CIVPRO Amendment and Summons

7/27/2019 CIVPRO Amendment and Summons

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SANTOS VS PNOC

Facts: PNOC Exploration Corporation, respondent, filed a complaint for a sum of money against

petitioner Pedro Santos Jr. in the RTC of Pasig. The amount sought to be collected was the petitioners

unpaid balance of the car loan advanced to him by respondent when he was still a member of its board of

directors.

Personal service of summons were made to petitioner but failed because the latter cannot be located in

his last known address despite earnest efforts to do so. Subsequently, on respondents motion, the trial

court allowed service of summons by publication. Respondent caused the publication of the summons in

Remate, a newspaper of general circulation in the Philippines. Thereafter, respondent submitted

the affidavit of publication and the affidavit of service of respondents employee to the effect that he sent a

copy of the summons by registered mail to petitioners last known address.

Petitioner still failed to answer within the prescribed period despite the publication of summons. Hence,respondent filed a motion for the reception of its evidence ex parte. Trial court granted said motion and

proceeded with the ex parte presentation and formal offer of its evidence.

Petitioner filed an Omnibus Motion for Reconsideration and to Admit Attached Answer, alleging that

the affidavit of service submitted by respondent failed to comply with Section 19, Rule 14 of the Rules of

Court as it was not executed by the clerk of court. Trial court denied the said motion and held that the

rules did not require such execution with the clerk of court. It also denied the motion to admit peti tioners

answer because the same was filed way beyond the reglementary period.

Petitioner appeals to the CA via a petition for certiorari but failed and even sustained the trial courtsdecision and ordered the former to pay the amount plus legal interest and cost of suit. Hence, this

petition.

Issues:

(1) Whether or not there is lack of jurisdiction over the petitioner due to improper service of summons.

(2) Whether or not the rule on service by publication under Section 14, Rule 14 of the Rules of Court

applies only to actions in rem, not actions in personam.

(3) Whether or not the affidavit of service of the copy of the summons should have been prepared by

the clerk of court and not respondents messenger.

Held:


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(1) Section 14, Rule 14 provides that in any action where the defendant is designated as an unknown

owner or the like or when his whereabouts are unknown and cannot be ascertained by diligentinquiry,

service may, by leave of court, be effected upon him by publication in a newspaper of general circulation

and in such places and for such times as the court may order. Since petitioner could not be personally

served with summons despite diligent efforts to locate his whereabouts, respondent sought and was

granted leave of court to effect the service of summons upon him by publication in a newspaper of

general circulation. Thus, petitioner was proper served with summons by publication and that there is

jurisdiction over his person.

(2) The in rem/in personam distinction was significant under the old rule because it was silent as to the

kind of action to which the rule was applicable but this has been changed, it now applies to any action.

The present rule expressly states that it applies in any action where th e defendant is designated as an

unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by

diligent inquiry. Hence, the petitioners contention that the complaint filed against him is not covered by

the said rule because the action for recovery of sum of money is an action in personam is not applicableanymore.

(3) The service of summons by publication is complemented by service of summons by registered mail to

defendants last known address. This complementary service is evidenced by an affidavitshowing the

deposit of a copy of the summons and order for publication in the post office, postage for prepaid,

directed to the defendant by registered mail to his last known address. The rules, however, do not

require that the affidavit of complementary service be executed by the clerk of court. While the trial court

ordinarily does the mailing of copies of its orders and processes, the duty to make the complementary

service by registered mail is imposed on the party who resorts to service by publication.


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G.R. No. 128803 September 25, 1998

ASIAVEST LIMITED, petitioner,vs.THE COURT OF APPEALS and ANTONIO HERAS, respondents.

DAVIDE, JR., J .:

In issue is the enforceability in the Philippines of a foreign judgment. The antecedents are summarized inthe 24 August 1990 Decision

1of Branch 107 of the Regional Trial Court of Quezon City in Civil Case No.

Q-52452; thus:

The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against thedefendant Antonio Heras praying that said defendant be ordered to pay to the plaintiff theamounts awarded by the Hong Kong Court Judgment dated December 28, 1984 andamended on April 13, 1987, to wit:

1) US$1,810,265.40 or its equivalent in Hong Kongcurrency at the time of payment with legal interest fromDecember 28, 1984 until fully paid;

2) interest on the sum of US$1,500.00 at 9.875% perannum from October 31, 1984 to December 28, 1984;and

3) HK$905.00 at fixed cost in the action; and

4) at least $80,000.00 representing attorney's fees,litigation expenses and cost, with interest thereon from

the date of the judgment until fully paid.

On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the courtcould resolve the said motion, a fire which partially razed the Quezon City Hall Buildingon June 11, 1988 totally destroyed the office of this Court, together with all its records,equipment and properties. On July 26, 1988, the plaintiff, through counsel filed a Motionfor Reconstitution of Case Records. The Court, after allowing the defendant to reactthereto, granted the said Motion and admitted the annexes attached thereto as thereconstituted records of this case per Order dated September 6, 1988. Thereafter, theMotion to Dismiss, the resolution of which had been deferred; was denied by the Court inits Order of October 4, 1988.

On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial

conference. At the conference, the parties could not arrive at any settlement. However,they agreed on the following stipulations of facts:

1. The defendant admits the existence of the judgmentdated December 28, 1984 as well as its amendmentdated April 13, 1987, but not necessarily the authenticityor validity thereof;


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was furnished or served on the defendant; anyway, it is not a legalrequirement to do so under Hong Kong laws;

a) The writ of summons or claim can be served by thesolicitor (lawyer) of the claimant or plaintiff. In HongKong there are no Court personnel who serve writs of

summons and/or most other processes.

b) If the writ of summons or claim (or complaint) is notcontested, the claimant or the plaintiff is not required topresent proof of his claim or complaint nor presentevidence under oath of the claim in order to obtain aJudgment.

c) There is no legal requirement that such a Judgment ordecision rendered by the Court in Hong Kong [to] makea recitation of the facts or the law upon which the claimis based.

d) There is no necessity to furnish the defendant with acopy of the Judgment or decision rendered against him.

e) In an action based on a guarantee, there is noestablished legal requirement or obligation under HongKong laws that the creditor must first bring proceedingsagainst the principal debtor. The creditor canimmediately go against the guarantor.

On cross examination, Mr. Lousich stated that before he was commissioned by the lawfirm of the defendant's counsel as an expert witness and to verify the records of the HongKong case, he had been acting as counsel for the defendant in a number of commercialmatters; that there was an application for service of summons upon the defendant

outside the jurisdiction of Hong Kong; that there was an order of the Court authorizingservice upon Heras outside of Hong Kong, particularly in Manila or any other place in thePhilippines (p. 9, TSN, 2/14/90); that there must be adequate proof of service ofsummons, otherwise the Hong Kong Court will refuse to render judgment (p. 10, ibid);that the mere fact that the Hong Kong Court rendered judgment, it can be presumed thatthere was service of summons; that in this case, it is not just a presumption becausethere was an affidavit stating that service was effected in [sic] a particular man here inManila; that such affidavit was filed by one Jose R. Fernandez of the firm Sycip Salazaron the 21st of December 1984, and stated in essence that "on Friday, the 23rd ofNovember 1984 he served the 4th defendant at No. 6 First Street, Quezon City byleaving it at that address with Mr. Dionisio Lopez, the son-in-law of the 4th defendant thecopy of the writ and Mr. Lopez informed me and I barely believed that he would bring thesaid writ to the attention of the 4th defendant" (pp. 11-12, ibid.); that upon filing of that

affidavit, the Court was asked and granted judgment against the 4th defendant; and thatif the summons or claim is not contested, the claimant of the plaintiff is not required topresent proof of his claim or complaint or present evidence under oath of the claim inorder to obtain judgment; and that such judgment can be enforced in the same manneras a judgment rendered after full hearing.

The trial court held that since the Hong Kong court judgment had been duly proved, it is a presumptiveevidence of a right as between the parties; hence, the party impugning it had the burden to prove want ofjurisdiction over his person. HERAS failed to discharge that burden. He did not testify to state


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categorically and under oath that he never received summons. Even his own witness Lousich admittedthat HERAS was served with summons in his Quezon City residence. As to De la Vega's testimonyregarding non-service of summons, the same was hearsay and had no probative value.

As to HERAS' contention that the Hong Kong court judgment violated the Constitution and the procedurallaws of the Philippines because it contained no statements of the facts and the law on which it was

based, the trial court ruled that since the issue relate to procedural matters, the law of the forum, i.e.,Hong Kong laws, should govern. As testified by the expert witness Lousich, such legalities were notrequired under Hong Kong laws. The trial Court also debunked HERAS' contention that the principle ofexcussion under Article 2058 of the Civil Code of the Philippines was violated. It declared that matters ofsubstance are subject to the law of the place where the transaction occurred; in this case, Hong Konglaws must govern.

The trial court concluded that the Hong Kong court judgment should be recognized and given effect in thisjurisdiction for failure of HERAS to overcome the legal presumption in favor of the foreign judgment. Itthen decreed; thus:

WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff thefollowing sums or their equivalents in Philippine currency at the time of payment:

US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875% per annumfrom October 31, 1984 to December 28, 1984, and HK$905 as fixed cost, with legalinterests on the aggregate amount from December 28, 1984, and to pay attorney's feesin the sum of P80,000.00.

ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial costs and anincrease in attorney's fees in the amount of US$19,346.45 with interest until full payment of the saidobligations. On the other hand, HERAS no longer opposed the motion and instead appealed the decisionto the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 29513.

In its order2

of 2 November 1990, the trial court granted ASIAVEST's motion for reconsideration byincreasing the award of attorney's fees to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINECURRENCY, AND TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would pay the

corresponding filing fees for the increase. ASIAVEST appealed the order requiring prior payment of filingfees. However, it later withdrew its appeal and paid the additional filing fees.

On 3 April 1997, the Court of Appeals rendered its decision3reversing the decision of the trial court and

dismissing ASIAVEST's complaint without prejudice. It underscored the fact that a foreign judgment doesnot of itself have any extraterritorial application. For it to be given effect, the foreign tribunal should haveacquired jurisdiction over the person and the subject matter. If such tribunal has not acquired jurisdiction,its judgment is void.

The Court of Appeals agreed with the trial court that matters of remedy and procedure, such as thoserelating to service of summons upon the defendant are governed by the lex fori, which was, in this case,the law of Hong Kong. Relative thereto, it gave weight to Lousich's testimony that under the Hong Konglaw, the substituted service of summons upon HERAS effected in the Philippines by the clerk of Sycip

Salazar Hernandez & Gatmaitan firm would be valid provided that it was done in accordance withPhilippine laws. It then stressed that where the action is in personam and the defendant is in thePhilippines, the summons should be personally served on the defendant pursuant to Section 7, Rule 14 ofthe Rules of Court.

4Substituted service may only be availed of where the defendant cannot be promptly

served in person, the fact of impossibility of personal service should be explained in the proof of service.It also found as persuasive HERAS' argument that instead of directly using the clerk of the Sycip SalazarHernandez & Gatmaitan law office, who was not authorized by the judge of the court issuing thesummons, ASIAVEST should have asked for leave of the local courts to have the foreign summons


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served by the sheriff or other court officer of the place where service was to be made, or for specialreasons by any person authorized by the judge.

The Court of Appeals agreed with HERAS that "notice sent outside the state to a non-resident isunavailing to give jurisdiction in an action against him personally for money recovery." Summons shouldhave been personally served on HERAS in Hong Kong, for, as claimed by ASIAVEST, HERAS was

physically present in Hong Kong for nearly 14 years. Since there was not even an attempt to servesummons on HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction overHERAS. Nonetheless it did not totally foreclose the claim of ASIAVEST; thus:

While We are not fully convinced that [HERAS] has a meritorious defense against[ASIAVEST's] claims or that [HERAS] ought to be absolved of any liability, nevertheless,in view of the foregoing discussion, there is a need to deviate front the findings of thelower court in the interest of justice and fair play. This, however, is without prejudice towhatever action [ASIAVEST] might deem proper in order to enforce its claims against[HERAS].

Finally, the Court of Appeals also agreed with HERAS that it was necessary that evidence supporting thevalidity of the foreign judgment be submitted, and that our courts are not bound to give effect to foreign

judgments which contravene our laws and the principle of sound morality and public policy.

ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in ruling that

I.

. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE "SUPPORTINGTHE VALIDITY OF THE JUDGMENT";

II.

. . . THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER

PHILIPPINES LAW;

III.

. . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN HONGKONG;

IV.

. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE OFPHILIPPINE COURTS;

V.

. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THEPRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THEPHILIPPINES.

Being interrelated, we shall take up together the assigned errors.


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Under paragraph (b) of Section 50, Rule 39 of the Rules of Court,5which was the governing law at the

time this case was decided by the trial court and respondent Court of Appeals, a foreign judgment againsta person rendered by a court having jurisdiction to pronounce the judgment is presumptive evidence of aright as between the parties and their successors in interest by the subsequent title. However, thejudgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud,or clear mistake of law or fact.

Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence of proof to thecontrary, a court, or judge acting as such, whether in the Philippines or elsewhere, is presumed to haveacted in the lawful exercise of jurisdiction.

Hence, once the authenticity of the foreign judgment is proved, the burden to repel it on grounds providedfor in paragraph (b) of Section 50, Rule 39 of the Rules of Court is on the party challenging the foreignjudgment HERAS in this case.

At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the otherhand, ASIAVEST presented evidence to prove rendition, existence, and authentication of the judgment bythe proper officials. The judgment is thus presumed to be valid and binding in the country from which itcomes, until the contrary is shown.

6Consequently, the first ground relied upon by ASIAVEST has merit.

The presumption of validity accorded foreign judgment would be rendered meaningless were the partyseeking to enforce it be required to first establish its validity.

The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did notacquire jurisdiction over the person of HERAS. This involves the issue of whether summons was properlyand validly served on HERAS. It is settled that matters of remedy and procedure such as those relating tothe service of process upon the defendant are governed by the lex forior the law of the forum,

7i.e., the

law of Hong Kong in this case. HERAS insisted that according to his witness Mr. Lousich, who waspresented as an expert on Hong Kong laws, there was no valid service of summons on him.

In his counter-affidavit,8which served as his direct testimony per agreement of the parties,

9Lousich

declared that the record of the Hong Kong case failed to show that a writ of summons was served uponHERAS in Hong Kong or that any such attempt was made. Neither did the record show that a copy of the

judgment of the court was served on HERAS. He stated further that under Hong Kong laws (a) a writ ofsummons could be served by the solicitor of the claimant or plaintiff; and (b) where the said writ or claimwas not contested, the claimant or plaintiff was not required to present proof under oath in order to obtainjudgment.

On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong Kong court authorizedservice of summons on HERAS outside of its jurisdiction, particularly in the Philippines. He admitted alsothe existence of an affidavit of one Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan lawfirm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St.,Quezon City, by leaving a copy with HERAS's son-in-law Dionisio Lopez. 10 On redirect examination,Lousich declared that such service of summons would be valid under Hong Kong laws provided that itwas in accordance with Philippine laws. 11

We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as anexpert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, therecord of public documents of a sovereign authority, tribunal, official body, or public officer may be provedby (1) an official publication thereof or (2) a copy attested by the officer having the legal custody thereof,which must be accompanied, if the record is not kept in the Philippines, with a certificate that such officerhas the custody. The certificate may be issued by a secretary of the embassy or legation, consul general,consul, vice consul, or consular agent, or any officer in the foreign service of the Philippines stationed inthe foreign country in which the record is kept, and authenticated by the seal of his office. The attestation


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must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as thecase may be, and must be under the official seal of the attesting officer.

Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law. Anauthority 12 on private international law thus noted:

Although it is desirable that foreign law be proved in accordance with the above rule,however, the Supreme Court held in the case ofWillamette Iron and Steel Works v.Muzzal,

13that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court)

does not exclude the presentation of other competent evidence to prove the existence ofa foreign law. In that case, the Supreme Court considered the testimony under oath of anattorney-at-law of San Francisco, California, who quoted verbatim a section of CaliforniaCivil Code and who stated that the same was in force at the time the obligations werecontracted, as sufficient evidence to establish the existence of said law. Accordingly, inline with this view, the Supreme Court in the Collector of Internal Revenue v. Fisher etal.,

14upheld the Tax Court in considering the pertinent law of California as proved by therespondents' witness. In that case, the counsel for respondent "testified that as an activemember of the California Bar since 1951, he is familiar with the revenue and taxationlaws of the State of California. When asked by the lower court to state the pertinent

California law as regards exemption of intangible personal properties, the witness citedArticle 4, Sec. 13851 (a) & (b) of the California Internal and Revenue Code as publishedin Derring's California Code, a publication of Bancroft-Whitney Co., Inc. And as part of histestimony, a full quotation of the cited section was offered in evidence by respondents."Likewise, in several naturalization cases, it was held by the Court that evidence of the lawof a foreign country on reciprocity regarding the acquisition of citizenship, although notmeeting the prescribed rule of practice, may be allowed and used as basis for favorableaction, if, in the light of all the circumstances, the Court is "satisfied of the authenticity ofthe written proof offered." 15 Thus, in, a number of decisions, mere authentication of theChinese Naturalization Law by the Chinese Consulate General of Manila was held to becompetent proof of that law.

16

There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong Kong

in respect of service of summons either in actions in rem orin personam, and where the defendant iseither a resident or nonresident of Hong Kong. In view of the absence of proof of the Hong Kong law onthis particular issue, the presumption of identity or similarity or the so-called processual presumption shallcome into play. It will thus be presumed that the Hong Kong law on the matter is similar to the Philippinelaw. 17

As stated in Valmonte vs. Court of Appeals,18

it will be helpful to determine first whether the action is inpersonam, in rem, orquasi in rem because the rules on service of summons under Rule 14 of the Rulesof Court of the Philippines apply according to the nature of the action.

An action in personam is an action against a person on the basis of his personal liability. An action inrem is an action against the thing itself instead of against the person.

19An action quasi in rem is one

wherein an individual is named as defendant and the purpose of the proceeding is to subject his interest

therein to the obligation or lien burdening the property.

20

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validlytry and decide the case. Jurisdiction over the person of a residentdefendant who does not voluntarilyappear in court can be acquired by personal service of summons as provided under Section 7, Rule 14 ofthe Rules of Court. If he cannot be personally served with summons within a reasonable time, substitutedservice may be made in accordance with Section 8 of said Rule. If he is temporarily out of the country,any of the following modes of service may be resorted to: (1) substituted service set forth in Section8;

21(2) personal service outside the country, with leave of court; (3) service by publication, also with

leave of court;22 or (4) any other manner the court may deem sufficient. 23


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However, in an action in personam wherein the defendant is a non-residentwho does not voluntarilysubmit himself to the authority of the court, personal service of summons within the state is essential tothe acquisition of jurisdiction over her person.

24This method of service is possible if such defendant is

physically present in the country. If he is not found therein, the court cannot acquire jurisdiction over hisperson and therefore cannot validly try and decide the case against him.

25An exception was laid down

in Gemperle v. Schenker26

wherein a non-resident was served with summons through his wife, who wasa resident of the Philippines and who was his representatives and attorney-in-fact in a prior civil case filedby him; moreover, the second case was a mere offshoot of the first case.

On the other hand, in a proceeding in rem orquasi in rem, jurisdiction over the person of the defendant isnot a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction overthe res. Nonetheless summons must be served upon the defendant not for the purpose of vesting thecourt with jurisdiction but merely for satisfying the due process requirements.

27Thus, where the

defendant is a non-resident who is not found in the Philippines and (1) the action affects the personalstatus of the plaintiff; (2) the action relates to, or the subject matter of which is property in the Philippinesin which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the defendantfrom any interest in the property located in the Philippines; or (4) the property of the defendant has beenattached in the Philippines service of summons may be effected by (a) personal service out of thecountry, with leave of court; (b) publication, also with leave of court, or (c) any other manner the court maydeem sufficient. 28

In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based onhis personal guarantee of the obligation of the principal debtor. Before we can apply the foregoing rules,we must determine first whether HERAS was a resident of Hong Kong.

Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until 1985,29

testified thatHERAS was the President and part owner of a shipping company in Hong Kong during all those timesthat she served as his secretary. He had in his employ a staff of twelve.

30He had "business

commitments, undertakings, conferences, and appointments until October 1984 when [he] left Hong Kongfor good,"

31HERAS's other witness, Russel Warren Lousich, testified that he had acted as counsel for

HERAS "for a number of commercial matters."32

ASIAVEST then infers that HERAS was a resident ofHong Kong because he maintained a business there.

It must be noted that in his Motion to Dismiss,33

as well as in hisAnswer

34to ASIAVEST's complaint for the enforcement of the Hong Kong court judgment, HERAS

maintained that the Hong Kong court did not have jurisdiction over him because the fundamental rule isthat jurisdiction in personam overnon-residentdefendants, so as to sustain a money judgment, must bebased upon personal service of summons within the state which renders the judgment.

35

For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36contended: "The question of HongKong court's 'want of jurisdiction' is therefore a triable issue if it is to be pleaded by the defendant to 'repel'the foreign judgment. Facts showing jurisdictional lack (e.g. that the Hong Kong suit was in personam,that defendant was not a resident of Hong Kongwhen the suit was filed or that he did not voluntarilysubmit to the Hong Kong court's jurisdiction) should be alleged and proved by the defendant."

37

In his Reply (to the Opposition to Motion to Dismiss),38

HERAS argued that the lack of jurisdiction overhis person was corroborated by ASIAVEST's allegation in the complaint that he "has his residence at No.6, 1st St., New Manila, Quezon City, Philippines." He then concluded that such judicial admissionamounted to evidence that he was and is not a resident of Hong Kong.

Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which wasthat "the residence of defendant, Antonio Heras, is New Manila, Quezon City." 39


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Petitioner is a corporation duly organized and existing under the laws of Singapore. It is not

considered as a foreign corporation doing business in the Philippines. Herein respondent Dakila

Trading Corporation is a corporation organized and existing under Philippine laws, and engaged in the

business of selling and leasing out laboratory instrumentation and process control instrumentation, and

trading of laboratory chemicals and supplies.

The antecedents of the present case are as follows:

Respondent entered into a Distribution Agreement[5]

on 1 June 1990 with Perkin-Elmer

Instruments Asia Pte Ltd. (PEIA), a corporation duly organized and existing under the laws

of Singapore and engaged in the business of manufacturing, producing, selling or distributing various

laboratory/analytical instruments. By virtue of the said agreement, PEIA appointed the respondent as thesole distributor of its products in the Philippines. The respondent was likewise granted the right to

purchase and sell the products of PEIA subject to the terms and conditions set forth in the Distribution

Agreement. PEIA, on the other hand, shall give respondent a commission for the sale of its products in

the Philippines.

Under the same Distribution Agreement, respondent shall order the products of PEIA, which it

shall sell in the Philippines, either from PEIA itself or from Perkin-Elmer Instruments (Philippines)

Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation duly organized and existing under

Philippine laws, and involved in the business of wholesale trading of all kinds of scientific,

biotechnological, and analytical instruments and appliances. PEIA allegedly owned 99% of the shares of

PEIP.

On 2 August 1997, however, PEIA unilaterally terminated the Distribution Agreement, prompting

respondent to file before the RTC of Mandaluyong City, Branch 212, a Complain t[6]for Collection of Sum

of Money and Damages with Prayer for Issuance of a Writ of Attachment against PEIA and PEIP,

docketed as Civil Case No. MC99-605.

The RTC issued an Order,[7]

dated 26 March 1999, denying respondents prayer for the issuance

of a writ of attachment. The respondent moved for the reconsideration of the said Order but it was denied

in another Order, dated 11 January 2000.[8]

Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of Court to

Deputize Respondents General Manager, Richard A. Tee, to Serve Summons Outside of
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the Philippines,[9]

which the RTC granted in its Order, dated 27 April 2000.[10]

Thus, an Alias Summons,

dated 4 September 2000, was issued by the RTC to PEIA. But the said Alias Summons was served

on 28 September 2000 and received by Perkinelmer Asia, a Singaporean based sole proprietorship,

owned by the petitioner and, allegedly, a separate and distinct entity from PEIA.

PEIP moved to dismiss[11]the Complaint filed by respondent on the ground that it states no cause

of action. Perkinelmer Asia, on the other hand, through its counsel, sent letters, dated 12 October

2000[12]and 15 November 2000,[13]to the respondent and to the RTC, respectively, to inform them of the

wrongful service of summons upon Perkinelmer Asia.

Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint, together with the

Amended Complaint claiming that PEIA had become a sole proprietorship [14]owned by the petitioner, and

subsequently changed its name to Perkinelmer Asia. Being a sole proprietorship of the petitioner, achange in PEIAs name and juridical status did not detract from the fact that all its due and outstanding

obligations to third parties were assumed by the petitioner. Hence, in its Amended

Complaint[15]

respondent sought to change the name of PEIA to that of the petitioner. In an Order,

dated 24 July 2001,[16]the RTC admitted the Amended Complaint filed by the respondent. Respondent

then filed another Motion[17]for the Issuance of Summons and for Leave of Court to Deputize

Respondents General Manager, Richard A. Tee, to Serve Summons Outside the Philippines. In another

Order, dated 4 March 2002,[18]the RTC deputized respondents General Manager to serve summons on

petitioner in Singapore. The RTC thus issued summons [19]to the petitioner. Acting on the said Order,

respondents General Manager went to Singapore and served summons on the petitioner.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to Dismiss filed by

PEIP, compelling the latter to file its Answer to the Amended Complaint.

Petitioner subsequently filed with the RTC a Special Appearance and Motion to

Dismiss[20]respondents Amended Complaint on 30 May 2002 based on the following grounds: (1) the

RTC did not acquire jurisdiction over the person of the petitioner; (2) the respondent failed to state a

cause of action against the petitioner because it is not the real party-in-interest; (3) evenassuming arguendo that the respondent correctly filed the case against the petitioner, the Distribution

Agreement which was the basis of its claim grants PEIA the right to terminate the contract at any time;

and (4) the venue was improperly laid. The RTC in its Order, dated 4 November 2002, denied petitioners

Motion to Dismiss, ratiocinating as follows:
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Prescinding from the above arguments of both parties, the [RTC] is inclined toDENY the Motion to Dismiss.

A careful scrutiny on (sic) the allegation in the (Amended) Complaint would showthat [herein respondent] alleges ownership by the [herein petitioner] of shares of stocks inthe [PEIP]. Such allegation of ownership of shares of stocks by the [petitioner] wouldreveal that there is an allegation of personal property in the Philippines. Shares of stocksrepresent personal property of the shareholder. Thus, it follows that even though theAmended Complaint is primarily for damages, it does relate to a property of the[petitioner], to which the latter has a claim interest (sic), or an actual or contingent lien,which will make it fall under one of the requisite (sic) for extraterritorial service underSection 15, Rule 14, of the Rules of Court. Thus, it could be gainfully said that thesummons had been validly served for [RTC] to acquire jurisdiction over the [petitioner].

The [petitioner] hinges its dismissal on the failure of the [respondent] to state acause of action. The [RTC] would like to emphasize that in a Motion to Dismiss, ithypothetically admits the truth of the facts alleged in a complaint.

When the ground for dismissal is that the complaint states no cause of action,such fact can be determined only from the facts alleged in the complaint x x x and from

no other x x x and the Court cannot consider other matters aliunde x x x. This impliesthat the issue must be passed upon on the basis of the allegations and declare them tobe false, otherwise it would be a procedural error and a denial of due process to the[respondent] x x x.

The three (3) essential elements of a cause of action are the following:

a) The plaintiffs legal rights;b) A correlative obligation of the defendant;c) The omission of the defendant in violation of the legal rights.

A cursory reading of the Amended Complaint would reveal that all of theessential elements of a cause of action are attendant in the Amended Complaint.

As for the contention that venue was improperly laid, x x x, the [RTC] in itsultimate desire that the ends of justice could be served in its fullest, cannot rule thatvenue was improperly laid.

x x x x

The stipulation as to the venue of a prospective action does not preclude thefiling of the suit in the residence of the [respondent] under Section 2, Rule 4, Rules ofCourt, especially where the venue stipulation was imposed by the [petitioner] for its ownbenefits.

x x x x

The [RTC] further believes that it is imperative that in order to ferret out the truth,a full-blown trial is necessary for parties to be able to prove or disprove theirallegations.[21]

Petitioner moved for the reconsideration of the aforesaid Order but, it was denied by the RTC in

its Order, dated 20 June 2003.
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Consequently, petitioner filed a Petition forCertiorariunder Rule 65 of the 1997 Revised Rules of

Civil Procedure with application for temporary restraining order and/or preliminary injunction before the

Court of Appeals alleging that the RTC committed grave abuse of discretion amounting to lack or excess

of jurisdiction in refusing to dismiss the Amended Complaint. The Court of Appeals never issued any

temporary restraining order or writ of injunction. On 4 April 2006, the Court of Appeals rendered a

Decision affirming the RTC Orders of 4 November 2002 and 20 June 2003.

This brings us to the present Petition before this Court wherein petitioner raised the following

issues.

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORIN NOT RULING THAT THE SERVICE OF SUMMONS ON PETITIONER WASDEFECTIVE AND THAT THE TRIAL COURT THUS FAILED TO ACQUIREJURISDICTION OVER THE PERSON OF THE PETITIONER.

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORIN RULING THAT THE SOLE ISSUE IN THE PETITION FOR CERTIORARIFILEDBEFORE IT IS THE QUESTION OF WHETHER THE TRIAL COURT ACQUIREDJURISDICTION OVER THE PERSON OF THE PETITIONER THROUGH THEEXTRATERRITORIAL SERVICE OF SUMMONS.

A.

WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVEGRANTED THE PETITION FOR CERTIORARIAND REVERSED THERTC ORDERS ON THE GROUND THAT THE AMENDED COMPLAINTFAILED TO STATE A CAUSE OF ACTION AGAINST PETITIONER.

1. BASED ON THE ALLEGATIONS IN THE EX-PARTEMOTION TO ADMIT AMENDED COMPLAINT, AMENDEDCOMPLAINT, AND ALL DOCUMENTS ATTACHED AND/OR RELATEDTHERETO, PETITIONER IS NOT THE REAL PARTY-IN-INTERESTDEFENDANT IN THE CASE BELOW.

2. ASSUMING ARGUENDO THAT RESPONDENT DAKILA

FILED THIS CASE AGAINST THE CORRECT [PARTY], INASMUCH ASTHE DISTRIBUTION AGREEMENT DATED 1 JUNE 1990 GRANTS[PEIA] THE RIGHT TO TERMINATE THE CONTRACT AT ANY TIME,RESPONDENT DAKILA FAILS TO STATE A CAUSE OF ACTION INTHE CASE BELOW.

B.


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Petitioner further argues that the appellate court should have granted its Petition for Certiorarion

the ground that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction

in refusing to dismiss respondents Amended Complaint for failure to state a cause of action against

petitioner which was not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that it

had never used the name PEIA as its corporate name, and neither did it change its name from that of

PEIA. Petitioner stresses that PEIA is an entirely different corporate entity that is not connected in

whatever manner to the petitioner. Even assuming arguendo that petitioner is the real party-in-interest in

Civil Case No. MC99-605 or that petitioner and PEIA are one and the same entity, petitioner still avows

that the respondent failed to state a cause of action against it because the Distribution Agreement

expressly grants PEIA the right to terminate the said contract at any time.

Lastly, it is the contention of the petitioner that the appellate court should have granted its Petition

forCertioraribecause the RTC committed grave abuse of discretion amounting to lack or excess ofjurisdiction in refusing to dismiss Civil Case No. MC99-605 for having been filed in an improper

venue. Petitioner asserts that in the Distribution Agreement entered into between the respondent and

PEIA, both had mutually agreed to the exclusive jurisdiction of the courts of Singapore or of

the Philippines as elected by PEIA. Absent any waiver by PEIA of its right to choose the venue of the

dispute, the Complaint filed by the respondent before the RTC in the Philippines should have been

dismissed on the ground of improper venue.

The Petition is meritorious.

Jurisdiction is the power with which courts are invested for administering justice; that is, for

hearing and deciding cases. In order for the court to have authority to dispose of the case on the merits, it

must acquire jurisdiction over the subject matter and the parties.[22]

Jurisdiction of the court over the subject matter is conferred only by the Constitution or by law. It

is determinable on the basis of allegations in the complaint.[23]

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdictionover the defendants in a civil case is acquired either through the service of summons upon them in the

manner required by law or through their voluntary appearance in court and their submission to its

authority. If the defendants have not been summoned, unless they voluntarily appear in court, the court

acquires no jurisdiction over their persons and a judgment rendered against them is null and void. To be

bound by a decision, a party should first be subjected to the courts jurisdiction .[24]
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Thus, one of the modes of acquiring jurisdiction over the person of the defendant or respondent in

a civil case is through service of summons. It is intended to give notice to the defendant or respondent

that a civil action has been commenced against him. The defendant or respondent is thus put on guard as

to the demands of the plaintiff or the petitioner.[25]

The proper service of summons differs depending on the nature of the civil case instituted by the

plaintiff or petitioner: whether it is in personam, in rem, orquasi in rem. Actions in personam, are those

actions brought against a person on the basis of his personal liability; actions in rem are actions against

the thing itself instead of against the person; and actions are quasi in rem, where an individual is named

as defendant and the purpose of the proceeding is to subject his or her interest in a property to the

obligation or loan burdening the property.[26]

Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are only fourinstances wherein a defendant who is a non-resident and is not found in the country may be served with

summons by extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiff;

(2) when the action relates to, or the subject of which is property, within the Philippines, in which the

defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such action

consists, wholly or in part, in excluding the defendant from any interest in property located in the

Philippines; and (4) when the defendant non-residents property has been attached within the

Philippines. In these instances, service of summons may be effected by (a) personal service out of the

country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may

deem sufficient.[27]

Undoubtedly, extraterritorial service of summons applies only where the action is in rem orquasi

in rem, but not if an action is in personam.

When the case instituted is an action in rem orquasi in rem, Philippine courts already have

jurisdiction to hear and decide the case because, in actions in rem and quasi in rem, jurisdiction over the

person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the court

acquires jurisdiction over the res.

[28]

Thus, in such instance, extraterritorial service of summons can bemade upon the defendant. The said extraterritorial service of summons is not for the purpose of vesting

the court with jurisdiction, but for complying with the requirements of fair play or due process, so that the

defendant will be informed of the pendency of the action against him and the possibility that property in

the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of

the plaintiff, and he can thereby take steps to protect his interest if he is so minded.[29] On the other hand,

when the defendant or respondent does not reside and is not found in the Philippines ,[30]and the action
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involved is in personam, Philippine courts cannot try any case against him because of the impossibility of

acquiring jurisdiction over his person unless he voluntarily appears in court .[31]

In the case at bar, this Court sustains the contention of the petitioner that there can never be a

valid extraterritorial service of summons upon it, because the case before the court a quo involving

collection of a sum of money and damages is, indeed, an action in personam, as it deals with the

personal liability of the petitioner to the respondent by reason of the alleged unilateral termination by the

former of the Distribution Agreement. Even the Court of Appeals, in its Decision dated 4 April 2004,

upheld the nature of the instant case as an action in personam. In the said Decision the appellate court

ruled that:

In the instant petition, [respondents] cause of action in Civil Case No. MC99 -605is anchored on the claim that petitioner unilaterally terminated the DistributionAgreement. Thus, [respondent] prays in its [C]omplaint that Upon the filing of theComplaint, issue an Order fixing the amount of the bond and issue a writ of attachmentrequiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are notexempt from execution, and as much as may be sufficient to satisfy [respondents]demands.

The action instituted by [respondent] affects the parties alone, not the wholeworld. Hence, it is an action in personam, i.e., any judgment therein is binding only uponthe parties properly impleaded.

x x x x

The objective sought in [respondents] [C]omplaint was to establish a claimagainst petitioner for its alleged unilateral termination of [D]istribution

[A]greement. Hence, to repeat, Civil Case No. MC99-605 is an action inpersonambecause it is an action against persons, namely, herein petitioner, onthe basis of its personal liability. As such, personal service of summons upon the[petitioner] is essential in order for the court to acquire of (sic) jurisdiction over [itsperson].

[32] (Emphasis supplied.)

Thus, being an action in personam, personal service of summons within the Philippines is necessary in

order for the RTC to validly acquire jurisdiction over the person of the petitioner, and this is not possible in

the present case because the petitioner is a non-resident and is not found within

the Philippines. Respondents allegation in its Amended Complaint that petitioner had personal property

within the Philippines in the form of shares of stock in PEIP did not make Civil Case No. MC99-605 fall

under any of the four instances mentioned in Section 15, Rule 14 of the Rules of Court, as to convert the

action in personam to an action in rem orquasi in rem and, subsequently, make the extraterritorial service

of summons upon the petitioner valid.
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It is incorrect for the RTC to have ruled that the allegations made by the respondent in its

Amended Complaint, which is primarily for collection of a sum of money and damages, that the petitioner

owns shares of stock within the Philippines to which the petitioner claims interest, or an actual or

contingent lien, would make the case fall under one of the aforesaid instances wherein extraterritorial

service of summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, would be

valid. The RTC in arriving at such conclusions relied on the second instance, mentioned under Section

15, Rule 14 of the 1997 Revised Rules of Civil Procedure ( i.e., when the action relates to, or the subject

of which is property, within the Philippines, in which the defendant claims a lien or interest, actual or

contingent), where extraterritorial service of summons can be properly made. However, the aforesaid

second instance has no application in the case before this Court. Primarily, the Amended Complaint filed

by the respondent against the petitioner was for the collection of sum of money and damages. The said

case was neither related nor connected to any property of the petitioner to which it claims a lien or

interest. The action for collection of a sum of money and damages was purely based on the personalliability of the petitioner towards the respondent. The petitioner is correct in saying that mere allegations

of personal property within the Philippines does not necessarily make the action as one that relates to or

the subject of which is, property within the Philippines as to warrant the extraterritorial service of

summons. For the action to be considered one that relates to, or the subject of which, is the property

within the Philippines, the main subject matter of the action must be the property itself of the petitioner in

the Philippines. By analogy, an action involving title to or possession of real or personal property -- such

as the foreclosure of real estate or chattel mortgage where the mortgagor does not reside or is not found

in the Philippines -- can be considered as an action which relates to, or the subject of which is, property

within the Philippines, in which the defendant claims a lien or interest, actual or contingent; and in such

instance, judgment will be limited to theres.[33]

Moreover, the allegations made by the respondent that the petitioner has property within

the Philippines were in support of its application for the issuance of a writ of attachment, which was

denied by the RTC. Hence, it is clear from the foregoing that the Complaint filed by the respondent

against the petitioner does not really relate to, or the subject of which is, property within the Philippines of

the petitioner.

This Court also finds error in the Decision of the Court of Appeals. It is provided for in the said

Decision, thus:

However, let it be emphasized that in the [C]omplaint filed before the trial court,[respondent] prayed that Upon the filing of the Complaint, issue an Order fixing theamount of the bond and issue a writ of attachment requiring the sheriff to attach the
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of the petitioner. The RTC is therefore bereft of any authority to act upon the Complaint filed before it by

the respondent insofar as the petitioner is concerned.

If there was no valid summons served upon petitioner, could RTC have acquired jurisdiction over

the person of the petitioner by the latters voluntary appearance? As a rule, even if the service of

summons upon the defendant or respondent in a civil case is defective, the court can still acquire

jurisdiction over his person when he voluntary appears in court or submits himself to its

authority. Nonetheless, voluntary appearance, as a mode of acquiring jurisdiction over the person of the

defendant, is likewise inapplicable in this case.

It is settled that a party who makes a special appearance in court for the purpose of challenging

the jurisdiction of said court, based on the invalidity of the service of summons, cannot be considered to

have voluntarily submitted himself to the jurisdiction of the court.

[36]

In the present case, petitioner hasbeen consistent in all its pleadings in assailing the service of summons upon it and the jurisdiction of the

RTC over its person. Thus, the petitioner cannot be declared in estoppel when it filed an Answer ad

cautelamwith compulsory counterclaim before the RTC while the instant Petition was still pending before

this Court. The petitioner was in a situation wherein it had no other choice but to file an Answer;

otherwise, the RTC would have already declared that petitioner had waived its right to file responsive

pleadings.[37]

Neither can the compulsory counterclaim contained in petitioners Answerad cautelam be

considered as voluntary appearance of petitioner before the RTC. Petitioner seeks to recover damages

and attorneys fees as a consequence of the unfounded suit filed by respondent against it. Thus,

petitioners compulsory counterclaim is only consistent with its position that the respondent wrongfully

filed a case against it and the RTC erroneously exercised jurisdiction over its person.

Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC over

respondents complaint and over petitioners counterclaim -- while it may have no jurisdiction over the

former, it may exercise jurisdiction over the latter. The compulsory counterclaim attached to petitioners

Answerad cautelam can be treated as a separate action, wherein petitioner is the plaintiff while

respondent is the defendant.[38] Petitioner could have instituted a separate action for the very same

claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to demand the same inCivil Case No. MC99-605.

[39] Jurisdiction of the RTC over the subject matter and the parties in the

counterclaim must thus be determined separately and independently from the jurisdiction of the same

court in the same case over the subject matter and the parties in respondents complaint.

Moreover, even though the petitioner raised other grounds in its Motion to Dismiss aside from

lack of jurisdiction over its person, the same is not tantamount to its voluntary appearance or submission
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to the authority of the court a quo. While in De Midgely v. Ferandos,[40]

it was held that, in a Motion to

Dismiss, the allegation of grounds other than lack of jurisdiction over the person of the defendant,

including a prayer "for such other reliefs as" may be deemed "appropriate and proper" amounted to

voluntary appearance, such ruling must be deemed superseded by the declaration of this Court in La

NavalDrug Corporation v. Court of Appeals[41]that estoppel by jurisdiction must be unequivocal and

intentional. It would be absurd to hold that petitioner unequivocally and intentionally submitted itself to the

jurisdiction of the court by seeking other reliefs to which it might be entitled when the only relief that it

could properly ask from the trial court is the dismissal of the complaint against it .[42] Thus, the allegation

of grounds other than lack of jurisdiction with a prayer for such other reliefs as may be deemed

appropriate and proper cannot be considered as unequivocal and intentional estoppel. Most telling is

Section 20, Rule 14 of the Rules of Court, which expressly provides:

SEC. 20. Voluntary appearance. - The defendants voluntary appearance in the

action shall be equivalent to service of summons. The inclusion in a motion to dismiss ofother grounds aside from lack of jurisdiction over the person of the defendant shall not bedeemed a voluntary appearance.

[43] (Emphasis supplied.)

In sum, this Court finds that the petitioner did not submit itself voluntarily to the authority of the

court a quo; and in the absence of valid service of summons, the RTC utterly failed to acquire jurisdiction

over the person of the petitioner.

Anent the existence of a cause of action against petitioner and the proper venue of the case, this

Court upholds the findings of the RTC on these issues.

Dismissal of a Complaint for failure to state a cause of action is provided for by the Rules of

Court.[44] When a Motion to Dismiss is grounded on the failure to state a cause of action, a ruling thereon

should be based only on the facts alleged in the complaint. The court must pass upon this issue

based solelyon such allegations, assuming them to be true. For it to do otherwise would be a procedural

error and a denial of plaintiffs right to due process.[45] While, truly, there are well-recognized

exceptions[46]to the rule that the allegations are hypothetically admitted as true and inquiry is confined to

the face of the complaint,[47]none of the exceptions apply in this case. Hence, the general rule

applies. The defense of the petitioner that it is not the real party-in-interest is evidentiary in nature which

must be proven in trial. The appellate court, then, cannot be faulted for not granting petitioners Motion to

Dismiss on the ground of failure to state a cause of action.
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Finally, as regards the petitioners counterclaim, which is purely for damages and attorneys fees by

reason of the unfounded suit filed by the respondent against it, it has long been settled that the same truly

falls under the classification ofcompulsory counterclaim and it must be pleaded in the same action,

otherwise, it is barred.[49] In the case at bar, this Court orders the dismissal of the Complaint filed by

the respondent against the petitioner because the court a quofailed to acquire jurisdiction over the

person of the latter. Since the Complaint of the respondent was dismissed, what will happen then to the

counterclaim of the petitioner? Does the dismissal of the complaint carry with it the dismissal of the

counterclaim?

In the cases ofMetal Engineering Resources Corp. v. Court of Appeals,[50]

International Container

Terminal Services, Inc. v. Court of Appeals,[51]and BA Finance Corporation v. Co.,

[52]the Court ruled that

if the court does not have jurisdiction to entertain the main action of the case and dismisses the same,

then the compulsory counterclaim, being ancillary to the principal controversy, must likewise be dismissedsince no jurisdiction remained for any grant of relief under the counterclaim.[53] If we follow the aforesaid

pronouncement of the Court in the cases mentioned above, the counterclaim of the herein petitioner

being compulsory in nature must also be dismissed together with the Complaint. However, in the case

ofPinga vs. Heirs of German Santiago,[54]the Court explicitly expressed that:

Similarly, Justice Feria notes that the present rule reaffirms the right of thedefendant to move for the dismissal of the complaint and to prosecute his counterclaim,as stated in the separate opinion [of Justice Regalado in BA Finance]. Retired Court ofAppeals Justice Hererra pronounces that the amendment to Section 3, Rule 17 [of the1997 Revised Rules of Civil Procedure] settles that nagging question whether the

dismissal of the complaint carries with it the dismissal of the counterclaim , andopines that by reason of the amendments, the rulings in MetalsEngineering,International Container, and BA Financemay be deemedabandoned. x x x.

x x x, when the Court promulgated the 1997 Rules of Civil Procedure, includingthe amended Rule 17, those previous jural doctrines that were inconsistent with the newrules incorporated in the 1997 Rules of Civil Procedure were implicitlyabandoned insofar as incidents arising after the effectivity of the new procedural rules on1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarilydismissed along with the complaint, clearly conflicts with the 1997 Rules of CivilProcedure. The abandonment ofBA Finance as doctrine extends as far back as 1997,when the Court adopted the new Rules of Civil Procedure. If, since then, abandonment

has not been affirmed in jurisprudence, it is only because no proper case has arisen thatwould warrant express confirmation of the new rule. That opportunity is here and now,and we thus rule that the dismissal of a complaint due to fault of the plaintiff iswithout prejudice to the right of the defendant to prosecute any pendingcounterclaims of whatever nature in the same or separate action. We confirmthat BA Financeand all previous rulings of the Court that are inconsistent with thispresent holding are now abandoned.

[55] [Emphasis supplied].
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It is true that the aforesaid declaration of the Court refers to instances covered by Section 3, Rule

17 of the 1997 Revised Rules of Civil Procedure [56]on dismissal of the complaint due to the fault of the

plaintiff. Nonetheless, it does not also preclude the application of the same to the instant case just

because the dismissal of respondents Complaint was upon the instance of the petitioner who correctly

argued lack of jurisdiction over its person.

Also in the case ofPinga v. Heirs of German Santiago, the Court discussed the situation wherein

the very filing of the complaint by the plaintiff against the defendant caused the violation of the latters

rights. As to whether the dismissal of such a complaint should also include the dismissal of the

counterclaim, the Court acknowledged that said matter is still debatable, viz:

Whatever the nature of the counterclaim, it bears the same integralcharacteristics as a complaint; namely a cause (or causes) of action constituting an act oromission by which a party violates the right of another. The main difference lies in thatthe cause of action in the counterclaim is maintained by the defendant against theplaintiff, while the converse holds true with the complaint. Yet, as with a complaint, acounterclaim without a cause of action cannot survive.

x x x if the dismissal of the complaint somehow eliminates the cause(s) of thecounterclaim, then the counterclaim cannot survive. Yet that hardly is the case,especially as a general rule. More often than not, the allegations that form thecounterclaim are rooted in an act or omission of the plaintiff other than the plaintiffs veryact of filing the complaint. Moreover, such acts or omissions imputed to the plaintiff areoften claimed to have occurred prior to the filing of the complaint itself. The onlyapparent exception to this circumstance is if it is alleged in the counterclaim thatthe very act of the plaintiff in filing the complaint precisely causes the violation ofthe defendants rights. Yet even in such an instance, it remains debatable whether

the dismissal or withdrawal of the complaint is sufficient to obviate the pendingcause of action maintained by the defendant against the plaintiff.

[57]

Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow

eliminates the cause of the counterclaim, then the counterclaim cannot survive. Conversely, if the

counterclaim itself states sufficient cause of action then itshouldstand independently of andsurvive the

dismissal of the complaint. Now, having been directly confronted with the problem of whether the

compulsory counterclaim by reason of the unfounded suit may prosper even if the main complaint had

been dismissed, we rule in the affirmative.

It bears to emphasize that petitioners counterclaim against respondent is for damages and

attorneys fees arising from the unfounded suit. While respondents Complaint against petitioner is

already dismissed, petitioner may have very well already incurred damages and litigation expenses such

as attorneys fees since it was forced to engage legal representation in the Philippines to protect its rights

and to assert lack of jurisdiction of the courts over its person by virtue of the improper service of summons
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upon it. Hence, the cause of action of petitioners counterclaim is not eliminated by the mere dismissal of

respondents complaint.

It may also do well to remember that it is this Court which mandated that claims for damages and

attorneys fees based on unfounded suit constitute compulsory counterclaim which must be pleaded in

the same action or, otherwise, it shall be barred. It will then be iniquitous and the height of injustice to

require the petitioner to make the counterclaim in the present action, under threat of losing his right to

claim the same ever again in any other court, yet make his right totally dependent on the fate of the

respondents complaint.

If indeed the Court dismisses petitioners counterclaim solely on the basis of the dis missal of

respondents Complaint, then what remedy is left for the petitioner? It can be said that he can still file a

separate action to recover the damages and attorneys fees based on the unfounded suit for he cannot bebarred from doing so since he did file the compulsory counterclaim in the present action, only that it was

dismissed when respondents Complaint was dismissed. However, this reasoning is highly flawed and

irrational considering that petitioner, already burdened by the damages and attorneys fees it may have

incurred in the present case, must again incur more damages and attorneys fees in pursuing a separate

action, when, in the first place, it should not have been involved in any case at all.

Since petitioners counterclaim is compulsory in nature and its cause of action survives that of the

dismissal of respondents complaint, then it should be resolved based on its own merits and evidentiary

support.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision of

the Court of Appeals, dated 4 April 2006, in CA-G.R. SP No. 78981, affirming the Orders, dated 4

November 2002 and 20 June 2003, of the Regional Trial Court of Mandaluyong City, Branch 212, in Civil

Case No. MC99-605, is herebyREVERSED AND SET ASIDE. Respondents Amended Complaint in Civil

Case No. MC99-605 as against the petitioner is hereby ordered DISMISSED, and all the proceedings

against petitioner in the court a quo by virtue thereof are hereby DECLAREDNULL AND

VOID. The Regional Trial Court of Mandaluyong City, Branch 212, isDIRECTED to proceed withoutfurther delay with the resolution of respondents Complaint in Civil Case No. MC99-605 as to defendant

PEIP, as well as petitioners counterclaim. No costs.

SO ORDERED.


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G.R. No. 156848 October 11, 2007

PIONEER INTERNATIONAL, LTD., petitioner,vs.HON. TEOFILO GUADIZ, JR., in his capacity as Presiding Judge of Regional Trial Court, Branch147, Makati City, and ANTONIO D. TODARO, respondents.

D E C I S I O N

CARPIO, J .:

The Case

This is a petition for review on certiorari1of the Decision2dated 27 September 2001 and of theResolution3dated 14 January 2003 of the Court of Appeals (appellate court) in CA-G.R. SP No. 54062.The Decision affirmed the Orders4dated 4 January 19995and 3 June 19996of Branch 147 of theRegional Trial Court of Makati City (trial court) in Civil Case No. 98-124. The trial court denied the motionto dismiss filed by Pioneer International, Ltd. (PIL)7in its special appearance.

The Facts

On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint for sum of money and damages withpreliminary attachment against PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer PhilippinesHoldings, Inc. (PPHI), John G. McDonald (McDonald), and Philip J. Klepzig (Klepzig). PIL and its co-defendants were served copies of the summons and of the complaint at PPHI and PCPIs office inAlabang, Muntinlupa, through Cecille L. De Leon (De Leon), who was Klepzigs Executive Assistant.

Todaro alleged that PIL is a corporation duly organized under Australian laws, while PCPI and PPHI arecorporations duly organized under Philippine laws. PIL is engaged in the ready-mix and concreteaggregates business and has established a presence worldwide. PIL established PPHI as the holdingcompany of the stocks of its operating company in the Philippines, PCPI. McDonald is the Chief

Executive Officer of PILs Hong Kong office while Klepzig is the President and Managing Director of PPHIand PCPI. For his part, Todaro further alleged that he was the managing director of BetonvalReadyconcrete, Inc. (Betonval) from June 1975 up to his resignation in February 1996.

Before Todaro filed his complaint, there were several meetings and exchanges of letters between Todaroand the officers of Pioneer Concrete (Hong Kong) Limited, Pioneer Concrete Group HK, PPHI, and PIL.According to Todaro, PIL contacted him in May 1996 and asked if he could join it in establishing a pre-mixed concrete plant and in overseeing its operations in the Philippines. Todaro confirmed his availabilityand expressed interest in joining PIL. Todaro met with several of PILs representatives and even gave PILthe names of three of his subordinates in Betonval whom he would like to join him in PIL.

Todaro attached nine letters, marked as Annexes "A" to "I," to his complaint. Annex "A"8shows that on 15July 1996, Todaro, under the letterhead of Ital Tech Distributors, Inc., sent a letter to Max Lindsay

(Lindsay) of Pioneer Concrete (Hong Kong) Limited. Todaro wrote that "[m]y aim is to run again a ready-mix concrete company in the Philippines and not to be a part-time consultant. Otherwise, I could havecharged your company with a much higher fee."

Annex "B"9shows that on 4 September 1996, Lindsay, under the letterhead of Pioneer Concrete (HongKong) Limited, responded by fax to Todaros faxed letter to McDonald and proposed that Todaro "joinPioneer on a retainer basis for 2 to 3 months on the understanding that [Todaro] would become apermanent employee if as we expect, our entry proceeds." The faxed letter to McDonald referred to byLindsay is not found in the rollo and was not attached to Todaros complaint.
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