elements of procedural due process, and neither of these time and time again reminded parties that they "are not at liberty to insulate
elements can be eliminated without running afoul of the constitutional guarantee. 22 themselves and their relationships from the impact of labor laws and regulations by
simply contracting with each other."31 Also, while a contract is the law between the
In dismissing employees, the employer must furnish them two written notices: 1) one parties, the provisions of positive law that regulate such contracts are deemed
to apprise them of the particular acts or omissions for which their dismissal is sought; included and shall limit and govern the relations between the parties. 32
and 2) the other to inform them of the decision to dismiss them. As to the requirement
of a hearing, its essence lies simply in the opportunity to be heard.23 Basic in our jurisprudence is the principle that when there is no showing of any clear,
valid, and legal cause for the termination of employment, the law considers the matter
The evidence in this case is crystal-clear. Respondent was not notified of the specific a case of illegal dismissal.33
act or omission for which her dismissal was being sought. Neither was she given any
chance to be heard, as required by law. At any rate, even if she were given the Awards for Damages Justified
opportunity to be heard, she could not have defended herself effectively, for she knew
no cause to answer to.

66
Finally, moral damages are recoverable when the dismissal of an employee is company, and by way of example or correction for the public good so that persons
attended by bad faith or constitutes an act oppressive to labor or is done in a manner similarly minded as [petitioners] would be deterred from committing the same acts."36
contrary to morals, good customs or public policy.34 Awards for moral and exemplary
damages would be proper if the employee was harassed and arbitrarily dismissed by The Court also affirms the award of attorney’s fees. It is settled that when an action is
the employer.35 instituted for the recovery of wages, or when employees are forced to litigate and
consequently incur expenses to protect their rights and interests, the grant of
In affirming the awards of moral and exemplary damages, we quote with approval the attorney’s fees is legally justifiable.37
following ratiocination of the labor arbiter:
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
"The records also show that [respondent’s] dismissal was effected by [petitioners’] AFFIRMED. Costs against petitioner.
capricious and high-handed manner, anti-social and oppressive, fraudulent and in
bad faith, and contrary to morals, good customs and public policy. Bad faith and fraud
are shown in the acts committed by [petitioners] before, during and after
[respondent’s] dismissal in addition to the manner by which she was dismissed. First,
[respondent] was pressured to resign for two different and contradictory reasons,
namely, cost-cutting and the need for a Chinese[-]speaking credit officer, for which no
written advice was given despite complainant’s request. Such wavering stance or
vacillating position indicates bad faith and a dishonest purpose. Second, she was
employed on account of her qualifications, experience and readiness for the position
of credit officer and pressured to resign a month after she was commended for her
good work. Third, the demand for [respondent’s] instant resignation on 19 April 1999
to give way to her replacement who was allegedly reporting soonest, is whimsical,
fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic]
until 15 May 1999 within which to leave. Fourth, the pressures made on her to resign
were highly oppressive, anti-social and caused her absolute torture, as [petitioners]
disregarded her situation as an overseas worker away from home and family, with no
prospect for another job. She was not even provided with a return trip fare. Fifth, the
notice of termination is an utter manifestation of bad faith and whim as it totally
disregards [respondent’s] right to security of tenure and due process. Such notice
together with the demands for [respondent’s] resignation contravenes the
fundamental guarantee and public policy of the Philippine government on security of
tenure.

"[Respondent] likewise established that as a proximate result of her dismissal and


prior demands for resignation, she suffered and continues to suffer mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock and
social humiliation. Her standing in the social and business community as well as
prospects for employment with other entities have been adversely affected by her
dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the
Civil Code.

xxxxxxxxx

"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in


terminating [respondent’s] employment and are therefore liable for exemplary
damages. This should served [sic] as protection to other employees of [petitioner]

67
iii. Jurisdiction over the res or the thing which is the subject of the litigation regard to the partition of the property in question, she referred private respondent's
counsel to her husband as the party to whom all communications intended for her
G.R. No. 108538 January 22, 1996 should be sent. The letter reads:

LOURDES A. VALMONTE and ALFREDO D. VALMONTE, petitioners, July 4, 1991


vs.
THE HONORABLE COURT OF APPEALS, THIRD DIVISION and ROSITA Dear Atty. Balgos:
DIMALANTA, respondents.
This is in response to your letter, dated 20 June 1991, which I received on 3 July
DECISION 1991. Please address all communications to my lawyer, Atty. Alfredo D. Valmonte,
whose address, telephone and fax numbers appear below.
MENDOZA, J.:
c/o Prime Marine
Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in an Gedisco Center, Unit 304
action for partition filed against her and her husband, who is also her attorney, 1564 A. Mabini, Ermita
summons intended for her may be served on her husband, who has a law office in the Metro Manila
Philippines. The Regional Trial Court of Manila, Branch 48, said no and refused to Telephone: 521-1736
declare Lourdes A. Valmonte in default, but the Court of Appeals said yes. Hence this Fax: 521-2095
petition for review on certiorari.
Service of summons was then made upon petitioner Alfredo D. Valmonte, who at the
The facts of the case are as follows: 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
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife. wife, Lourdes A. Valmonte, on the ground that he was not authorized to accept the
They are both residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A. process on her behalf. Accordingly the process server left without leaving a copy of
Petitioner Alfredo D. Valmonte, who is a member of the Philippine bar, however, the summons and complaint for petitioner Lourdes A. Valmonte.
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 Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim.
Gedisco Centre, 1564 A. Mabini Ermita, Manila. 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
On March 9, 1992, private respondent Rosita Dimalanta, who is the sister of petitioner entered a special appearance in behalf of his wife and opposed the private
Lourdes A. Valmonte, filed a complaint for partition of real property and accounting of respondent's motion.
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 In its Order dated July 3, 1992, the trial court, denied private respondent's motion to
apartment located in Paco, Manila. declare petitioner Lourdes A. Valmonte in default. A motion for reconsideration was
similarly denied on September 23, 1992. Whereupon, private respondent filed a
In her Complaint, private respondent alleged: petition for certiorari, prohibition and mandamus with the Court of Appeals.

The plaintiff is of legal age, a widow and is at present a resident of 14823 Conway On December 29, 1992, the Court of Appeals rendered a decision granting the
Road, Chesterfield, Missouri, U.S.A., while the defendants are spouses, of legal age petition and declaring Lourdes A. Valmonte in default. A copy of the appellate court's
and at present residents of 90222 Carkeek Drive, South Seattle, Washington, U.S.A., decision was received by petitioner Alfredo D. Valmonte on January 15, 1993 at his
but, for purposes of this complaint may be served with summons at Gedisco Center, Manila office and on January 21, 1993 in Seattle, Washington. Hence, this petition.
Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant Alfredo D. Valmonte as
defendant Lourdes Arreola Valmonte's spouse holds office and where he can be The issue at bar is whether in light of the facts set forth above, petitioner Lourdes A.
found. Valmonte was validly served with summons. In holding that she had been, the Court
of Appeals stated:1
Apparently, the foregoing averments were made on the basis of a letter previously
sent by petitioner Lourdes A. Valmonte to private respondent's counsel in which, in

68
[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the private respondent Lourdes Arreola Valmonte as having been properly served with
aforementioned counsel of Dimalanta to address all communications (evidently summons.
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 Petitioners assail the aforequoted decision, alleging that the Court of Appeals erred
husband. Such directive was made without any qualification just as was her (1) in refusing to apply the provisions of Rule 14, §17 of the Revised Rules of Court
choice/designation of her husband Atty. Valmonte as her lawyer likewise made and applying instead Rule 14, §8 when the fact is that petitioner Lourdes A. Valmonte
without any qualification or reservation. Any disclaimer therefore on the part of Atty. is a nonresident defendant; and (2) because even if Rule 14, §8 is the applicable
Valmonte as to his being his wife's attorney (at least with regard to the dispute vis-a- provision, there was no valid substituted service as there was no strict compliance
vis (sic) the Paco property) would appear to be feeble or trifling, if not incredible. 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
This view is bolstered by Atty. Valmonte's subsequent alleged special appearance petitioners are invoking a technicality and that strict adherence to the rules would only
made on behalf of his wife. Whereas Mrs. Valmonte had manifestly authorized her result in a useless ceremony.
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 We hold that there was no valid service of process on Lourdes A. Valmonte.
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 To provide perspective, it will be helpful to determine first the nature of the action filed
authority to receive summons on her behalf. In effect, she is asserting that against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private
representation by her lawyer (who is also her husband) as far as the Paco property respondent, whether it is an action in personam, in rem or quasi in rem. This is
controversy is concerned, should only be made by him when such representation because the rules on service of summons embodied in Rule 14 apply according to
would be favorable to her but not otherwise. It would obviously be inequitable for this whether an action is one or the other of these actions.
Court to allow private respondent Lourdes A. Valmonte to hold that her husband has
In an action in personam, personal service of summons or, if this is not possible and
the authority to represent her when an advantage is to be obtained by her and to
he cannot be personally served, substituted service, as provided in Rule 14, §§7-82 is
deny such authority when it would turn out to be her disadvantage. If this be allowed,
essential for the acquisition by the court of jurisdiction over the person of a defendant
Our Rules of Court, instead of being an instrument to promote justice would be made
who does not voluntarily submit himself to the authority of the court.3 If defendant
use of to thwart or frustrate the same.
cannot be served with summons because he is temporarily abroad, but otherwise he
xxx xxx xxx 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
Turning to another point, it would not do for Us to overlook the fact that the disputed cannot be personally served with summons, may be summoned either by means of
summons was served not upon just an ordinary lawyer of private respondent Lourdes substituted service in accordance with Rule 14, §8 or by publication as provided in §§
A. Valmonte, but upon her lawyer husband. But that is not all, the same 17 and 18 of the same Rule.5
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 In all of these cases, it should be noted, defendant must be a resident of the
to the conjugal partnership of the defendants (the spouses Valmonte). It is highly Philippines, otherwise an action in personam cannot be brought because jurisdiction
inconceivable and certainly it would be contrary to human nature for the over his person is essential to make a binding decision.
lawyer/husband/co-defendant to keep to himself the fact that they (the spouses
On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person
Valmonte) had been sued with regard to a property which, he claims to be conjugal.
of the defendant is not essential for giving the court jurisdiction so long as the court
Parenthetically, there is nothing in the records of the case before Us regarding any
acquires jurisdiction over the res. If the defendant is a nonresident and he is not found
manifestation by private respondent Lourdes A. Valmonte about her lack of
in the country, summons may be served exterritorially in accordance with Rule 14,
knowledge about the case instituted against her and her lawyer/husband/co-
§17, which provides:
defendant by her sister Rosita. . . .
§17. Extraterritorial service. - When the defendant does not reside and is not found in
PREMISES CONSIDERED, the instant petition for certiorari, prohibition and
the Philippines and the action affects the personal status of the plaintiff or relates to,
mandamus is given due course. This Court hereby Resolves to nullify the orders of
or the subject of which is, property within the Philippines, in which the defendant has
the court a quo dated July 3, 1992 and September 23, 1992 and further declares
or claims a lien or interest, actual or contingent, or in which the relief demanded

69
consists, wholly or in part, in excluding the defendant from any interest therein, or the Since in the case at bar, the service of summons upon petitioner Lourdes A.
property of the defendant has been attached within the Philippines, service may, by Valmonte was not done by means of any of the first two modes, the question is
leave of court, be effected out of the Philippines by personal service as under section whether the service on her attorney, petitioner Alfredo D. Valmonte, can be justified
7; or by publication in a newspaper of general circulation in such places and for such under the third mode, namely, "in any . . . manner the court may deem sufficient."
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 We hold it cannot. This mode of service, like the first two, must be made outside the
any other manner the court may deem sufficient. Any order granting such leave shall Philippines, such as through the Philippine Embassy in the foreign country where the
specify a reasonable time, which shall not be less than sixty (60) days after notice, defendant resides.8 Moreover, there are several reasons why the service of
within which the defendant must answer.. 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
In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is on petitioner Alfredo D. Valmonte was not made upon the order of the court as
that it has jurisdiction over the res, i.e. the personal status of the plaintiff who is required by Rule 14, §17 and certainly was not a mode deemed sufficient by the court
domiciled in the Philippines or the property litigated or attached. 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.
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 In the second place, service in the attempted manner on petitioner was not made
that he will be informed of the pendency of the action against him and the possibility upon prior leave of the trial court as required also in Rule 14, §17. As provided in §19,
that property in the Philippines belonging to him or in which he has an interest may be such leave must be applied for by motion in writing, supported by affidavit of the
subjected to a judgment in favor of the plaintiff and he can thereby take steps to plaintiff or some person on his behalf and setting forth the grounds for the application.
protect his interest if he is so minded.6
Finally, and most importantly, because there was no order granting such leave,
Applying the foregoing rules to the case at bar, private respondent's action, which is petitioner Lourdes A. Valmonte was not given ample time to file her Answer which,
for partition and accounting under Rule 69, is in the nature of an action quasi in rem. according to the rules, shall be not less than sixty (60) days after notice. It must be
Such an action is essentially for the purpose of affecting the defendant's interest in a noted that the period to file an Answer in an action against a resident defendant
specific property and not to render a judgment against him. As explained in the differs from the period given in an action filed against a nonresident defendant who is
leading case of Banco Español Filipino v. Palanca :7 not found in the Philippines. In the former, the period is fifteen (15) days from service
of summons, while in the latter, it is at least sixty (60) days from notice.
[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 Strict compliance with these requirements alone can assure observance of due
from the true action in rem in the circumstance that in the former an individual is process. That is why in one case,9 although the Court considered publication in the
named as defendant and the purpose of the proceeding is to subject his interest Philippines of the summons (against the contention that it should be made in the
therein to the obligation or lien burdening the property. All proceedings having for foreign state where defendant was residing) sufficient, nonetheless the service was
their sole object the sale or other disposition of the property of the defendant, whether considered insufficient because no copy of the summons was sent to the last known
by attachment, foreclosure, or other form of remedy, are in a general way thus correct address in the Philippines..
designated. The judgment entered in these proceedings is conclusive only between
the parties. Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-463
(1975), in which it was held that service of summons upon the defendant's husband
As petitioner Lourdes A. Valmonte is a nonresident who is not found in the was binding on her. But the ruling in that case is justified because summons were
Philippines, service of summons on her must be in accordance with Rule 14, §17. served upon defendant's husband in their conjugal home in Cebu City and the wife
Such service, to be effective outside the Philippines, must be made either (1) by was only temporarily absent, having gone to Dumaguete City for a vacation. The
personal service; (2) by publication in a newspaper of general circulation in such action was for collection of a sum of money. In accordance with Rule 14, §8,
places and for such time as the court may order, in which case a copy of the substituted service could be made on any person of sufficient discretion in the
summons and order of the court should be sent by registered mail to the last known dwelling place of the defendant, and certainly defendant's husband, who was there,
address of the defendant; or (3) in any other manner which the court may deem was competent to receive the summons on her behalf. In any event, it appears that
sufficient. defendant in that case submitted to the jurisdiction of the court by instructing her
husband to move for the dissolution of the writ of attachment issued in that case.

70
On the other hand, in the case of Gemperle v. Schenker, 10 it was held that service
on the wife of a nonresident defendant was found sufficient because the defendant
had appointed his wife as his attorney-in-fact. It was held that although defendant
Paul Schenker was a Swiss citizen and resident of Switzerland, service of summons
upon his wife Helen Schenker who was in the Philippines was sufficient because she
was her husband's representative and attorney-in-fact in a civil case, which he had
earlier filed against William Gemperle. In fact Gemperle's action was for damages
arising from allegedly derogatory statements contained in the complaint filed in the
first case. As this Court said, "[i]n other words, Mrs. Schenker had authority to sue,
and had actually sued, on behalf of her husband, so that she was, also, empowered
to represent him in suits filed against him, particularly in a case, like the one at bar,
which is a consequence of the action brought by her on his behalf" 11 Indeed, if
instead of filing an independent action Gemperle filed a counterclaim in the action
brought by Mr. Schenker against him, there would have been no doubt that the trial
court could have acquired jurisdiction over Mr. Schenker through his agent and
attorney-in-fact, Mrs. Schenker.

In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint her
husband as her attorney-in-fact. Although she wrote private res- pondent's attorney
that "all communications" intended for her should be addressed to her husband who
is also her lawyer at the latter's address in Manila, no power of attorney to receive
summons for her can be inferred therefrom. In fact the letter was written seven
months before the filing of this case below, and it appears that it was written in
connection with the negotiations between her and her sister, respondent Rosita
Dimalanta, concerning the partition of the property in question. As is usual in
negotiations of this kind, the exchange of correspondence was carried on by counsel
for the parties. But the authority given to petitioner's husband in these negotiations
certainly cannot be construed as also including an authority to represent her in any
litigation.

For the foregoing reasons, we hold that there was no valid service on petitioner
Lourdes A. Valmonte in this case.

WHEREFORE, the decision appealed from is REVERSED and the orders dated July
3, 1992 and September 23, 1992 of the Regional Trial Court of Manila, Branch 48 are
REINSTATED.

71
iii. Jurisdiction over the res or the thing which is the subject of the litigation the Agreement. Originally instituted in the United States District Court of Texas, 165th
Judicial District, where it was docketed as Case No. 85-57746, the venue of the
G.R. No. 103493 June 19, 1997 action was later transferred to the United States District Court for the Southern District
of Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE the original complaint. ATHONA filed an answer with counterclaim, impleading private
LIMITED, and ATHONA HOLDINGS, N.V., petitioners, respondents herein as counterdefendants, for allegedly conspiring in selling the
vs. property at a price over its market value. Private respondent Perlas, who had
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA allegedly appraised the property, was later dropped as counterdefendant. ATHONA
O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents. sought the recovery of damages and excess payment allegedly made to 1488, Inc.
and, in the alternative, the rescission of sale of the property. For their part, PHILSEC
and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their
MENDOZA, J.: person, but, as their motion was denied, they later filed a joint answer with
counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC's own
This case presents for determination the conclusiveness of a foreign judgment upon former president, for the rescission of the sale on the ground that the property had
the rights of the parties under the same cause of action asserted in a case in our local been overvalued. On March 13, 1990, the United States District Court for the
court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56, Southern District of Texas dismissed the counterclaim against Edgardo V. Guevarra
which, in view of the pendency at the time of the foreign action, dismissed Civil Case on the ground that it was "frivolous and [was] brought against him simply to humiliate
No. 16563 on the ground of litis pendentia, in addition to forum non conveniens. On and embarrass him." For this reason, the U.S. court imposed so-called Rule 11
appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari. sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.

The facts are as follows: On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States,
petitioners filed a complaint "For Sum of Money with Damages and Writ of Preliminary
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans Attachment" against private respondents in the Regional Trial Court of Makati, where
from petitioners Ayala International Finance Limited (hereafter called AYALA) 1 and it was docketed as Civil Case No. 16563. The complaint reiterated the allegation of
Philsec Investment Corporation (hereafter called PHILSEC) in the sum of petitioners in their respective counterclaims in Civil Action No. H-86-440 of the United
US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of States District Court of Southern Texas that private respondents committed fraud by
P14,088,995.00. In order to facilitate the payment of the loans, private respondent selling the property at a price 400 percent more than its true value of US$800,000.00.
1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's Petitioners claimed that, as a result of private respondents' fraudulent
obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the
executed a Warranty Deed with Vendor's Lien by which it sold to petitioner Athona Agreement and to purchase the Houston property. Petitioners prayed that private
Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, respondents be ordered to return to ATHONA the excess payment of
U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a loan to US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a writ
ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. of preliminary attachment against the real and personal properties of private
The balance of US$307,209.02 was to be paid by means of a promissory note respondents. 2
executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of
indebtedness and delivered to 1488, Inc. all the shares of stock in their possession (1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in
belonging to Ducat. the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-
IFL to state a cause of action. Ducat contended that the alleged overpricing of the
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL
amount covered by the note became due and demandable. Accordingly, on October which were not parties to the sale and whose only participation was to extend
17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and financial accommodation to ATHONA under a separate loan agreement. On the other
ATHONA in the United States for payment of the balance of US$307,209.02 and for hand, private respondents 1488, Inc. and its president Daic filed a joint "Special
damages for breach of contract and for fraud allegedly perpetrated by petitioners in Appearance and Qualified Motion to Dismiss," contending that the action being in
misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under personam, extraterritorial service of summons by publication was ineffectual and did

72
not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign The Court of Appeals also held that Civil Case No. 16563 was an action in personam
corporation, and Daic, who is a non-resident alien. for the recovery of a sum of money for alleged tortious acts, so that service of
summons by publication did not vest the trial court with jurisdiction over 1488, Inc.
On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that and Drago Daic. The dismissal of Civil Case No. 16563 on the ground of forum non
"the evidentiary requirements of the controversy may be more suitably tried before the conveniens was likewise affirmed by the Court of Appeals on the ground that the case
forum of the litis pendentia in the U.S., under the principle in private international law can be better tried and decided by the U.S. court:
of forum non conveniens," even as it noted that Ducat was not a party in the U.S.
case. The U.S. case and the case at bar arose from only one main transaction, and involve
foreign elements, to wit: 1) the property subject matter of the sale is situated in Texas,
A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the
On March 9, 1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. buyer, Athona Holdings, a foreign corporation which does not claim to be doing
and Daic on the ground of litis pendentia considering that business in the Philippines, is wholly owned by Philsec, a domestic corporation,
Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the Warranty
the "main factual element" of the cause of action in this case which is the validity of Deed was executed in Texas, U.S.A.
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District Court In their present appeal, petitioners contend that:
which, under the doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or fluctuations of 1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME
the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE
the transaction in 1983 up to the present and verily, . . . (emphasis by trial court) COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE
CIVIL ACTION IS NOT APPLICABLE.
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because
they were non-residents and the action was not an action in rem or quasi in rem, so 2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE
that extraterritorial service of summons was ineffective. The trial court subsequently COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
lifted the writ of attachment it had earlier issued against the shares of stocks of 1488, THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
Inc. and Daic.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE
applying the principle of litis pendentia and forum non conveniens and in ruling that it ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS
had no jurisdiction over the defendants, despite the previous attachment of shares of RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY
stocks belonging to 1488, Inc. and Daic. REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR TORTIOUS
OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS (WHO ARE
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE
16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus: PHILIPPINES.

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants We will deal with these contentions in the order in which they are made.
are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the
Athona Holdings, NV. The case at bar involves the same parties. The transaction First. It is important to note in connection with the first point that while the present
sued upon by the parties, in both cases is the Warranty Deed executed by and case was pending in the Court of Appeals, the United States District Court for the
between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the Southern District of Texas rendered judgment 5 in the case before it. The judgment,
promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed which was in favor of private respondents, was affirmed on appeal by the Circuit
by herein appellants, on the marketability of Ducat's securities given in exchange for Court of Appeals. 6 Thus, the principal issue to be resolved in this case is whether
the Texas property. The recovery of a sum of money and damages, for fraud Civil Case No. 16536 is barred by the judgment of the U.S. court.
purportedly committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the same Warranty Private respondents contend that for a foreign judgment to be pleaded as res
Deed. judicata, a judgment admitting the foreign decision is not necessary. On the other

73
hand, petitioners argue that the foreign judgment cannot be given the effect of res summary. Neither the trial court nor the appellate court was even furnished copies of
judicata without giving them an opportunity to impeach it on grounds stated in Rule the pleadings in the U.S. court or apprised of the evidence presented thereat, to
39, §50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to the party, assure a proper determination of whether the issues then being litigated in the U.S.
collusion, fraud, or clear mistake of law or fact." court were exactly the issues raised in this case such that the judgment that might be
rendered would constitute res judicata. As the trial court stated in its disputed order
Petitioners' contention is meritorious. While this Court has given the effect of res dated March 9, 1988.
judicata to foreign judgments in several cases, 7 it was after the parties opposed to
the judgment had been given ample opportunity to repel them on grounds allowed On the plaintiff's claim in its Opposition that the causes of action of this case and the
under the law. 8 It is not necessary for this purpose to initiate a separate action or pending case in the United States are not identical, precisely the Order of January 26,
proceeding for enforcement of the foreign judgment. What is essential is that there is 1988 never found that the causes of action of this case and the case pending before
opportunity to challenge the foreign judgment, in order for the court to properly the USA Court, were identical. (emphasis added)
determine its efficacy. This is because in this jurisdiction, with respect to actions in
personam, as distinguished from actions in rem, a foreign judgment merely It was error therefore for the Court of Appeals to summarily rule that petitioners' action
constitutes prima facie evidence of is barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction
the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 of the U.S. court over their persons, but their claim was brushed aside by both the
Rule 39, §50 provides: trial court and the Court of Appeals. 13

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition
foreign country, having jurisdiction to pronounce the judgment is as follows: for the enforcement of judgment in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the proceedings were suspended because of the pendency of this case. To sustain the
title to the thing; appellate court's ruling that the foreign judgment constitutes res judicata and is a bar
to the claim of petitioners would effectively preclude petitioners from repelling the
(b) In case of a judgment against a person, the judgment is presumptive evidence of judgment in the case for enforcement. An absurdity could then arise: a foreign
a right as between the parties and their successors in interest by a subsequent title; judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is
but the judgment may be repelled by evidence of a want of jurisdiction, want of notice pleaded to resist a claim as in this case, but it may be opposed by the defendant if the
to the party, collusion, fraud, or clear mistake of law or fact. foreign judgment is sought to be enforced against him in a separate proceeding. This
is plainly untenable. It has been held therefore that:
Thus, in the case of General Corporation of the Philippines v. Union Insurance
Society of Canton, Ltd., 10 which private respondents invoke for claiming conclusive [A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
effect for the foreign judgment in their favor, the foreign judgment was considered res where affirmative relief is being sought. Hence, in the interest of justice, the complaint
judicata because this Court found "from the evidence as well as from appellant's own should be considered as a petition for the recognition of the Hongkong judgment
pleadings" 11 that the foreign court did not make a "clear mistake of law or fact" or under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant,
that its judgment was void for want of jurisdiction or because of fraud or collusion by private respondent herein, may present evidence of lack of jurisdiction, notice,
the defendants. Trial had been previously held in the lower court and only afterward collusion, fraud or clear mistake of fact and law, if applicable. 14
was a decision rendered, declaring the judgment of the Supreme Court of the State of
Washington to have the effect of res judicata in the case before the lower court. In the Accordingly, to insure the orderly administration of justice, this case and Civil Case
same vein, in Philippines International Shipping Corp. v. Court of Appeals, 12 this No. 92-1070 should be consolidated. 15 After all, the two have been filed in the
Court held that the foreign judgment was valid and enforceable in the Philippines Regional Trial Court of Makati, albeit in different salas, this case being assigned to
there being no showing that it was vitiated by want of notice to the party, collusion, Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in
fraud or clear mistake of law or fact. The prima facie presumption under the Rule had Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have
not been rebutted. the burden of impeaching the foreign judgment and only in the event they succeed in
doing so may they proceed with their action against private respondents.
In the case at bar, it cannot be said that petitioners were given the opportunity to
challenge the judgment of the U.S. court as basis for declaring it res judicata or Second. Nor is the trial court's refusal to take cognizance of the case justifiable under
conclusive of the rights of private respondents. The proceedings in the trial court were the principle of forum non conveniens. First, a motion to dismiss is limited to the

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grounds under Rule 16, §1, which does not include forum non conveniens. 16 The
propriety of dismissing a case based on this principle requires a factual determination,
hence, it is more properly considered a matter of defense. Second, while it is within
the discretion of the trial court to abstain from assuming jurisdiction on this ground, it
should do so only after "vital facts are established, to determine whether special
circumstances" require the court's desistance. 17

In this case, the trial court abstained from taking jurisdiction solely on the basis of the
pleadings filed by private respondents in connection with the motion to dismiss. It
failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and
one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment
of the latter's debt which was the object of the transaction under litigation. The trial
court arbitrarily dismissed the case even after finding that Ducat was not a party in the
U.S. case.

Third. It was error we think for the Court of Appeals and the trial court to hold that
jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in
personam and summons were served by extraterritorial service. Rule 14, §17 on
extraterritorial service provides that service of summons on a non-resident defendant
may be effected out of the Philippines by leave of Court where, among others, "the
property of the defendant has been attached within the Philippines." 18 It is not
disputed that the properties, real and personal, of the private respondents had been
attached prior to service of summons under the Order of the trial court dated April 20,
1987. 19

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994,
to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra
to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court,
the Court finds that the judgment sought to be enforced is severable from the main
judgment under consideration in Civil Case No. 16563. The separability of Guevara's
claim is not only admitted by petitioners, 20 it appears from the pleadings that
petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563.
21 Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case
No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation with
Civil Case No. 92-1070 and for further proceedings in accordance with this decision.
The temporary restraining order issued on June 29, 1994 is hereby LIFTED.

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