G.R. No. 94980 - Litton Mills, Inc. vs. Court of Appeals

Litton Mills, Inc. (petitioner) entered into a contract with Empire Sales Philippines Corporation acting as the local agent of Gelhaar Uniform Company, Inc. (a U.S.-organized foreign corporation).
Under the agreement, Litton Mills was to supply Gelhaar with 7,770 dozens of soccer jerseys, subject to the condition that an inspection certificate be issued by Empire (the designated agent) before Litton could collect on an irrevocable letter of credit.

Four shipments totaling 4,770 dozens of soccer jerseys were sent between December 2 and December 30, 1983.
A fifth shipment comprising 2,110 dozens was inspected between January 9 and January 19, 1984; however, Empire refused to issue the required inspection certificate despite the inspection being conducted.

Litton Mills filed a complaint on January 23, 1984, for specific performance, seeking a preliminary mandatory injunction compelling Empire to issue the inspection certificate for the fifth shipment.
Litton argued that under the letter of credit provisions the goods had to be shipped by January 30, 1984, before the vessel’s scheduled receipt on January 27, 1984 and prior to the letter of credit’s expiry on February 14, 1984.

The Regional Trial Court of Pasig (Branch 158) issued a writ of preliminary injunction on January 25, 1984.
Following the issuance of the writ, Empire subsequently provided the inspection certificate, ensuring the timely shipment of the cargo.
Multiple motions for extension of time to answer were filed by counsel for the defendants (through Atty. Remie Noval) on various dates in 1984, with nearly all motions granted until one was denied. The court then reconsidered its stance, eventually admitting the answer of the defendants.

On January 29, 1985, the law firm representing Gelhaar (Sycip, Salazar, Feliciano, and Hernandez) entered a special appearance to object to the court’s jurisdiction over Gelhaar.
The firm moved to dismiss the case and quash the summons on the ground that Gelhaar, as a foreign corporation, was not “doing business” in the Philippines—citing the precedent of Pacific Micronisian Lines, Inc. v. Del Rosario.
Atty. Remie Noval, who had appeared for Gelhaar earlier, was later challenged regarding his authority to represent Gelhaar. Although he claimed to have been authorized and that Gelhaar had been informed, Gelhaar ultimately disavowed his appointment, arguing that no proper communication or confirmation of his representation had occurred.

The trial court, on September 24, 1986, denied Gelhaar’s motion to dismiss and quash the summons, ruling that Gelhaar was, in fact, doing business in the Philippines and that service of summons via its agent (Empire) was valid.
Gelhaar filed a motion for reconsideration, which was denied by the trial court.
Subsequently, Gelhaar elevated the issue through a special civil action of certiorari to the Court of Appeals, which on August 20, 1990, set aside the trial court orders. The appellate court held that:

Proof that Gelhaar was doing business in the Philippines should have been presented;
The trial court erred in relying solely on the complaint’s mere allegations; and
The voluntary appearance of Atty. Remie Noval did not confer jurisdiction over Gelhaar due to questions regarding his authority.

Whether the trial court acquired jurisdiction over Gelhaar by serving summons through its agent, Empire, in compliance with Rule 14, A14.
Whether the allegations in the complaint sufficiently established that Gelhaar was “doing business” in the Philippines, as required for valid service.

Whether the appearance of Atty. Remie Noval on behalf of Gelhaar constituted a binding submission to the court’s jurisdiction.
Whether the purported authority of Atty. Noval was confirmed or disavowed by Gelhaar, impacting the validity of the filing of the answer on its behalf.

Whether a single contractual transaction, even if substantial, can be deemed “doing business” in the Philippines or whether it constitutes an isolated, casual act not subject to a Philippine court’s jurisdiction.