Dial Corporation v. Soriano
REITERATIONFacts
1. The Antecedents: Petitioners, foreign corporations not domiciled in the Philippines, entered into contracts with respondent Imperial Vegetable Oil Company, Inc. (IVO) for the delivery of coconut oil. These contracts stipulated that any disputes would be settled through arbitration under FOSFA or NIOP rules. IVO defaulted on these contracts, leading petitioners and others to initiate arbitration proceedings abroad, some resulting in favorable awards. 2. Procedural History: IVO filed a complaint for injunction and damages against nineteen foreign buyers, including the petitioners, in the Regional Trial Court (RTC) of Manila. IVO sought to disown contracts entered into by its former president, Dominador Monteverde, alleging they were unauthorized and that the petitioners were harassing the company. The RTC authorized extraterritorial service of summons upon the petitioners. The petitioners filed motions to dismiss, arguing improper service and lack of jurisdiction, which the RTC denied. Their subsequent motions for reconsideration were also denied. 3. The Petition: The petitioners filed a petition for certiorari with the Supreme Court, arguing that the RTC erred in upholding the validity of the extraterritorial service of summons. They contended that the action was a personal action (in personam) and not an action in rem or quasi in rem, thus requiring personal service within the Philippines, not extraterritorial service, to establish jurisdiction. They asserted that the RTC lacked jurisdiction over them as non-resident foreign corporations not doing business in the Philippines without a license, and that the extraterritorial service was improper under Rule 14 of the Rules of Court.
Issue(s)
Whether the Regional Trial Court acquired jurisdiction over the persons of the petitioners through extraterritorial service of summons. Whether the action filed by IVO against the petitioners is an action in personam or an action in rem/quasi in rem. Whether the petitioners, as foreign corporations, are considered to be doing business in the Philippines without a license, thereby subjecting them to the jurisdiction of Philippine courts.
Ruling
The petition for certiorari is granted. The orders dated April 24, 1987, and December 15, 1987, of the respondent Judge are set aside. The complaint in Civil Case No. 87-40166 is dismissed as against the petitioners for failure of the court to acquire jurisdiction over them.
Ratio Decidendi
On the issue of jurisdiction through extraterritorial service of summons: The Supreme Court held that extraterritorial service of summons is proper only in specific instances enumerated under Section 17, Rule 14 of the Rules of Court. These instances include actions affecting the personal status of the plaintiff, actions relating to property within the Philippines in which the defendant has or claims an interest, actions where the relief demanded consists in excluding the defendant from any interest in Philippine property, or when the defendant's property has been attached within the Philippines. The Court found that the present action, being an injunction to restrain enforcement of contracts and to recover damages, is a personal action (action in personam), not an action in rem or quasi in rem. Therefore, personal or substituted service of summons, not extraterritorial service, was necessary to confer jurisdiction on the court over the persons of the petitioners. The Court emphasized that extraterritorial service cannot subject non-resident defendants to the processes of Philippine courts when the action is personal and the defendants have no property within the jurisdiction. The Court also clarified that contractual rights of petitioners are not property found in the Philippines for the purpose of justifying extraterritorial service, as petitioners had not filed an action to enforce these rights locally nor submitted to the court's jurisdiction. On the nature of the action: The Court classified Civil Case No. 87-40166 as a personal action (action in personam). It distinguished this from an action in rem, which is an action against the thing itself. A personal action, as defined in Hernandez vs. Rural Bank of Lucena, Inc., is one brought for the recovery of personal property, enforcement of a contract, recovery of damages for breach thereof, or recovery of damages for injury to person or property. The complaint filed by IVO sought to restrain the enforcement of contracts and to recover damages, fitting the definition of a personal action. The Court reiterated the principle that for an action in personam against a non-resident defendant, personal service within the state is fundamental to acquire jurisdiction for a money judgment, as stated in Boudard vs. Tait. On foreign corporations doing business in the Philippines: While the lower court invoked Section 33 of the Corporation Code, which allows foreign corporations transacting business without a license to be sued in Philippine courts, the Supreme Court noted that this provision does not repeal the rules requiring proper service of summons as provided in Rule 14 of the Rules of Court and Section 128 of the Corporation Code. The Court found a contradiction in the respondent court's reasoning: it authorized extraterritorial service, implying the defendants were not found in the Philippines and did not transact business here, yet it also concluded they were doing business without a license, subjecting them to jurisdiction. The petitioners explicitly denied doing business in the Philippines. The Court concluded that even if they were considered to be doing business, the fundamental requirement of proper service of summons to acquire jurisdiction over their persons was not met through extraterritorial service in this personal action.
Main Doctrine
Extraterritorial service of summons is improper and null and void when the action is a personal action (action in personam) and the non-resident defendant has no property in the Philippines, as Philippine courts cannot acquire jurisdiction over the person of such defendant under such circumstances.