Litton Mills, Inc. v. Court of Appeals and Gelhaar Uniform Company, Inc.
REITERATIONFacts
The Antecedents: Petitioner Litton Mills, Inc. (Litton) entered into an agreement with Empire Sales Philippines Corporation (Empire), as local agent of private respondent Gelhaar Uniform Company (Gelhaar), a U.S. corporation, for the supply of soccer jerseys. Litton was to supply 7,770 dozens of jerseys, with payment contingent on an inspection certificate from Empire. Litton made four shipments, but Empire refused to issue an inspection certificate for the fifth shipment, alleging it was without valid reason. Litton filed a complaint for specific performance and damages with the RTC, seeking a writ of preliminary mandatory injunction to compel Empire to issue the certificate. The RTC issued the writ, and Empire subsequently issued the certificate, allowing the shipment to proceed on time. Procedural History: Atty. Remie Noval filed multiple motions for extension of time to file an answer for the defendants, which were granted. He later filed the pre-trial brief. Subsequently, the law firm Sycip, Salazar, Feliciano and Hernandez entered a special appearance for Gelhaar, objecting to the court's jurisdiction. They moved to dismiss the case and quash the summons, arguing Gelhaar was a foreign corporation not doing business in the Philippines and thus beyond the court's reach. They also denied Atty. Noval's authority to appear for Gelhaar, asserting his answer did not bind the corporation. The RTC denied Gelhaar's motion to dismiss, finding it was doing business in the Philippines and service of summons was valid. Gelhaar's motion for reconsideration was denied. Gelhaar then filed a special civil action for certiorari with the Court of Appeals, which set aside the RTC orders, holding that proof of Gelhaar doing business in the Philippines should have been presented and that jurisdiction was not acquired through voluntary submission due to questioned authority of Atty. Noval. The Petition: Litton petitioned the Supreme Court, contending that jurisdiction over Gelhaar was acquired through service of summons on its agent and/or by the voluntary appearance of Atty. Noval. The Supreme Court reversed the Court of Appeals, reinstating the RTC order but granting Gelhaar a new period to file its answer.
Issue(s)
Whether the trial court acquired jurisdiction over Gelhaar through service of summons upon its agent. Whether Gelhaar was doing business in the Philippines. Whether the single transaction of purchasing soccer jerseys constituted "doing business" in the Philippines. Whether the appearance of Atty. Remie Noval in behalf of Gelhaar constituted a voluntary submission to the jurisdiction of the court.
Ruling
The Supreme Court reversed the decision of the Court of Appeals. It held that the trial court acquired jurisdiction over Gelhaar by valid service of summons upon its agent, Empire Sales Philippines Corporation, pursuant to Rule 14, Section 14 of the Rules of Court. While the Court of Appeals correctly ruled that Atty. Noval's appearance was not binding on Gelhaar, this did not divest the trial court of jurisdiction already acquired through proper service of summons. Gelhaar was given a new period of ten (10) days to file its answer.
Ratio Decidendi
On the issue of jurisdiction acquired through service of summons upon its agent: The Court held that the Court of Appeals erred in requiring proof of Gelhaar doing business in the Philippines before summons could be served under Rule 14, Section 14. Citing Signetics Corporation v. Court of Appeals, the Court clarified that jurisdiction and venue are initially determined by the allegations in the complaint. The allegation that Gelhaar, through its agent Empire, ordered soccer jerseys and opened a letter of credit was a sufficient allegation that Gelhaar was doing business in the Philippines. Therefore, service of summons upon Gelhaar's agent, Empire Sales Philippines Corp., was valid and conferred jurisdiction upon the trial court. On whether Gelhaar was doing business in the Philippines: The Court found that Gelhaar's act of purchasing soccer jerseys was within the ordinary course of its business, as it was engaged in the manufacture of uniforms. The Court distinguished this from isolated or casual transactions, citing Wang Laboratories, Inc. v. Mendoza, where a single act of a foreign corporation, if indicative of a purpose to do other business, constitutes doing business. The purchase of goods for its manufacturing operations clearly indicated a purpose to engage in business in the Philippines. On whether the single transaction constituted "doing business": The Court reiterated that the materiality lies not just in the number of acts but in the circumstances. The purchase of 7,770 dozens of soccer jerseys, in the context of Gelhaar being a manufacturer of uniforms, was not merely incidental or casual. It distinctly indicated a purpose on the part of Gelhaar to do business in the Philippines, aligning with the principle that acts in the ordinary course of business are considered as constituting doing business. On whether the appearance of Atty. Noval constituted voluntary submission to jurisdiction: The Court affirmed the Court of Appeals' ruling that Atty. Noval's appearance was not binding on Gelhaar. Atty. Noval admitted he was not appointed by Gelhaar, and Gelhaar's subsequent telex message denied authorizing his representation and claimed no correspondence or conversation with him. The Court found Atty. Noval's claims of tacit confirmation and knowledge by Gelhaar to be hearsay, lacking direct evidence of notification or furnishing of pleadings. Therefore, no voluntary appearance by Gelhaar could be inferred from Atty. Noval's actions, and Gelhaar should be allowed a new period to file its own answer.
Main Doctrine
A foreign corporation is deemed to be doing business in the Philippines if its acts indicate a purpose to engage in business, even if it involves a single transaction, provided such transaction is within the ordinary course of its business. Service of summons upon its agent in the Philippines is valid for acquiring jurisdiction over the foreign corporation.