Case Summary (G.R. No. L-21981)
Service of summons, special appearance, and jurisdictional contest
The RTC granted leave to deputize Dakila’s general manager to serve summons in Singapore, and summons were subsequently served on the petitioner in Singapore. Petitioner filed a special appearance and a motion to dismiss arguing lack of personal jurisdiction (invalid extraterritorial service), failure to state a cause of action (not the real party in interest), contract provision allowing PEIA to terminate at any time, and improper venue. The RTC denied the motion to dismiss and later denied reconsideration; the Court of Appeals affirmed. Petitioner sought Supreme Court review via Rule 45 petition.
Issues presented to the Supreme Court
The petition raised three principal contestations: (1) whether service of summons on petitioner was defective and whether the RTC acquired jurisdiction over petitioner’s person; (2) whether the Court of Appeals erred in treating jurisdiction by extraterritorial service as the petition’s sole issue and in refusing to dismiss for failure to state a cause of action or improper venue; and (3) whether petitioner was entitled to injunctive relief. Subsidiary contentions included petitioner’s assertion that it was not PEIA or its successor and that the Distribution Agreement allowed PEIA to terminate at will, which would negate Dakila’s cause of action.
Governing principles on jurisdiction and service of summons
The Court reiterated that jurisdiction comprises authority over subject matter and parties; subject-matter jurisdiction is conferred by the Constitution or law and is determined from the complaint’s allegations. Jurisdiction over defendants is obtained by service of summons as required by law or by voluntary appearance. Service of summons serves notice and enables the court to proceed against the party. The nature of the action—whether in personam, in rem, or quasi in rem—determines proper mode of service.
Statutory exceptions for extraterritorial service (Rule 14, Section 15)
Under Section 15, Rule 14 of the 1997 Rules, extraterritorial service on a non-resident not found in the Philippines is permitted only in four situations: (1) actions affecting personal status; (2) actions relating to property in the Philippines in which the defendant claims an interest or lien, actual or contingent; (3) actions where relief sought would exclude the defendant from any interest in property located in the Philippines; and (4) when the defendant’s property has been attached in the Philippines. Extraterritorial service is primarily applicable to in rem or quasi in rem actions where jurisdiction over the res suffices rather than personal jurisdiction.
Nature of the claim: in personam, not in rem or quasi in rem
The Court agreed with petitioner that Dakila’s complaint for collection and damages based on alleged unilateral termination of the Distribution Agreement is essentially in personam because it seeks remedies grounded in the defendant’s personal liability. The Court of Appeals itself had characterized the action as in personam. As such, valid personal service within the Philippines is necessary to vest the RTC with jurisdiction over the petitioner’s person; extraterritorial service under Section 15 applies only to in rem or quasi in rem actions.
Dakila’s allegations of Philippine property interest and attachment
Dakila alleged that the petitioner owned 99% of PEIP shares and sought writs of attachment; the RTC earlier denied Dakila’s attachment motion on the ground that PEIP’s corporate personality is distinct from shareholders, and attachment was not proper. The Supreme Court emphasized that Rule 14, Section 15’s fourth instance requires actual attachment of the non-resident defendant’s property in the Philippines — not merely allegations of property ownership. Because the writ of attachment had been denied and no valid attachment of petitioner’s alleged Philippine property occurred, the action did not convert into quasi in rem and extraterritorial service remained inapplicable.
Legal effect of defective extraterritorial service and voluntary appearance doctrine
Because the action remained in personam and petitioner was non-resident and not found in the Philippines, extraterritorial service could not validly confer personal jurisdiction. The Court further explained that a defendant’s voluntary appearance or submission may cure defective service, but a special appearance made solely to contest jurisdiction does not constitute voluntary submission. Petitioner consistently challenged jurisdiction; its filing of an Answer ad cautelam and a compulsory counterclaim did not amount to voluntary submission because Rule 14, Section 20 expressly provides that including other grounds in a motion to dismiss does not constitute voluntary appearance. The Court thus held the RTC did not acquire jurisdiction over petitioner’s person.
Failure-to-state-a-cause-of-action and venue contentions addressed
The Supreme Court upheld the RTC’s and Court of Appeals’ rulings that Dakila’s amended complaint, on its face, sufficiently alleged the basic elements of a cause of action so as to survive a motion to dismiss for failure to state a cause of action. The Court reiterated that a motion to dismiss for failure to state a cause of action is decided on the complaint’s allegations assumed true, and defenses asserting petitioner is not the real party in interest are evidentiary — to be resolved at trial. On venue, the Court accepted the RTC’s reasoning that the Distribution Agreement’s forum clause was alternative (courts of Singapore or of the Philippines) and that filing in the defendant’s residence (Dakila’s residence) is not precluded; thus venue in the Philippines was not improper.
Treatment and survival of petitioner’s compulsory counterclaim
The Court examined whether dismissal of Dakila’s complaint for lack of jurisdiction over petitioner would necessitate dismissal of petitioner’s compulsory counterclaim for damages and attorney’s fees arising from the purportedly unfounded suit. The Court reviewed prior jurisprudence and Rule 17 amendments, and concluded that when a compulsory counterclaim states an independent cause of action (as here, damages and fees resulting from being forced to defend an unfounded suit), it may survive dismissal of the plaintiff’s complaint. The Court found petitioner’s c
Case Syllabus (G.R. No. L-21981)
Title and Nature of Proceeding
- Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision of the Court of Appeals dated 4 April 2006 in CA-G.R. SP No. 78981.
- The Court of Appeals decision affirmed the Mandaluyong City Regional Trial Court (RTC), Branch 212, Orders dated 4 November 2002 and 20 June 2003 in Civil Case No. MC99-605, which denied petitioner’s Motion to Dismiss and its Motion for Reconsideration.
- The petition challenges the acquisition of jurisdiction by the RTC over petitioner, the sufficiency of the Amended Complaint to state a cause of action against petitioner, the propriety of venue, and requests injunctive relief (temporary restraining order and/or writ of injunction).
Parties
- Petitioner: Perkin Elmer Singapore Pte Ltd., a corporation organized and existing under the laws of Singapore; asserted not to be a foreign corporation "doing business" in the Philippines.
- Respondent: Dakila Trading Corporation, a Philippine corporation engaged in selling and leasing laboratory and process control instrumentation and trading laboratory chemicals and supplies.
- Other entities appearing in the case background: Perkin-Elmer Instruments Asia Pte Ltd. (PEIA) — a Singapore corporation; Perkin-Elmer Instruments (Philippines) Corporation (PEIP) — a Philippine corporation, alleged affiliate of PEIA, allegedly 99% owned by PEIA according to the pleadings.
Factual Antecedents
- On 1 June 1990 respondent entered into a Distribution Agreement with PEIA appointing respondent as PEIA’s sole distributor in the Philippines and granting rights to purchase and sell PEIA products; PEIA agreed to give respondent commission for sales.
- Under the Distribution Agreement respondent could order products either from PEIA or from PEIP; PEIP is described as involved in wholesale trading of scientific and analytical instruments and appliances, allegedly 99% owned by PEIA.
- PEIA unilaterally terminated the Distribution Agreement on 2 August 1997.
- Respondent filed before RTC Mandaluyong City, Branch 212, a Complaint for Collection of Sum of Money and Damages with Prayer for Writ of Attachment against PEIA and PEIP, docketed Civil Case No. MC99-605.
- RTC denied respondent’s prayer for issuance of a writ of attachment on 26 March 1999; respondent’s motion for reconsideration was denied on 11 January 2000.
- Respondent obtained leave of court to deputize its General Manager, Richard A. Tee, to serve summons outside the Philippines; an Alias Summons dated 4 September 2000 was served on 28 September 2000 and received by “Perkinelmer Asia,” a Singapore sole proprietorship owned by petitioner and alleged to be a separate entity from PEIA.
- Respondent filed an Ex-Parte Motion to Admit Amended Complaint alleging that PEIA had become a sole proprietorship owned by petitioner and had changed its name to Perkinelmer Asia; respondent sought to change the defendant’s name in the complaint accordingly. The RTC admitted the Amended Complaint on 24 July 2001.
- The RTC deputized respondent’s General Manager to serve summons on petitioner in Singapore by Order dated 4 March 2002; summons was issued and served in Singapore.
- PEIP moved to dismiss the Complaint for failure to state a cause of action; PEIA/Perkinelmer Asia informed respondent and the RTC by letters dated 12 October 2000 and 15 November 2000 about wrongful service upon Perkinelmer Asia.
- Petitioner filed a Special Appearance and Motion to Dismiss on 30 May 2002 raising lack of jurisdiction over person, seeking dismissal for failure to state cause of action because petitioner was not the real party-in-interest, asserting Distribution Agreement gave PEIA power to terminate at any time, and contesting venue.
- The RTC denied the Motion to Dismiss on 4 November 2002 and denied reconsideration on 20 June 2003.
RTC’s Reasoning in Denying Motion to Dismiss
- RTC construed allegations in the Amended Complaint that petitioner owned shares of stock in PEIP as an allegation of personal property in the Philippines, and reasoned that shares represent personal property of the shareholder.
- RTC concluded that such allegation establishes that the action "relate[s] to a property of the [petitioner]" and thus falls under extraterritorial service under Section 15, Rule 14 of the Rules of Court, enabling acquisition of jurisdiction.
- RTC emphasized that in a Motion to Dismiss for failure to state a cause of action the facts alleged in the complaint are hypothetically admitted, and that the Amended Complaint contained the three essential elements of a cause of action (plaintiff’s legal right, correlative obligation of defendant, omission in violation of legal rights).
- On venue, RTC held that a stipulation as to venue does not preclude filing the suit in the residence of the respondent under Section 2, Rule 4, Rules of Court, particularly where the venue stipulation was imposed by the petitioner for its own benefit.
- RTC concluded a full-blown trial was necessary to ferret out truth.
Court of Appeals Decision (as affirmed below prior to this petition)
- Court of Appeals affirmed the RTC Orders dated 4 November 2002 and 20 June 2003, holding that respondent’s cause of action is anchored on alleged unilateral termination of Distribution Agreement and that respondent’s complaint was primarily to establish a claim against petitioner for that termination.
- Court of Appeals characterized the action as in personam and stated personal service of summons was essential to acquire jurisdiction, but nevertheless accepted the view that extraterritorial service might be proper because respondent prayed for issuance of a writ of attachment and sought attachment of properties of Perkin-Elmer Philippines.
- The Court of Appeals reasoned that the complaint for collection of sum of money was converted into an action quasi in rem by attachment of petitioner’s interest in Perkin-Elmer Philippines, thereby satisfying an instance for extraterritorial service under Section 15, Rule 14.
Issues Presented to the Supreme Court
- Whether the Court of Appeals erred in not ruling that service of summons on petitioner was defective and that the trial court thus failed to acquire jurisdiction over petitioner’s person.
- Whether the Court of Appeals erred in framing the “sole issue” before it as whether the trial court acquired jurisdiction over petitioner through extraterritorial service of summons, including subissues:
- Whether the Amended Complaint failed to state a cause of action against petitioner and whether petitioner was the real party-in-interest.
- Whether the Distribution Agreement’s termination clause vitiated respondent’s cause of action even if petitioner were the correct party.
- Whether venue was improperly laid and whether the Court of Appeals should have reversed the RTC on that ground.
- Whether petitioner is entitled to a temporary restraining order and/or writ of injunction.
Legal Framework on Jurisdiction, Service and Types of Actions (as stated in the source)
- Jurisdiction is the power of courts to hear and decide cases; to dispose on the merits, courts must acquire jurisdiction over subject matter and parties.
- Jurisdiction over subject matter is conferred by Constitution or by law and is determinable from the allegations in the complaint.
- Courts acquire jurisdiction over plaintiffs upon filing of complaint;