Banco do Brasil v. Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute originated from the seizure of the vessel M/V Star Ace and its cargo by customs personnel on suspicion of being hijacked and intended for smuggling. The vessel, carrying cargo, had docked in San Fernando, La Union, due to engine trouble. Despite initial approval for unloading and storage, customs boarded and seized the vessel and its contents. Subsequently, the vessel ran aground during a typhoon and was abandoned. A salvage agreement was entered into with private respondent Cesar Urbino, Sr. for securing and repairing the vessel, with compensation stipulated as $1 million and fifty percent of the cargo after expenses. While the seizure proceedings were ongoing, the District Collector of Customs lifted the warrant of seizure, but the Customs Commissioner later ordered the forfeiture of the vessel and cargo in favor of the government. 2. Procedural History: Private respondent Duraproof Services, to enforce its salvor's lien, filed a Petition for Certiorari, Prohibition, and Mandamus with the Regional Trial Court (RTC) of Manila, assailing the actions of the Customs Commissioner and District Collector. The petition was amended multiple times to implead various parties, including Banco do Brasil. After several motions to dismiss and orders regarding default, the RTC issued a Decision on February 18, 1991, holding several respondents liable, including petitioner Banco do Brasil for $300,000.00 in damages. A compromise agreement was later approved, reducing the adjudged amounts, and a writ of execution was issued. Banco do Brasil filed an Urgent Motion to Vacate Judgment and Dismiss Case, asserting lack of jurisdiction due to improper service of summons. The RTC initially granted this motion, setting aside its decision as against Banco do Brasil. Private respondent appealed to the Court of Appeals (CA), which, in a Decision and Resolution, reinstated the RTC's February 18, 1991 decision in its entirety, finding the suit to be in rem and service by publication sufficient. Banco do Brasil sought reconsideration, reiterating its lack of jurisdiction argument, but the CA denied it. 3. The Petition: Petitioner Banco do Brasil seeks review on certiorari of the Court of Appeals' decision, arguing that the appellate court erred in declaring the suit in rem and thus finding that service of summons by publication was sufficient to acquire jurisdiction over its person. Petitioner contends that the action against it, seeking damages, is in personam, requiring personal service of summons for jurisdiction. As a non-resident foreign corporation not engaged in business in the Philippines, petitioner asserts that the court could not acquire personal jurisdiction over it through extraterritorial service of summons under Rule 14, Section 17 of the Rules of Court, as the conditions for such service were not met. Petitioner also challenges the finding that the trial court's February 18, 1991 decision had attained finality with respect to it, noting its timely motion to vacate the judgment after learning of the case.
Issue(s)
Whether the Court of Appeals erred in holding that the action against petitioner Banco do Brasil was an action in rem, thereby validating extraterritorial service of summons, and whether the Regional Trial Court acquired jurisdiction over the person of petitioner Banco do Brasil. Whether the Regional Trial Court's decision dated February 18, 1991, had attained finality with respect to petitioner Banco do Brasil.
Ruling
The petition is granted. The Decision and Resolution of the Court of Appeals are reversed and set aside insofar as they affect petitioner Banco do Brasil. The Order dated May 20, 1991, of the Regional Trial Court of Manila, Branch 8, is reinstated.
Ratio Decidendi
On the nature of the action and jurisdiction over petitioner Banco do Brasil: The Court held that while the initial suit might have been considered in rem, the private respondent's claim for damages against petitioner Banco do Brasil transformed the action into one in personam. An action in personam requires personal service of summons within the jurisdiction for the court to acquire jurisdiction over the defendant's person. Extraterritorial service of summons, as provided under Rule 14, Section 17 of the Rules of Court, is only proper in specific instances, primarily when the action is in rem or quasi in rem, or when the defendant's property within the Philippines has been attached. In this case, the private respondent sought to recover damages amounting to $300,000.00 from petitioner Banco do Brasil, which went beyond the res and sought a personal judgment against the petitioner. Therefore, the publication of summons was invalid and ineffective for the trial court to acquire jurisdiction over the person of petitioner Banco do Brasil. The trial court had no jurisdiction to award damages against the petitioner. On the finality of the trial court's decision: The Court reiterated its ruling in the Vlason case, stating that in cases involving multiple defendants, each defendant has a different period to appeal, and the decision only becomes final and executory upon the lapse of the reglementary period for all defendants to appeal without any appeal being perfected. Petitioner Banco do Brasil filed its motion to vacate judgment and dismiss the case on April 10, 1991, only six days after learning of the decision on April 4, 1991. In the absence of evidence proving petitioner's earlier receipt of the decision, the February 18, 1991 decision could not be considered final and executory with respect to petitioner.
Main Doctrine
An action for damages against a non-resident foreign corporation, even if initially related to a res within the Philippines, becomes an action in personam requiring personal service of summons for the court to acquire jurisdiction over the defendant's person. Extraterritorial service of summons is insufficient for an in personam action.