Lingner & Fisher Gmbh v. Intermediate Appellate Court
REITERATIONFacts
The Antecedents: Deutsche Milchwerke Dr. A. Sauer (DMW) and Philippine Chemical Laboratories, Inc. (PHILCHEM) executed an Agency AGREEMENT on February 28, 1963, making PHILCHEM the exclusive importer of DMW's PRODUCTS into the Philippines. The agreement had a term of five years, renewable automatically, and included provisions for local manufacturing, a royalty clause for five years post-termination, and a stipulation that "All legal settlements within the compass of this AGREEMENT shall fall under the jurisdiction of Philippine courts." DMW's interests were later acquired by Lingner & Fisher GMBH (LINGNER), a subsidiary of Beecham Group Ltd. The agreement was extended and finally terminated on August 31, 1977. Procedural History: On July 20, 1979, PHILCHEM filed a claim against LINGNER for P1,055,000.00 under the ROYALTY CLAUSE. After settlement discussions failed, PHILCHEM filed a complaint against BEECHAM alone, but summons could not be served. PHILCHEM amended the complaint to include LINGNER and BEECHAM as defendants, pleading that summons could be served on their law firm. LINGNER, through its law firm, filed a special appearance and moved to dismiss, arguing it was not a foreign corporation doing business in the Philippines and could not be served through the law firm. The Trial Court denied the motion. LINGNER elevated the matter to the Intermediate Appellate Court (IAC) via certiorari, reiterating the service of summons issue and requesting an evidentiary hearing on whether LINGNER was doing business in the Philippines. The IAC upheld the validity of the service of summons through the law firm and denied the request for an evidentiary hearing. The Petition: LINGNER filed a petition with the Supreme Court, challenging the IAC's ruling.
Issue(s)
Whether summons could be validly served on LINGNER through its law firm. Whether LINGNER was doing business in the Philippines. Whether an evidentiary hearing was necessary to determine if LINGNER was doing business in the Philippines. Whether alias summons by publication could be issued on LINGNER.
Ruling
The Supreme Court upheld the denial of the motion to dismiss, directing the Regional Trial Court to allow PHILCHEM to apply for the issuance of alias summons on LINGNER by publication, and thereafter, to proceed to trial and judgment.
Ratio Decidendi
On the issue of whether summons could be validly served on LINGNER through its law firm: The Court noted that the Trial Court denied the motion to dismiss, holding that LINGNER could be served through its law firm. The Intermediate Appellate Court (IAC) further upheld this, citing Johnlo Trading Co. vs. Flores. While the Supreme Court did not explicitly rule on the validity of service through the law firm in its resolution, it ultimately directed the issuance of alias summons by publication, rendering the initial service method moot. On the issue of whether LINGNER was doing business in the Philippines: The Court found that evidence on this matter was no longer necessary. This was because the parties had expressly stipulated in their AGREEMENT that "All legal settlements within the compass of this AGREEMENT shall fall under the jurisdiction of Philippine courts." This stipulation constituted a covenant on venue, binding LINGNER to be sued in Philippine courts for controversies related to the AGREEMENT, irrespective of whether it was doing business in the Philippines. On the issue of whether an evidentiary hearing was necessary to determine if LINGNER was doing business in the Philippines: The Appellate Court acted correctly in denying the request for an evidentiary hearing. Evidence for factual issues contemplated by law for the Appellate Court's jurisdiction pertains to "incidental" facts not fully heard by the lower court. The law did not intend for the Appellate Court to conduct an original and full trial of a main factual issue, which properly belongs to Trial Courts. Therefore, the IAC's denial of the evidentiary hearing was justified. On the issue of whether alias summons by publication could be issued on LINGNER: The Court held that a case should not be dismissed simply because an original summons was wrongfully served. For the expeditious determination of the controversy, and in view of the insufficiency of evidence that LINGNER was doing business in the Philippines (a sine qua non requirement for service under Section 14, Rule 14 of the Rules of Court), it was best that alias summons be issued on LINGNER by publication under Section 17, Rule 14, in relation to Rule 4 of the Rules of Court. This recognizes the principle that venue can be agreed upon by the parties, and if a local plaintiff and a foreign corporation agreed on Philippine venue, summons by publication can be made under the principle of liberal construction of rules to promote a just determination of actions.
Main Doctrine
Parties to an agreement expressly stipulating that all legal settlements shall fall under the jurisdiction of Philippine courts, are bound by such covenant on venue, allowing them to be sued in Philippine courts for controversies related to the agreement, even if the defendant is a foreign corporation not necessarily doing business in the Philippines, and service of summons may be effected by publication.