Case Summary (G.R. No. 153004)
Factual Background — Agency, Accounting Obligation, and Alleged Default
On October 13, 1927, Co Quico entered into an agency contract with Asiatic Petroleum to sell its petroleum products for cash on commission, with an express obligation to render proper accounting. By the complaint filed May 24, 1933, Asiatic Petroleum alleged that Co Quico was in default for P2,123.80 (after deductions) and an additional P109.67, and that he had left for China without accounting. The complaint also asserted that Co Quico had disposed of or was disposing of property with intent to defraud creditors, and sought a writ of attachment and recovery of the stated amounts.
Procedural History — Attachment, Publication, Default Judgment, and Execution
On May 26, 1933 the trial court issued a preliminary attachment which was served on the Mercantile Bank of China while in liquidation; the bank acknowledged deposits belonging to Co Quico (P3,421.61 in a current account and Amoy $3,403.16 in a foreign currency savings account). The trial court ordered summons by publication (clerk to mail copies to the last known address in Tarlac). Defendant did not appear; on November 17, 1933 the court entered judgment for the plaintiff in the amounts prayed. A writ of execution was issued and levied on the bank deposits, but the Execution Return initially showed unsatisfied levy because the deposits had allegedly been transferred to Co Chio. Subsequent alias writs were issued and levied on the same deposits; the bank noted the garnishment and indicated payments would be made in due course. Co Chio submitted a written statement asserting that Co Quico was the true owner of the deposits.
Post-Judgment Special Appearance and Motion to Nullify Proceedings
On August 20, 1938, counsel for Co Quico entered a special appearance solely to move to set aside and declare null all proceedings in the case (except filing of the complaint). The grounds asserted were (1) the court had not acquired jurisdiction over the person of the defendant, and (2) the defendant had been deprived of his property without due process of law. The trial court granted relief, setting aside all prior proceedings except the complaint and ordering the defendant to be summoned in accordance with law.
Legal Issue Presented
Whether the trial court’s prior proceedings culminating in the November 17, 1933 judgment — entered after summons by publication and after garnishment of the defendant’s domestic bank deposits — were void for lack of personal jurisdiction and for deprivation of property without due process, such that the later order setting aside those proceedings was correct.
Court’s Reasoning on Jurisdiction Over Property and Proceedings
The Supreme Court emphasized the dispositive fact that Co Quico, though outside the Philippines when the action was instituted, had property located within the Philippines (the bank deposits) that were garnished at the commencement of the action. The Court invoked the general principle that all property within a State is subject to the jurisdiction of its courts — courts may adjudicate title to such property, enforce liens on it, and subject it to payment of the debts of its owners whether resident or not. The Court observed that this territorial control over property is a core attribute of sovereign power and that, where governmental functions are departmentalized, judiciary powers to reach property within the State are coextensive with legislative and executive powers in that respect.
Characterization of the Proceedings and Notice Considerations
The
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Citation and Procedural Posture
- Reported at 69 Phil. 433, G.R. No. 46529; decision dated January 23, 1940.
- Appeal to the Supreme Court from an order of the Court of First Instance of Manila dated September 12, 1938, which set aside and declared null and void all proceedings previously had in the action (except filing of the complaint) and ordered the case reopened for summons in accordance with law.
- The appeal challenges the lower court’s vacation of its own judgment of November 17, 1933, and related prior proceedings originating from a complaint filed May 24, 1933.
Parties and Roles
- Plaintiff-Appellant: The Asiatic Petroleum (P. I.), Ltd. (hereafter, appellant).
- Defendant-Appellee: Co Quico (hereafter, appellee).
- Other persons/entities of note: Mercantile Bank of China (in liquidation); Bank Commissioner (receiver of the Bank); Co Chio (son of appellee, alleged transferee of deposits); counsel who entered special appearance for appellee on August 20, 1938.
Nature of Action and Reliefs Sought
- Action founded on an agency relationship and accounting: appellant alleged appellee, as sales agent on commission, failed to render proper accounting and owed sums to appellant.
- Reliefs sought in complaint filed May 24, 1933:
- Recovery of two monetary items: P2,123.80 (principal item) and P109.67 (additional item), totaling the amount prayed for in the complaint.
- Preliminary attachment of the defendant’s properties on sworn allegation that defendant had disposed of part of his property and was disposing of the rest with intent to defraud creditors.
Contractual Background and Exhibits
- Agency contract executed October 13, 1927 (referred to as Exhibit A-1) by which appellee became sales agent on commission for appellant, to sell appellant’s gasoline, kerosene and other petroleum products in cash and under stipulated conditions, including the rendering of proper accounting.
- Exhibit H: written statement by Co Chio, the alleged transferee, asserting that his father, Co Quico, was the real owner of the deposits.
Facts Pertinent to Jurisdiction and Attachment
- On the date of filing (May 24, 1933), appellee was in default in the amount described in the complaint after deducting a cash bond, payments, allowances and commissions.
- Appellee left for China without rendering an accounting.
- On May 26, 1933, the trial court issued a preliminary writ of attachment; the attachment was served on the Mercantile Bank of China (then in liquidation).
- Bank Commissioner (receiver) initially reported deposits of appellee with the Mercantile Bank of China as P3,421.61 (current account) and Amoy $3,403.16 (foreign currency savings account). The receiver later revised that statement on August 21, 1933, stating the defendant had transferred said deposits to his son, Co Chio.
- The Bank made notation of the garnishment and referenced letters to the appellant dated May 27 and August 21, 1933; the receiver’s certificate of proof of claim No. 207 reflected the amounts noted.
- Co Chio executed a written statement (Exhibit H) claiming that his father, Co Quico, was the true owner of the deposits.
Procedural History in the Trial Court
- By order dated June 6, 1933, the trial court ordered the defendant summoned by publication because his whereabouts were unknown and directed that copies of the order and complaint be mailed to his last known address in Tarlac, Tarlac.
- Defendant defaulted to the complaint.
- On November 17, 1933, the trial court rendered judgment in favor of the plaintiffs, awarding the total amount prayed for in the complaint.
- A writ of execution issued; levy was made on deposits of appellee with the Mercantile Bank of China but, due to the alleged transfer to Co Chio, the execution initially returned unsatisfied.
- Alias writs of execution were issued and levied upon said deposits; the Mercantile Bank of China reported notations of levies and referred to prior communications indicating payments would be made in due course.
- Provincial writ of execution addressed to the Provincial Sheriff of Tarlac was issued, but the sheriff returned that appellee had no property subject to execution in Tarlac.