Case Summary (G.R. No. 159471)
Key Dates
Contract formation: May 9, 1974 (International Passenger Sales Agency Agreement). Tokyo suit filed: March 25, 1980. Attempts at service in Yokohama: April 11 and April 24, 1980. Request for diplomatic service: July 11, 1980. Service in Manila via Philippine deputy sheriff: August 28, 1980. Tokyo judgment rendered: January 29, 1981 (final when not appealed). Enforcement suit in Manila: filed May 20, 1983. RTC decision granting demurrer: June 21, 1989. Court of Appeals decision: November 10, 1993. Supreme Court decision: 1995 (decision reviewed).
Applicable law and procedural authorities
- 1987 Philippine Constitution (applicable by instruction due to decision date).
- Rules of Court: Section 50, Rule 39 (evidentiary effect of foreign judgment), Section 3, Rule 131 (presumption of regularity of courts), Section 14, Rule 14 (service on foreign corporations doing business in the Philippines), Section 18, Rule 14 (service on residents temporarily out of the Philippines).
- Statutory provisions cited: Section 128, Corporation Code (resident agent; service on SEC), Section 190, Insurance Code (service on Insurance Commissioner), Section 17, General Banking Act (service on Superintendent of Banks).
- Civil Code provisions referenced for damages (Articles 2208 and 2234).
- Controlling jurisprudence cited in the decision: Boudard v. Tait; Magdalena Estate v. Nieto; Dial Corp. v. Soriano; Milliken v. Meyer; and other U.S. and Philippine authorities on corporate domicile and residence.
Factual background relevant to jurisdiction
Northwest sued Sharp in Tokyo for collection of unremitted ticket sales proceeds. Two personal attempts to serve summons at Sharp’s Yokohama branch failed: on the first occasion the person believed authorized to accept process (Mr. Dinozo) was in Manila; on the second he refused to accept process claiming he was no longer an employee. The Tokyo court then authorized service at Sharp’s head office in Manila by requesting the Supreme Court of Japan to serve through diplomatic channels; the summons were transmitted to the Japanese Embassy in Manila, then to the Philippine Department of Foreign Affairs and the Executive Judge of the Court of First Instance of Manila, and were ultimately served on Sharp in Manila by Deputy Sheriff Rolando Balingit. Sharp did not appear in Japan; Tokyo rendered judgment against Sharp, which became final and executory. Northwest thereafter sought enforcement in the Manila RTC.
Procedural history in the Philippine courts
Sharp answered, alleging the Japanese judgment was null and void for want of jurisdiction, lack of proper notice, collusion, fraud, or clear mistake of law or fact. After trial, Sharp moved for judgment on a demurrer to evidence asserting (1) lack of jurisdiction in the Japanese court and (2) denial of due process and contravention of Philippine public policy. The RTC granted the demurrer and dismissed the enforcement action on the ground that the Japanese court acquired no personal jurisdiction because service was effected outside Japan. The Court of Appeals affirmed, relying principally on the maxim that process has no extraterritorial effect (Boudard, etc.). Northwest petitioned to the Supreme Court.
Issue presented and standard of review
Primary legal issue: whether the judgment of the Tokyo District Court is enforceable in the Philippines by reason of valid service of process effected by diplomatic channels and thus proper acquisition of personal jurisdiction over Sharp. Standard of review on questions of foreign law and factual presumption: foreign procedural law is a question of fact and must be pleaded and proved; foreign judgments, however, enjoy a presumption of validity and regularity that the attacking party must overcome (Section 50, Rule 39; Section 3, Rule 131).
Presumptions governing foreign judgments and burden of proof
The Supreme Court reiterated the established Philippine rule that a foreign judgment is presumptively valid and regular, and that a party attacking it (Sharp) bears the burden of showing want of jurisdiction, lack of notice, collusion, fraud, or a clear mistake of law or fact. Because the validity of foreign procedural acts (such as the effectiveness of extraterritorial service in Japan) is a matter of foreign law, it must be proved like any other fact; absent such proof, Philippine courts may invoke the processual presumption that foreign procedural rules are similar to Philippine rules.
Relevance of foreign procedural law and the processual presumption
The Court emphasized that the question whether Japan would treat the diplomatic channel service as valid is a matter of Japanese procedural law and thus a factual issue. Sharp did not present evidence as to Japanese law on service by diplomatic channels. In the absence of such evidence, the Court invoked the processual presumption: that Japanese law on service would be similar to Philippine law governing service on foreign corporations doing business in the Philippines. Under that presumption, the mode of diplomatic transmission followed by the Japanese court (through its Ministry of Foreign Affairs to the Philippine DFA and then to a Philippine judicial officer) could be treated as equivalent to the Philippine statutory modes of service on foreign corporations doing business in the Philippines.
Philippine law on service upon foreign corporations doing business in the Philippines
Section 14, Rule 14 of the Rules of Court (as explicated by the Court) provides that service upon a foreign corporation doing business in the Philippines may be made on (1) its resident agent designated for that purpose; (2) if no resident agent, on the government official designated by law; or (3) on any of its officers or agents within the Philippines. The statutory provisions cited (Section 128 Corporation Code; Section 190 Insurance Code; Section 17 General Banking Act) contemplate that if a foreign corporation has ceased to transact business or has no resident agent, service may be made on the relevant government official (SEC, Insurance Commissioner, Superintendent of Banks), and that official must transmit a copy to the corporation’s home office — the sending being an essential part of the service. Where the corporation has officers or agents in the Philippines, service on them is likewise authorized.
Application of Philippine service rules to the facts
The Court found that Sharp never asserted that it had designated a resident agent for service in Japan or that it had a resident agent in the Philippines to receive process on its behalf. Two attempted services at the Yokohama branch had failed. The Tokyo court elected to effect service via diplomatic channels to Sharp’s principal office in Manila. The diplomatic transmission and subsequent delivery to Philippine authorities, followed by service by the Executive Judge’s order and the Deputy Sheriff, were treated by the Supreme Court as equivalent to service on the designated government official or on Sharp’s officers or agents in the Philippines under Section 14, Rule 14 and Section 128 of the Corporation Code. Thus, under the processual presumption and the presumption of regularity of foreign courts, the extraterritorial service was deemed valid for purposes of acquisition of jurisdiction by the Japanese court.
Corporate residence, domicile, and amenability to foreign jurisdiction
The Court engaged the jurisprudential distinction between a corporation’s place of incorporation (its technical domicile) and the notion of “residence” for certain legal purposes. While a corporation’s formal domicile is the state of incorporation, courts have treated foreign corporations that lawfully do business and maintain offices in another jurisdiction as “residents” of that jurisdiction for certain procedural purposes. The Court relied on prior Philippine and U.S. authorities and invoked the processual presumption to treat Sharp, which maintained four branches in Japan, as amenable to Japanese jurisdiction and therefore subject to the Japanese court’s lawful methods of serving process.
Rejection of authorities relied upon by the trial court and Court of Appeals
The Supreme Court found the trial court’s and Court of Appeals’ reliance on Boudard, and cases like Magdalena Estate and Dial, distinguishable or inapplicable on the facts. Boudard concerned a different factual matrix (no presence of the defendant or agents in the foreign forum), and other cited authorities involved defendants without domiciliary presence or proper licensing in the forum. M
Case Syllabus (G.R. No. 159471)
Case Caption, Source, and Decision
- G.R. No. 112573; First Division; decision penned by Justice Davide, Jr.; promulgated February 09, 1995; reported at 311 Phil. 203.
- Petition for review on certiorari by petitioner Northwest Orient Airlines, Inc. (hereinafter "NORTHWEST") seeking to set aside the Court of Appeals decision that affirmed dismissal of NORTHWEST's complaint to enforce a Japanese court judgment against respondent C.F. Sharp & Company, Inc. (hereinafter "SHARP").
- The Supreme Court partly granted the petition: it affirmed the Court of Appeals' denial of NORTHWEST's claims for attorney's fees, litigation expenses and exemplary damages; it reversed the dismissal of NORTHWEST's enforcement complaint and rendered judgment ordering SHARP to pay the amounts adjudged in the Japanese judgment with interest and costs against SHARP.
- Concurrence: Justices Padilla (Chairman), Bellosillo, Quiason, and Kapunan concurred.
Parties and Corporate Status
- Petitioner: NORTHWEST, a corporation organized under the laws of the State of Minnesota, U.S.A.
- Private respondent: C.F. Sharp & Company, Inc. (SHARP), a corporation incorporated under Philippine laws.
- At relevant times, SHARP maintained a Japan branch in Yokohama and was doing business in Japan through four registered branches.
Material Facts — Contract, Defaults, and Japanese Proceedings
- On May 9, 1974, NORTHWEST and SHARP, through SHARP's Japan branch, entered into an International Passenger Sales Agency Agreement authorizing SHARP to sell NORTHWEST's air transportation tickets.
- NORTHWEST alleged that SHARP, unable to remit proceeds of ticket sales, was sued by NORTHWEST in Tokyo, Japan on March 25, 1980 for collection of unremitted proceeds and damages.
- On April 11, 1980, the 36th Civil Department, Tokyo District Court issued a writ of summons addressed to SHARP at its Yokohama office (Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka-ku, Yokohama, Kanagawa Prefecture).
- Two attempts at service in Yokohama failed: on the first attempt the bailiff was told Mr. Dinozo (believed authorized to receive processes) was in Manila and would return April 24, 1980; on April 24, 1980 Mr. Dinozo refused to accept the summons claiming he no longer was an employee of SHARP.
- After the unsuccessful attempts, the Tokyo District Court ordered service at SHARP's head office in Manila; on July 11, 1980 the Director of the Tokyo District Court requested the Supreme Court of Japan to serve the summons through diplomatic channels to SHARP's head office in Manila.
- The Supreme Court of Japan sent the summons via the Ministry of Foreign Affairs of Japan to the Japanese Embassy in Manila, which forwarded the processes to the Philippine Department (then Ministry) of Foreign Affairs; the Executive Judge of the Court of First Instance (now Regional Trial Court) Manila then ordered Deputy Sheriff Rolando Balingit to serve SHARP.
- On August 28, 1980, Deputy Sheriff Rolando Balingit delivered the writ of summons to SHARP in Manila. SHARP failed to appear for the scheduled hearing.
- On January 29, 1981, the Tokyo District Court entered judgment against SHARP ordering it to pay 83,158,195 Yen and damages for delay at 6% per annum from August 28, 1980 until full payment.
- On March 24, 1981, SHARP received a copy of the Japanese judgment. SHARP did not appeal; the judgment became final and executory in Japan.
Procedural History in the Philippines — Enforcement, Pleadings, Trial Court Ruling
- NORTHWEST filed an enforcement action of the Japanese judgment in the Regional Trial Court, Manila, Branch 54, as Civil Case No. 83-17637, on May 20, 1983.
- On July 16, 1983, SHARP filed its answer asserting that the Japanese judgment was null, void and unenforceable in the Philippines on grounds of lack of proper notice, collusion or fraud, and clear mistake of law and fact.
- After trial, SHARP filed a Motion for Judgment on a Demurrer to Evidence on April 21, 1989 arguing (1) the Japanese judgment was null for want of jurisdiction over SHARP; and (2) the judgment was contrary to Philippine law and public policy and rendered without due process.
- On June 21, 1989, the trial court granted the demurrer to evidence and dismissed NORTHWEST's complaint, holding that the Japanese court did not acquire jurisdiction over SHARP because service was effected in the Philippines rather than within Japan, relying chiefly on Boudard v. Tait and the principle that extraterritorial service cannot confer jurisdiction in personam.
Trial Court's Rationale and Findings
- The trial court characterized the Tokyo action as one strictly in personam; it concluded that the process of a foreign court has no extraterritorial effect and that personal service of summons within the forum is required for acquisition of jurisdiction over a defendant in an action in personam.
- The trial court accepted NORTHWEST's admission that the summons issued by the Japanese court was served in the Philippines through a Philippine sheriff and thus concluded that Japan did not acquire jurisdiction over SHARP.
Court of Appeals Decision and Reasoning
- The Court of Appeals, in a decision of November 10, 1993, sustained the trial court's dismissal and relied on Boudard v. Tait, Magdalena Estate, Inc. v. Nieto, Dial Corp. v. Soriano, and analogous authorities to hold that service of process beyond territorial boundaries does not confer jurisdiction for in personam judgments.
- The Court of Appeals reiterated the general rule that processes of a court cannot be lawfully served outside the territorial limits of that court's jurisdiction and that actual service within the forum on the defendant or someone authorized to accept service is necessary.
- The Court of Appeals rejected NORTHWEST's argument distinguishing resident and non-resident defendants for corporations, reasoning that the residence concept properly applies to natural persons and that corporations are residents only of the state where incorporated; thus, SHARP as a Philippine corporation was non-resident in Japan and required personal service within Japan for the Japanese court to acquire jurisdiction.
Issues Presented to the Supreme Court
- Whether a Japanese court can acquire jurisdiction over a Philippine corporation (SHARP) doing business in Japan by serving summons through diplomatic channels on the Philippine corporation at its principal office in Manila after prior attempts to serve summons in Japan had failed.
- Whether the extraterritorial service effected in Manila was effective to vest jurisdiction in the Tokyo District Court.
- Whether NORTHWEST is entitled to attorney's fees, litigation expenses, and exemplary damages.
Governing Rules, Statutes, and Doctrines Cited
- Presumption of validity and regularity of foreign judgments and proceed