Title
Northwest Orient Airlines, Inc. vs. Court of Appeals
Case
G.R. No. 112573
Decision Date
Feb 9, 1995
Northwest Airlines sued C.F. Sharp in Japan for unremitted ticket sales. Despite extraterritorial summons, the Japanese judgment was deemed enforceable in the Philippines, as Sharp's business in Japan subjected it to jurisdiction.
foreign judgment
extraterritorial service of summons
jurisdiction

Case Summary (G.R. No. 112573)

Factual Background

The parties entered into an International Passenger Sales Agency Agreement on May 9, 1974 under which Northwest Orient Airlines, Inc. authorized C.F. Sharp & Company, Inc. to sell airline tickets. When Sharp failed to remit ticket sale proceeds, Northwest filed a collection suit in Tokyo on March 25, 1980. The Tokyo District Court issued a writ of summons directed to Sharp at its Yokohama branch on April 11, 1980. Two attempts at personal service in Yokohama failed: on the first attempt an intended recipient was absent in Manila; on the second the person present disclaimed authority to accept process. The Tokyo court then ordered service at Sharp’s head office in Manila through diplomatic channels. The Supreme Court of Japan transmitted the writ to the Ministry of Foreign Affairs which caused delivery to the Japanese Embassy in Manila; the documents were thereafter transmitted to Philippine authorities and Deputy Sheriff Rolando Balingit effected service on Sharp in Manila on August 28, 1980. Sharp did not appear in Tokyo. The Tokyo District Court rendered judgment for Northwest on January 29, 1981 for 83,158,195 Yen plus statutory delay damages, and the judgment became final when Sharp did not appeal.

Enforcement Proceeding in the Philippines

Unable to execute the Tokyo judgment in Japan, Northwest instituted Civil Case No. 83-17637 before the Regional Trial Court, Branch 54, Manila on May 20, 1983 to enforce the foreign judgment. Sharp answered on July 16, 1983 and alleged that the Japanese judgment was null and void and unenforceable in the Philippines for want of jurisdiction, lack of due notice, collusion, fraud, or clear mistake of law and fact. The case proceeded to trial. After the plaintiff rested, Sharp filed a Motion for Judgment on a Demurrer to Evidence on April 21, 1989, repeating its jurisdictional and due-process objections. The trial court granted the demurrer on June 21, 1989 and dismissed Northwest’s complaint as void for want of jurisdiction over the person of Sharp.

Trial Court Reasoning

The trial court held that the action was strictly in personam and that the Japanese court did not acquire jurisdiction over Sharp because service had been effected outside Japan. The trial court relied upon the principle that a court’s process has no extraterritorial effect and that personal service within the forum is required for jurisdiction in an action in personam. The trial court noted that if Sharp were resident in Japan, service in Japan would suffice; but it found service had been made in the Philippines and not within Japan, and thus the Tokyo judgment was void for want of jurisdiction.

Court of Appeals Decision

The Court of Appeals affirmed the trial court. It accepted the general rule that processes of a court cannot be lawfully served outside the territorial limits of that court’s jurisdiction and that personal service within the forum is required to confer jurisdiction in an action in personam. The appellate court rejected Northwest’s argument that a distinction between resident and non-resident defendants would permit extraterritorial service upon a resident defendant, reasoning that such a distinction applies to natural persons and not to corporations. Citing authorities that a corporation’s domicile is where it was incorporated, the Court of Appeals concluded that Sharp, being a Philippine corporation, was a non-resident of Japan for jurisdictional purposes and that service in Manila was ineffective to vest jurisdiction in the Tokyo court.

Issues Presented to the Supreme Court

The principal issue framed by Northwest was whether the Tokyo District Court acquired jurisdiction over Sharp when summons was served through diplomatic channels at Sharp’s principal office in Manila after prior attempts at service in Japan failed. Ancillary issues included whether the extraterritorial service rendered the foreign judgment void and whether Northwest was entitled to attorney’s fees, litigation expenses, and exemplary damages.

Burden of Proof and Presumption of Validity

The Supreme Court reiterated that a foreign judgment is presumptively valid and that the regularity of proceedings, including notice, is presumed. It cited Section 50, Rule 39 and Section 3, Rule 131 to note that a party who assails a foreign judgment bears the burden of proving want of jurisdiction, want of notice, collusion, fraud, or clear mistake of law or fact. The Court found that Sharp, as the party attacking the Tokyo judgment, failed to discharge that burden.

Proof of Foreign Procedural Law

The Court emphasized that questions of remedy and procedure are governed by the lex fori where the judgment was rendered and that foreign procedural law is a question of fact which must be pleaded and proved. The Court observed that Sharp did not present evidence of the Japanese procedural law that would render the extraterritorial service ineffective. Because Sharp did not produce such proof, the presumption of validity of the Japanese court’s service and judgment remained.

Processual Presumption and Application of Philippine Law

Confronted with the absence of proof of Japanese procedure, the Supreme Court invoked the so-called processual presumption to assume identity or similarity between Japanese and Philippine procedural rules regarding service upon a private foreign corporation. The Court stated that under Section 14, Rule 14 of the Rules of Court, a foreign corporation doing business in the Philippines may be served in one of several ways: on a resident agent designated by law; on a government official designated by law if there is no resident agent; or on any of its officers or agents within the Philippines. The Court construed the diplomatic transmission and service in Manila as equivalent to service upon the proper government official contemplated by Section 14, Rule 14 in relation to Section 128, Corporation Code.

Statutory Framework for Service on Foreign Corporations

The Supreme Court examined the statutory provisions cited by the parties. It noted that Section 128, Corporation Code, Section 190, Insurance Code, and Section 17, General Banking Act contemplate service on designated governmental officials when a foreign corporation has ceased to transact business in the Philippines or lacks a resident agent. The Court found that Sharp did not assert that it had designated a resident agent in Japan. The Court also found that two attempts at service were made at Sharp’s Yokohama branch and that, after those attempts failed, the Tokyo court ordered service at Sharp’s head office in Manila. The Court concluded that service through diplomatic channels and actual delivery by a Philippine deputy sheriff constituted service equivalent to that authorized under Philippine law.

Corporate Domicile and the Residence Question

Addressing the characterizations applied by the Court of Appeals, the Supreme Court surveyed authority on corporate domicile. It acknowledged the technical rule that a corporation’s domicile is the state of its incorporation but observed that for certain purposes a corporation may be regarded as resident in a jurisdiction where it maintains offices and transacts business. Relying on precedent including State Investment House, Inc. vs. Citibank, N.A. and Claude Neon Lights vs. Philippine Advertising Corp., the Court concluded that because Sharp maintained four registered branches and transacted business in Japan, it could be deemed a resident of Japan for process purposes and was amenable to its courts’ lawful modes of service.

Validity of the Extraterritorial Service and Judgment

The Supreme Court held that the extraterritorial service of the summons upon Sharp through diplomatic channels and by service at its Manila head office was valid. The Court grounded this conclusion on two independent presumptions: first, the presumption of regularity of official acts in the absence of contrary proof as to Japanese procedure; and second, the processual presumption equating Japanese procedure with Philippine procedure for the purpose of service on a private foreign corporation doing business in the forum. Accordingly, the Tokyo District Court acquired jurisdiction over Sharp, and the foreign judgment was not void for want of jurisdiction.

Disposition on Damages, Fees, a

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