1

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149177

November 23, 2007

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO.,

LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the April 18, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R.
SP No. 60827, and the July 25, 2001 Resolution 2denying the motion for
reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a
Japanese consultancy firm providing technical and management support in the
infrastructure projects of foreign governments, 3 entered into an Independent
Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines. 4 The agreement provides that respondent
was to extend professional services to Nippon for a year starting on April 1,
1999.5 Nippon then assigned respondent to work as the project manager of the
Southern Tagalog Access Road (STAR) Project in the Philippines, following the
company's consultancy contract with the Philippine Government. 6
When the STAR Project was near completion, the Department of Public Works and
Highways (DPWH) engaged the consultancy services of Nippon, on January 28,
2000, this time for the detailed engineering and construction supervision of the
Bongabon-Baler Road Improvement (BBRI) Project. 7 Respondent was named as the
project manager in the contract's Appendix 3.1. 8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for
its International Division, informed respondent that the company had no more
intention of automatically renewing his ICA. His services would be engaged by the
company only up to the substantial completion of the STAR Project on March 31,
2000, just in time for the ICA's expiry. 9
Threatened with impending unemployment, respondent, through his lawyer,
requested a negotiation conference and demanded that he be assigned to the BBRI
project. Nippon insisted that respondents contract was for a fixed term that had
already expired, and refused to negotiate for the renewal of the ICA. 10
As he was not able to generate a positive response from the petitioners, respondent
consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific
performance and damages with the Regional Trial Court of Lipa City. 11

2
For their part, petitioners, contending that the ICA had been perfected in Japan and
executed by and between Japanese nationals, moved to dismiss the complaint for
lack of jurisdiction. They asserted that the claim for improper pre-termination of
respondent's ICA could only be heard and ventilated in the proper courts of Japan
following the principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the
replacement of Kitamura by a certain Y. Kotake as project manager of the BBRI
Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank 14 that
matters connected with the performance of contracts are regulated by the law
prevailing at the place of performance, 15 denied the motion to dismiss. 16 The trial
court subsequently denied petitioners' motion for reconsideration, 17 prompting them
to file with the appellate court, on August 14, 2000, their first Petition
for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205]. 18 On August 23,
2000, the CA resolved to dismiss the petition on procedural groundsfor lack of
statement of material dates and for insufficient verification and certification against
forum shopping.19 An Entry of Judgment was later issued by the appellate court on
September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on September 19,
2000, still within the reglementary period, a second Petition for Certiorari under
Rule 65 already stating therein the material dates and attaching thereto the proper
verification and certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the
assailed April 18, 2001 Decision 22finding no grave abuse of discretion in the trial
court's denial of the motion to dismiss. The CA ruled, among others, that the
principle of lex loci celebrationis was not applicable to the case, because nowhere in
the pleadings was the validity of the written agreement put in issue. The CA thus
declared that the trial court was correct in applying instead the principle of lex loci
solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the CA in the
assailed July 25, 2001 Resolution.24
Remaining steadfast in their stance despite the series of denials, petitioners
instituted the instant Petition for Review on Certiorari25 imputing the following errors
to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
THE TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF
THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO
JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND
EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING
THE NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE
INTERNATIONAL LAWS.26

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The pivotal question that this Court is called upon to resolve is whether the subject
matter jurisdiction of Philippine courts in civil cases for specific performance and
damages involving contracts executed outside the country by foreign nationals may
be assailed on the principles of lex loci celebrationis, lex contractus, the "state of
the most significant relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural
matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP
No. 60205 has already barred the filing of the second petition docketed as CA-G.R.
SP No. 60827 (fundamentally raising the same issues as those in the first one) and
the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the
petition's defective certification of non-forum shopping, it was a dismissal without
prejudice.27 The same holds true in the CA's dismissal of the said case due to
defects in the formal requirement of verification 28 and in the other requirement in
Rule 46 of the Rules of Court on the statement of the material dates. 29 The dismissal
being without prejudice, petitioners can re-file the petition, or file a second petition
attaching thereto the appropriate verification and certificationas they, in fact did
and stating therein the material dates, within the prescribed period 30 in Section 4,
Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the
merits and leaves the parties free to litigate the matter in a subsequent action as
though the dismissed action had not been commenced. In other words, the
termination of a case not on the merits does not bar another action involving the
same parties, on the same subject matter and theory. 32
Necessarily, because the said dismissal is without prejudice and has no res
judicata effect, and even if petitioners still indicated in the verification and
certification of the second certiorari petition that the first had already been
dismissed on procedural grounds,33 petitioners are no longer required by the Rules
to indicate in their certification of non-forum shopping in the instant petition for
review of the second certiorari petition, the status of the aforesaid first petition
before the CA. In any case, an omission in the certificate of non-forum shopping
about any event that will not constitute res judicata and litis pendentia, as in the
present case, is not a fatal defect. It will not warrant the dismissal and nullification
of the entire proceedings, considering that the evils sought to be prevented by the
said certificate are no longer present.34
The Court also finds no merit in respondent's contention that petitioner Hasegawa is
only authorized to verify and certify, on behalf of Nippon, the certiorari petition filed
with the CA and not the instant petition. True, the Authorization 35 dated September
4, 2000, which is attached to the second certiorari petition and which is also
attached to the instant petition for review, is limited in scopeits wordings indicate
that Hasegawa is given the authority to sign for and act on behalf of the company
only in the petition filed with the appellate court, and that authority cannot extend
to the instant petition for review. 36 In a plethora of cases, however, this Court has
liberally applied the Rules or even suspended its application whenever a satisfactory
explanation and a subsequent fulfillment of the requirements have been
made.37 Given that petitioners herein sufficiently explained their misgivings on this
point and appended to their Reply 38 an updated Authorization39 for Hasegawa to act

4
on behalf of the company in the instant petition, the Court finds the same as
sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the
verification and certification. As respondent pointed out, and to which we agree,
Hasegawa is truly not authorized to act on behalf of Nippon in this case. The
aforesaid September 4, 2000 Authorization and even the subsequent August 17,
2001 Authorization were issued only by Nippon's president and chief executive
officer, not by the company's board of directors. In not a few cases, we have ruled
that corporate powers are exercised by the board of directors; thus, no person, not
even its officers, can bind the corporation, in the absence of authority from the
board.40Considering that Hasegawa verified and certified the petition only on his
behalf and not on behalf of the other petitioner, the petition has to be denied
pursuant to Loquias v. Office of the Ombudsman.41 Substantial compliance will not
suffice in a matter that demands strict observance of the Rules. 42 While technical
rules of procedure are designed not to frustrate the ends of justice, nonetheless,
they are intended to effect the proper and orderly disposition of cases and
effectively prevent the clogging of court dockets. 43
Further, the Court has observed that petitioners incorrectly filed a Rule 65
petition to question the trial court's denial of their motion to dismiss. It is a wellestablished rule that an order denying a motion to dismiss is interlocutory, and
cannot be the subject of the extraordinary petition for certiorari or mandamus. The
appropriate recourse is to file an answer and to interpose as defenses the objections
raised in the motion, to proceed to trial, and, in case of an adverse decision, to
elevate the entire case by appeal in due course. 44 While there are recognized
exceptions to this rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its
jurisdiction to hear and resolve the civil case for specific performance and damages
filed by the respondent. The ICA subject of the litigation was entered into and
perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the Japanese
language. Thus, petitioners posit that local courts have no substantial relationship
to the parties46following the [state of the] most significant relationship rule in
Private International Law.47
The Court notes that petitioners adopted an additional but different theory when
they elevated the case to the appellate court. In the Motion to Dismiss 48 filed with
the trial court, petitioners never contended that the RTC is an inconvenient forum.
They merely argued that the applicable law which will determine the validity or
invalidity of respondent's claim is that of Japan, following the principles of lex loci
celebrationis and lex contractus.49 While not abandoning this stance in their petition
before the appellate court, petitioners on certiorari significantly invoked the defense
of forum non conveniens.50 On petition for review before this Court, petitioners
dropped their other arguments, maintained the forum non conveniens defense, and
introduced their new argument that the applicable principle is the [state of the]
most significant relationship rule.51
Be that as it may, this Court is not inclined to deny this petition merely on the basis
of the change in theory, as explained in Philippine Ports Authority v. City of
Iloilo.52 We only pointed out petitioners' inconstancy in their arguments to
emphasize their incorrect assertion of conflict of laws principles.

5
To elucidate, in the judicial resolution of conflicts problems, three consecutive
phases are involved: jurisdiction, choice of law, and recognition and enforcement of
judgments. Corresponding to these phases are the following questions: (1) Where
can or should litigation be initiated? (2) Which law will the court apply? and (3)
Where can the resulting judgment be enforced? 53
Analytically, jurisdiction and choice of law are two distinct concepts. 54 Jurisdiction
considers whether it is fair to cause a defendant to travel to this state; choice of law
asks the further question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to exercise
jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often coincide, the
"minimum contacts" for one do not always provide the necessary "significant
contacts" for the other. 55 The question of whether the law of a state can be applied
to a transaction is different from the question of whether the courts of that state
have jurisdiction to enter a judgment. 56
In this case, only the first phase is at issuejurisdiction.1wphi1 Jurisdiction,
however, has various aspects. For a court to validly exercise its power to adjudicate
a controversy, it must have jurisdiction over the plaintiff or the petitioner, over the
defendant or the respondent, over the subject matter, over the issues of the case
and, in cases involving property, over the res or the thing which is the subject of the
litigation.57 In assailing the trial court's jurisdiction herein, petitioners are actually
referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the
sovereign authority which establishes and organizes the court. It is given only by
law and in the manner prescribed by law. 58 It is further determined by the
allegations of the complaint irrespective of whether the plaintiff is entitled to all or
some of the claims asserted therein. 59 To succeed in its motion for the dismissal of
an action for lack of jurisdiction over the subject matter of the claim, 60 the movant
must show that the court or tribunal cannot act on the matter submitted to it
because no law grants it the power to adjudicate the claims. 61
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial
court is not properly vested by law with jurisdiction to hear the subject controversy
for, indeed, Civil Case No. 00-0264 for specific performance and damages is one not
capable of pecuniary estimation and is properly cognizable by the RTC of Lipa
City.62What they rather raise as grounds to question subject matter jurisdiction are
the principles of lex loci celebrationisand lex contractus, and the "state of the most
significant relationship rule."
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the "law of the place of the ceremony" 63 or the law
of the place where a contract is made.64 The doctrine of lex contractus or lex loci
contractus means the "law of the place where a contract is executed or to be
performed."65 It controls the nature, construction, and validity of the contract 66 and
it may pertain to the law voluntarily agreed upon by the parties or the law intended
by them either expressly or implicitly. 67 Under the "state of the most significant
relationship rule," to ascertain what state law to apply to a dispute, the court should
determine which state has the most substantial connection to the occurrence and
the parties. In a case involving a contract, the court should consider where the
contract was made, was negotiated, was to be performed, and the domicile, place

6
of business, or place of incorporation of the parties. 68 This rule takes into account
several contacts and evaluates them according to their relative importance with
respect to the particular issue to be resolved. 69
Since these three principles in conflict of laws make reference to the law applicable
to a dispute, they are rules proper for the second phase, the choice of law. 70 They
determine which state's law is to be applied in resolving the substantive issues of a
conflicts problem.71 Necessarily, as the only issue in this case is that of jurisdiction,
choice-of-law rules are not only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the
fact that they have not yet pointed out any conflict between the laws of Japan and
ours. Before determining which law should apply, first there should exist a conflict of
laws situation requiring the application of the conflict of laws rules. 72 Also, when the
law of a foreign country is invoked to provide the proper rules for the solution of a
case, the existence of such law must be pleaded and proved. 73
It should be noted that when a conflicts case, one involving a foreign element, is
brought before a court or administrative agency, there are three alternatives open
to the latter in disposing of it: (1) dismiss the case, either because of lack of
jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction
over the case and apply the internal law of the forum; or (3) assume jurisdiction
over the case and take into account or apply the law of some other State or
States.74 The courts power to hear cases and controversies is derived from the
Constitution and the laws. While it may choose to recognize laws of foreign nations,
the court is not limited by foreign sovereign law short of treaties or other formal
agreements, even in matters regarding rights provided by foreign sovereigns. 75
Neither can the other ground raised, forum non conveniens,76 be used to deprive
the trial court of its jurisdiction herein. First, it is not a proper basis for a motion to
dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a
ground.77 Second, whether a suit should be entertained or dismissed on the basis of
the said doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court. 78 In this case, the RTC decided
to assume jurisdiction. Third, the propriety of dismissing a case based on this
principle requires a factual determination; hence, this conflicts principle is more
properly considered a matter of defense.79
Accordingly, since the RTC is vested by law with the power to entertain and hear the
civil case filed by respondent and the grounds raised by petitioners to assail that
jurisdiction are inappropriate, the trial and appellate courts correctly denied the
petitioners motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.

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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 72494 August 11, 1989
HONGKONG
AND
SHANGHAI
BANKING
vs.
JACK ROBERT SHERMAN, DEODATO RELOJ
APPELLATE COURT, respondents.

CORPORATION, petitioner,
and

THE

INTERMEDIATE

Quiason, Makalintal, Barot & Torres for petitioner.

Alejandro, Aranzaso & Associates for private respondents.

MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate
Appellate Court (now Court of Appeals) dated August 2, 1985, which reversed the
order of the Regional Trial Court dated February 28,1985 denying the Motion to
Dismiss filed by private respondents Jack Robert Sherman and Deodato Reloj.
A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by
petitioner Hongkong and Shanghai Banking Corporation (hereinafter referred to as
petitioner BANK) against private respondents Jack Robert Sherman and Deodato
Reloj, docketed as Civil Case No. Q-42850 before the Regional Trial Court of Quezon
City, Branch 84.
It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd.
(hereinafter referred to as COMPANY), a company incorporated in Singapore applied
with, and was granted by, the Singapore branch of petitioner BANK an overdraft
facility in the maximum amount of Singapore dollars 200,000.00 (which amount was
subsequently increased to Singapore dollars 375,000.00) with interest at 3% over
petitioner BANK prime rate, payable monthly, on amounts due under said overdraft
facility; as a security for the repayment by the COMPANY of sums advanced by
petitioner BANK to it through the aforesaid overdraft facility, on October 7, 1982,
both private respondents and a certain Robin de Clive Lowe, all of whom were
directors of the COMPANY at such time, executed a Joint and Several Guarantee (p.
53, Rollo) in favor of petitioner BANK whereby private respondents and Lowe agreed
to pay, jointly and severally, on demand all sums owed by the COMPANY to
petitioner BANK under the aforestated overdraft facility.
The Joint and Several Guarantee provides, inter alia, that:
This guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws
of the Republic of Singapore. We hereby agree that the Courts of Singapore shall
have jurisdiction over all disputes arising under this guarantee. ... (p. 33-A, Rollo).

8
The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded
payment of the obligation from private respondents, conformably with the
provisions of the Joint and Several Guarantee. Inasmuch as the private respondents
still failed to pay, petitioner BANK filed the above-mentioned complaint.
On December 14,1984, private respondents filed a motion to dismiss (pp 5456, Rollo) which was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the
motion, the trial court issued an order dated February 28, 1985 (pp, 64-65, Rollo),
which read as follows:
In a Motion to Dismiss filed on December 14, 1984, the defendants seek the
dismissal of the complaint on two grounds, namely:
1. That the court has no jurisdiction over the subject matter of the complaint; and
2. That the court has no jurisdiction over the persons of the defendants.
In the light of the Opposition thereto filed by plaintiff, the Court finds no merit in the
motion. "On the first ground, defendants claim that by virtue of the provision in the
Guarantee (the actionable document) which reads
This guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws
of the Republic of Singapore. We hereby agree that the courts in Singapore shall
have jurisdiction over all disputes arising under this guarantee,
the Court has no jurisdiction over the subject matter of the case. The Court finds
and concludes otherwise. There is nothing in the Guarantee which says that the
courts of Singapore shall have jurisdiction to the exclusion of the courts of other
countries or nations. Also, it has long been established in law and jurisprudence that
jurisdiction of courts is fixed by law; it cannot be conferred by the will, submission or
consent of the parties.
On the second ground, it is asserted that defendant Robert' , Sherman is not a
citizen nor a resident of the Philippines. This argument holds no water. Jurisdiction
over the persons of defendants is acquired by service of summons and copy of the
complaint on them. There has been a valid service of summons on both defendants
and in fact the same is admitted when said defendants filed a 'Motion for Extension
of Time to File Responsive Pleading on December 5, 1984.
WHEREFORE, the Motion to Dismiss is hereby DENIED.
SO ORDERED.
A motion for reconsideration of the said order was filed by private respondents
which was, however, denied (p. 66, Rollo).
Private respondents then filed before the respondent Intermediate Appellate Court
(now Court of Appeals) a petition for prohibition with preliminary injunction and/or
prayer for a restraining order (pp. 39-48, Rollo). On August 2, 1985, the respondent
Court rendered a decision (p. 37, Rollo), the dispositive portion of which reads:
WHEREFORE, the petition for prohibition with preliminary injuction is hereby
GRANTED. The respondent Court is enjoined from taking further cognizance of the

9
case and to dismiss the same for filing with the proper court of Singapore which is
the proper forum. No costs.
SO ORDERED.
The motion for reconsideration was denied (p. 38, Rollo), hence, the present
petition.
The main issue is whether or not Philippine courts have jurisdiction over the suit.
The controversy stems from the interpretation of a provision in the Joint and Several
Guarantee, to wit:
(14) This guarantee and all rights, obligations and liabilites arising hereunder shall
be construed and determined under and may be enforced in accordance with the
laws of the Republic of Singapore. We hereby agree that the Courts in Singapore
shall have jurisdiction over all disputes arising under this guarantee. ... (p. 53A, Rollo)
In rendering the decision in favor of private respondents, the Court of Appeals
made, the following observations (pp. 35-36, Rollo):
There are significant aspects of the case to which our attention is invited. The loan
was obtained by Eastern Book Service PTE, Ltd., a company incorporated
in Singapore. The loan was granted by theSingapore Branch of Hongkong and
Shanghai Banking Corporation. The Joint and Several Guarantee was also concluded
in Singapore. The loan was in Singaporean dollars and the repayment thereof also in
the same currency. The transaction, to say the least, took place in Singporean
setting in which the law of that country is the measure by which that relationship of
the parties will be governed.
xxx xxx xxx
Contrary to the position taken by respondents, the guarantee agreement
compliance that any litigation will be before the courts of Singapore and that the
rights and obligations of the parties shall be construed and determined in
accordance with the laws of the Republic of Singapore. A closer examination of
paragraph 14 of the Guarantee Agreement upon which the motion to dismiss is
based, employs in clear and unmistakeable (sic) terms the word 'shall' which under
statutory construction is mandatory.
Thus it was ruled that:
... the word 'shall' is imperative, operating to impose a duty which may be enforced
(Dizon vs. Encarnacion, 9 SCRA 714).lwph1.t
There is nothing more imperative and restrictive than what the agreement
categorically commands that 'all rights, obligations, and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore.'
While it is true that "the transaction took place in Singaporean setting" and that the
Joint and Several Guarantee contains a choice-of-forum clause, the very essence of
due process dictates that the stipulation that "[t]his guarantee and all rights,

10
obligations and liabilities arising hereunder shall be construed and determined
under and may be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over
all disputes arising under this guarantee" be liberally construed. One basic principle
underlies all rules of jurisdiction in International Law: a State does not have
jurisdiction in the absence of some reasonable basis for exercising it, whether the
proceedings are in rem quasi in rem or in personam. To be reasonable, the
jurisdiction must be based on some minimum contacts that will not offend
traditional notions of fair play and substantial justice (J. Salonga, Private
International Law, 1981, p. 46). Indeed, as pointed-out by petitioner BANK at the
outset, the instant case presents a very odd situation. In the ordinary habits of life,
anyone would be disinclined to litigate before a foreign tribunal, with more reason
as a defendant. However, in this case, private respondents are Philippine residents
(a fact which was not disputed by them) who would rather face a complaint against
them before a foreign court and in the process incur considerable expenses, not to
mention inconvenience, than to have a Philippine court try and resolve the case.
Private respondents' stance is hardly comprehensible, unless their ultimate intent is
to evade, or at least delay, the payment of a just obligation.
The defense of private respondents that the complaint should have been filed in
Singapore is based merely on technicality. They did not even claim, much less
prove, that the filing of the action here will cause them any unnecessary trouble,
damage, or expense. On the other hand, there is no showing that petitioner BANK
filed the action here just to harass private respondents.
In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969,
30 SCRA 187, it was ruled:
... An accurate reading, however, of the stipulation, 'The parties agree to sue and be
sued in the Courts of Manila,' does not preclude the filing of suits in the residence of
plaintiff or defendant. The plain meaning is that the parties merely consented to be
sued in Manila. Qualifying or restrictive words which would indicate that Manila and
Manila alone is the venue are totally absent therefrom. We cannot read into that
clause that plaintiff and defendant bound themselves to file suits with respect to the
last two transactions in question only or exclusively in Manila. For, that agreement
did not change or transfer venue. It simply is permissive. The parties solely agreed
to add the courts of Manila as tribunals to which they may resort. They did not
waive their right to pursue remedy in the courts specifically mentioned in Section
2(b) of Rule 4. Renuntiatio non praesumitur.
This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon,
etc., et al., G.R. No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation
was "[i]n case of litigation, jurisdiction shall be vested in the Court of Davao City."
We held:
Anent the claim that Davao City had been stipulated as the venue, suffice it to say
that a stipulation as to venue does not preclude the filing of suits in the residence of
plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in the absence of
qualifying or restrictive words in the agreement which would indicate that the place
named is the only venue agreed upon by the parties.
Applying the foregoing to the case at bar, the parties did not thereby stipulate that
only the courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither
did the clause in question operate to divest Philippine courts of jurisdiction. In

11
International Law, jurisdiction is often defined as the light of a State to exercise
authority over persons and things within its boundaries subject to certain
exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns,
ambassadors and diplomatic representatives of other States, and foreign military
units stationed in or marching through State territory with the permission of the
latter's authorities. This authority, which finds its source in the concept of
sovereignty, is exclusive within and throughout the domain of the State. A State is
competent to take hold of any judicial matter it sees fit by making its courts and
agencies assume jurisdiction over all kinds of cases brought before them (J.
Salonga, Private International Law, 1981, pp. 37-38).lwph1.t
As regards the issue on improper venue, petitioner BANK avers that the objection to
improper venue has been waived. However, We agree with the ruling of the
respondent Court that:
While in the main, the motion to dismiss fails to categorically use with exactitude
the words 'improper venue' it can be perceived from the general thrust and context
of the motion that what is meant is improper venue, The use of the word
'jurisdiction' was merely an attempt to copy-cat the same word employed in the
guarantee agreement but conveys the concept of venue. Brushing aside all
technicalities, it would appear that jurisdiction was used loosely as to be
synonymous with venue. It is in this spirit that this Court must view the motion to
dismiss. ... (p. 35, Rollo).
At any rate, this issue is now of no moment because We hold that venue here was
properly laid for the same reasons discussed above.
The respondent Court likewise ruled that (pp. 36-37, Rollo):
... In a conflict problem, a court will simply refuse to entertain the case if it is not
authorized by law to exercise jurisdiction. And even if it is so authorized, it may still
refuse to entertain the case by applying the principle of forum non conveniens. ...
However, whether a suit should be entertained or dismissed on the basis of the
principle of forum non conveniensdepends largely upon the facts of the particular
case and is addressed to the sound discretion of the trial court (J. Salonga, Private
International Law, 1981, p. 49).lwph1.t Thus, the respondent Court should not
have relied on such principle.
Although the Joint and Several Guarantee prepared by petitioner BANK is a contract
of adhesion and that consequently, it cannot be permitted to take a stand contrary
to the stipulations of the contract, substantial bases exist for petitioner Bank's
choice of forum, as discussed earlier.
Lastly, private respondents allege that neither the petitioner based at Hongkong nor
its Philippine branch is involved in the transaction sued upon. This is a vain attempt
on their part to further thwart the proceedings below inasmuch as well-known is the
rule that a defendant cannot plead any defense that has not been interposed in the
court below.
ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the
decision of the Regional Trial Court is REINSTATED, with costs against private
respondents. This decision is immediately executory.

12
SO ORDERED.

13

14
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26379

December 27, 1969

WILLIAM C. REAGAN, ETC., petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General
Felicisimo R. Rosete, Solicitor Lolita O. Gal-lang and Special Attorney Gamaliel H.
Mantolino for respondent.
FERNANDO, J.:
A question novel in character, the answer to which has far-reaching implications, is
raised by petitioner William C. Reagan, at one time a civilian employee of an
American corporation providing technical assistance to the United States Air Force
in the Philippines. He would dispute the payment of the income tax assessed on him
by respondent Commissioner of Internal Revenue on an amount realized by him on
a sale of his automobile to a member of the United States Marine Corps, the
transaction having taken place at the Clark Field Air Base at Pampanga. It is his
contention, seriously and earnestly expressed, that in legal contemplation the sale
was made outside Philippine territory and therefore beyond our jurisdictional power
to tax.
Such a plea, far-fetched and implausible, on its face betraying no kinship with
reality, he would justify by invoking, mistakenly as will hereafter be more fully
shown an observation to that effect in a 1951 opinion, 1 petitioner ignoring that such
utterance was made purely as a flourish of rhetoric and by way of emphasizing the
decision reached, that the trading firm as purchaser of army goods must respond for
the sales taxes due from an importer, as the American armed forces being exempt
could not be taxed as such under the National Internal Revenue Code. 2 Such an
assumption, inspired by the commendable aim to render unavailing any attempt at
tax evasion on the part of such vendee, found expression anew in a 1962
decision,3 coupled with the reminder however, to render the truth unmistakable,
that "the areas covered by the United States Military Bases are not foreign
territories both in the political and geographical sense."
As thus clarified, it is manifest that such a view amounts at most to a legal fiction
and is moreover obiter. It certainly cannot control the resolution of the specific
question that confronts us. We declare our stand in an unequivocal manner. The
sale having taken place on what indisputably is Philippine territory, petitioner's
liability for the income tax due as a result thereof was unavoidable. As the Court of
Tax Appeals reached a similar conclusion, we sustain its decision now before us on
appeal.
In the decision appealed from, the Court of Tax Appeals, after stating the nature of
the case, started the recital of facts thus: "It appears that petitioner, a citizen of the
United States and an employee of Bendix Radio, Division of Bendix Aviation

15
Corporation, which provides technical assistance to the United States Air Force, was
assigned at Clark Air Base, Philippines, on or about July 7, 1959 ... . Nine (9) months
thereafter and before his tour of duty expired, petitioner imported on April 22, 1960
a tax-free 1960 Cadillac car with accessories valued at $6,443.83, including freight,
insurance and other charges." 4 Then came the following: "On July 11, 1960, more
than two (2) months after the 1960 Cadillac car was imported into the Philippines,
petitioner requested the Base Commander, Clark Air Base, for a permit to sell the
car, which was granted provided that the sale was made to a member of the United
States Armed Forces or a citizen of the United States employed in the U.S. military
bases in the Philippines. On the same date, July 11, 1960, petitioner sold his car for
$6,600.00 to a certain Willie Johnson, Jr. (Private first class), United States Marine
Corps, Sangley Point, Cavite, Philippines, as shown by a Bill of Sale . . . executed at
Clark Air Base. On the same date, Pfc. Willie (William) Johnson, Jr. sold the car to
Fred Meneses for P32,000.00 as evidenced by a deed of sale executed in Manila." 5
As a result of the transaction thus made, respondent Commissioner of Internal
Revenue, after deducting the landed cost of the car as well as the personal
exemption to which petitioner was entitled, fixed as his net taxable income arising
from such transaction the amount of P17,912.34, rendering him liable for income
tax in the sum of P2,979.00. After paying the sum, he sought a refund from
respondent claiming that he was exempt, but pending action on his request for
refund, he filed the case with the Court of Tax Appeals seeking recovery of the sum
of P2,979.00 plus the legal rate of interest.
As noted in the appealed decision: "The only issue submitted for our resolution is
whether or not the said income tax of P2,979.00 was legally collected by
respondent for petitioner."6 After discussing the legal issues raised, primarily the
contention that the Clark Air Base "in legal contemplation, is a base outside the
Philippines" the sale therefore having taken place on "foreign soil", the Court of Tax
Appeals found nothing objectionable in the assessment and thereafter the payment
of P2,979.00 as income tax and denied the refund on the same. Hence, this appeal
predicated on a legal theory we cannot accept. Petitioner cannot make out a case
for reversal.
1. Resort to fundamentals is unavoidable to place things in their proper perspective,
petitioner apparently feeling justified in his refusal to defer to basic postulates of
constitutional and international law, induced no doubt by the weight he would
accord to the observation made by this Court in the two opinions earlier referred to.
To repeat, scant comfort, if at all is to be derived from such an obiter dictum, one
which is likewise far from reflecting the fact as it is.
Nothing is better settled than that the Philippines being independent and sovereign,
its authority may be exercised over its entire domain. There is no portion thereof
that is beyond its power. Within its limits, its decrees are supreme, its commands
paramount. Its laws govern therein, and everyone to whom it applies must submit
to its terms. That is the extent of its jurisdiction, both territorial and personal.
Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution
of its sovereignty.
It is to be admitted that any state may, by its consent, express or implied, submit to
a restriction of its sovereign rights. There may thus be a curtailment of what
otherwise is a power plenary in character. That is the concept of sovereignty as
auto-limitation, which, in the succinct language of Jellinek, "is the property of a
state-force due to which it has the exclusive capacity of legal self-determination and

16
self-restriction."7 A state then, if it chooses to, may refrain from the exercise of what
otherwise is illimitable competence.
Its laws may as to some persons found within its territory no longer control. Nor
does the matter end there. It is not precluded from allowing another power to
participate in the exercise of jurisdictional right over certain portions of its territory.
If it does so, it by no means follows that such areas become impressed with an alien
character. They retain their status as native soil. They are still subject to its
authority. Its jurisdiction may be diminished, but it does not disappear. So it is with
the bases under lease to the American armed forces by virtue of the military bases
agreement of 1947. They are not and cannot be foreign territory.
Decisions coming from petitioner's native land, penned by jurists of repute, speak to
that effect with impressive unanimity. We start with the citation from Chief Justice
Marshall, announced in the leading case of Schooner Exchange v. M'Faddon,8 an
1812 decision: "The jurisdiction of the nation within its own territory is necessarily
exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any
restriction upon it, deriving validity from an external source, would imply a
diminution of its sovereignty to the extent of the restriction, and an investment of
that sovereignty to the same extent in that power which could impose such
restriction." After which came this paragraph: "All exceptions, therefore, to the full
and complete power of a nation within its own territories, must be traced up to the
consent of the nation itself. They can flow from no other legitimate source."
Chief Justice Taney, in an 1857 decision,9 affirmed the fundamental principle of
everyone within the territorial domain of a state being subject to its commands: "For
undoubtedly every person who is found within the limits of a government, whether
the temporary purposes or as a resident, is bound by its laws." It is no exaggeration
then for Justice Brewer to stress that the United States government "is one having
jurisdiction over every foot of soil within its territory, and acting directly upon each
[individual found therein]; . . ." 10
Not too long ago, there was a reiteration of such a view, this time from the pen of
Justice Van Devanter. Thus: "It now is settled in the United States and recognized
elsewhere that the territory subject to its jurisdiction includes the land areas under
its dominion and control the ports, harbors, bays, and other in closed arms of the
sea along its coast, and a marginal belt of the sea extending from the coast line
outward a marine league, or 3 geographic miles." 11 He could cite moreover, in
addition to many American decisions, such eminent treatise-writers as Kent, Moore,
Hyde, Wilson, Westlake, Wheaton and Oppenheim.
As a matter of fact, the eminent commentator Hyde in his three-volume work on
International Law, as interpreted and applied by the United States, made clear that
not even the embassy premises of a foreign power are to be considered outside the
territorial domain of the host state. Thus: "The ground occupied by an embassy is
not in fact the territory of the foreign State to which the premises belong through
possession or ownership. The lawfulness or unlawfulness of acts there committed is
determined by the territorial sovereign. If an attache commits an offense within the
precincts of an embassy, his immunity from prosecution is not because he has not
violated the local law, but rather for the reason that the individual is exempt from
prosecution. If a person not so exempt, or whose immunity is waived, similarly
commits a crime therein, the territorial sovereign, if it secures custody of the
offender, may subject him to prosecution, even though its criminal code normally
does not contemplate the punishment of one who commits an offense outside of the

17
national domain. It is not believed, therefore, that an ambassador himself possesses
the right to exercise jurisdiction, contrary to the will of the State of his sojourn, even
within his embassy with respect to acts there committed. Nor is there apparent at
the present time any tendency on the part of States to acquiesce in his exercise of
it."12
2. In the light of the above, the first and crucial error imputed to the Court of Tax
Appeals to the effect that it should have held that the Clark Air Force is foreign soil
or territory for purposes of income tax legislation is clearly without support in law.
As thus correctly viewed, petitioner's hope for the reversal of the decision
completely fades away. There is nothing in the Military Bases Agreement that lends
support to such an assertion. It has not become foreign soil or territory. This
country's jurisdictional rights therein, certainly not excluding the power to tax, have
been preserved. As to certain tax matters, an appropriate exemption was provided
for.
Petitioner could not have been unaware that to maintain the contrary would be to
defy reality and would be an affront to the law. While his first assigned error is thus
worded, he would seek to impart plausibility to his claim by the ostensible
invocation of the exemption clause in the Agreement by virtue of which a "national
of the United States serving in or employed in the Philippines in connection with the
construction, maintenance, operation or defense of the bases and residing in the
Philippines only by reason of such employment" is not to be taxed on his income
unless "derived from Philippine source or sources other than the United States
sources."13 The reliance, to repeat, is more apparent than real for as noted at the
outset of this opinion, petitioner places more faith not on the language of the
provision on exemption but on a sentiment given expression in a 1951 opinion of
this Court, which would be made to yield such an unwarranted interpretation at war
with the controlling constitutional and international law principles. At any rate, even
if such a contention were more adequately pressed and insisted upon, it is on its
face devoid of merit as the source clearly was Philippine.
In Saura Import and Export Co. v. Meer,14 the case above referred to, this Court
affirmed a decision rendered about seven months previously, 15 holding liable as an
importer, within the contemplation of the National Internal Revenue Code provision,
the trading firm that purchased army goods from a United States government
agency in the Philippines. It is easily understandable why. If it were not thus, tax
evasion would have been facilitated. The United States forces that brought in such
equipment later disposed of as surplus, when no longer needed for military
purposes, was beyond the reach of our tax statutes.
Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting
extensively from the earlier opinion. He could have stopped there. He chose not to
do so. The transaction having occurred in 1946, not so long after the liberation of
the Philippines, he proceeded to discuss the role of the American military contingent
in the Philippines as a belligerent occupant. In the course of such a dissertion,
drawing on his well-known gift for rhetoric and cognizant that he was making an as
if statement, he did say: "While in army bases or installations within the Philippines
those goods were in contemplation of law on foreign soil."
It is thus evident that the first, and thereafter the controlling, decision as to the
liability for sales taxes as an importer by the purchaser, could have been reached
without any need for such expression as that given utterance by Justice Tuason. Its
value then as an authoritative doctrine cannot be as much as petitioner would

18
mistakenly attach to it. It was clearly obiter not being necessary for the resolution of
the issue before this Court.16It was an opinion "uttered by the way." 17 It could not
then be controlling on the question before us now, the liability of the petitioner for
income tax which, as announced at the opening of this opinion, is squarely raised
for the first time.18
On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is
a maxim, not to be disregarded, that general expressions, in every opinion, are to
be taken in connection with the case in which those expressions are used. If they go
beyond the case, they may be respected, but ought not to control the judgment in a
subsequent suit when the very point is presented for decision." 19
Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector
of Internal Revenue,20 a 1962 decision relied upon by petitioner, put a different
complexion on the matter. Again, it was by way of pure embellishment, there being
no need to repeat it, to reach the conclusion that it was the purchaser of army
goods, this time from military bases, that must respond for the advance sales taxes
as importer. Again, the purpose that animated the reiteration of such a view was
clearly to emphasize that through the employment of such a fiction, tax evasion is
precluded. What is more, how far divorced from the truth was such statement was
emphasized by Justice Barrera, who penned the Co Po opinion, thus: "It is true that
the areas covered by the United States Military Bases are not foreign territories both
in the political and geographical sense." 21
Justice Tuason moreover made explicit that rather than corresponding with reality,
what was said by him was in the way of a legal fiction. Note his stress on "in
contemplation of law." To lend further support to a conclusion already announced,
being at that a confirmation of what had been arrived at in the earlier case,
distinguished by its sound appreciation of the issue then before this Court and to
preclude any tax evasion, an observation certainly not to be taken literally was thus
given utterance.
This is not to say that it should have been ignored altogether afterwards. It could be
utilized again, as it undoubtedly was, especially so for the purpose intended,
namely to stigmatize as without support in law any attempt on the part of a
taxpayer to escape an obligation incumbent upon him. So it was quoted with that
end in view in the Co Po case. It certainly does not justify any effort to render futile
the collection of a tax legally due, as here. That was farthest from the thought of
Justice Tuason.
What is more, the statement on its face is, to repeat, a legal fiction. This is not to
discount the uses of a fictio jurisin the science of the law. It was Cardozo who
pointed out its value as a device "to advance the ends of justice" although at times
it could be "clumsy" and even "offensive".22 Certainly, then, while far from
objectionable as thus enunciated, this observation of Justice Tuason could be
misused or misconstrued in a clumsy manner to reach an offensive result. To repeat,
properly used, a legal fiction could be relied upon by the law, as Frankfurter noted,
in the pursuit of legitimate ends.23 Petitioner then would be well-advised to take to
heart such counsel of care and circumspection before invoking not a legal fiction
that would avoid a mockery of the law by avoiding tax evasion but what clearly is a
misinterpretation thereof, leading to results that would have shocked its originator.

19
The conclusion is thus irresistible that the crucial error assigned, the only one that
calls for discussion to the effect that for income tax purposes the Clark Air Force
Base is outside Philippine territory, is utterly without merit. So we have said earlier.
3. To impute then to the statement of Justice Tuason the meaning that petitioner
would fasten on it is, to paraphrase Frankfurter, to be guilty of succumbing to the
vice of literalness. To so conclude is, whether by design or inadvertence, to misread
it. It certainly is not susceptible of the mischievous consequences now sought to be
fastened on it by petitioner.
That it would be fraught with such peril to the enforcement of our tax statutes on
the military bases under lease to the American armed forces could not have been
within the contemplation of Justice Tuason. To so attribute such a bizarre
consequence is to be guilty of a grave disservice to the memory of a great jurist. For
his real and genuine sentiment on the matter in consonance with the imperative
mandate of controlling constitutional and international law concepts was
categorically set forth by him, not as an obiter but as the rationale of the decision,
in People v. Acierto24 thus: "By the [Military Bases] Agreement, it should be noted,
the Philippine Government merely consents that the United States exercise
jurisdiction in certain cases. The consent was given purely as a matter of comity,
courtesy, or expediency over the bases as part of the Philippine territory or divested
itself completely of jurisdiction over offenses committed therein."
Nor did he stop there. He did stress further the full extent of our territorial
jurisdiction in words that do not admit of doubt. Thus: "This provision is not and can
not on principle or authority be construed as a limitation upon the rights of the
Philippine Government. If anything, it is an emphatic recognition and reaffirmation
of Philippine sovereignty over the bases and of the truth that all jurisdictional rights
granted to the United States and not exercised by the latter are reserved by the
Philippines for itself."25
It is in the same spirit that we approach the specific question confronting us in this
litigation. We hold, as announced at the outset, that petitioner was liable for the
income tax arising from a sale of his automobile in the Clark Field Air Base, which
clearly is and cannot otherwise be other than, within our territorial jurisdiction to
tax.
4. With the mist thus lifted from the situation as it truly presents itself, there is
nothing that stands in the way of an affirmance of the Court of Tax Appeals decision.
No useful purpose would be served by discussing the other assigned errors,
petitioner himself being fully aware that if the Clark Air Force Base is to be
considered, as it ought to be and as it is, Philippine soil or territory, his claim for
exemption from the income tax due was distinguished only by its futility.
There is further satisfaction in finding ourselves unable to indulge petitioner in his
plea for reversal. We thus manifest fealty to a pronouncement made time and time
again that the law does not look with favor on tax exemptions and that he who
would seek to be thus privileged must justify it by words too plain to be mistaken
and too categorical to be misinterpreted. 26 Petitioner had not done so. Petitioner
cannot do so.
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the
refund of P2,979.00 as the income tax paid by petitioner is affirmed. With costs
against petitioner.

20

21
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 46631

November 16, 1939

IDONAH SLADE PERKINS, petitioner,

vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE ARTHUR
PERKINS, and BENGUET CONSOLIDATED MINING COMPANY, respondents.
Alva J. Hill for petitioner.
Ross, Lawrence, Selph & Carrascoso for respondent Judge and Benguet
Consolidated Mining Company.
DeWitt, Perkins & Ponce Enrile for respondent Perkins.
MORAN, J.:
On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court
of First Instance of Manila against the Benguet Consolidated Mining Company for
dividends amounting to P71,379.90 on 52,874 shares of stock registered in his
name, payment of which was being withheld by the company; and, for the
recognition of his right to the control and disposal of said shares, to the exclusion of
all others. To the complaint, the company filed its answer alleging, by way of
defense, that the withholding of such dividends and the non-recognition of plaintiff's
right to the disposal and control of the shares were due to certain demands made
with respect to said shares by the petitioner herein, Idonah Slade Perkins, and by
one George H. Engelhard. The answer prays that the adverse claimants be made
parties to the action and served with notice thereof by publication, and that
thereafter all such parties be required to interplead and settle the rights among
themselves. On September 5, 1938, the trial court ordered respondent Eugene
Arthur Perkins to include in his complaint as parties defendant petitioner, Idonah
Slade Perkins, and George H. Engelhard. The complaint was accordingly amended
and in addition to the relief prayed for in the original complaint, respondent Perkins
prayed that petitioner Idonah Slade Perkins and George Engelhard be adjudged
without interest in the shares of stock in question and excluded from any claim they
assert thereon. Thereafter, summons by publication were served upon the nonresident defendants, Idonah Slade Perkins and George H. Engelhard, pursuant to the
order of the trial court. On December 9, 1938, Engelhard filed his answer to the
amended complaint, and on December 10, 1938, petitioner Idonah Slade Perkins,
through counsel, filed her pleading entitled "objection to venue, motion to quash,
and demurrer to jurisdiction" wherein she challenged the jurisdiction of the lower
court over her person. Petitioner's objection, motion and demurrer having been
overruled as well as her motion for reconsideration of the order of denial, she now
brought the present petition for certiorari, praying that the summons by publication
issued against her be declared null and void, and that, with respect to her,
respondent Judge be permanently prohibited from taking any action on the case.
The controlling issue here involved is whether or not the Court of First Instance of
Manila has acquired jurisdiction over the person of the present petitioner as a nonresident defendant, or, notwithstanding the want of such jurisdiction, whether or not
said court may validly try the case. The parties have filed lengthy memorandums

22
relying on numerous authorities, but the principles governing the question are well
settled in this jurisdiction.
Section 398 of our Code of Civil Procedure provides that when a non-resident
defendant is sued in the Philippine courts and it appears, by the complaint or by
affidavits, that the action relates to real or personal property within the Philippines
in which said defendant has or claims a lien or interest, actual or contingent, or in
which the relief demanded consists, wholly or in part, in excluding such person from
any interest therein, service of summons maybe made by publication.
We have fully explained the meaning of this provision in El Banco Espaol Filipino
vs. Palanca, 37 Phil., 921, wherein we laid down the following rules:
(1) In order that the court may validly try a case, it must have jurisdiction
over the subject-matter and over the persons of the parties. Jurisdiction over
the subject-matter is acquired by concession of the sovereign authority which
organizes a court and determines the nature and extent of its powers in
general and thus fixes its jurisdiction with reference to actions which it may
entertain and the relief it may grant. Jurisdiction over the persons of the
parties is acquired by their voluntary appearance in court and their
submission to its authority, or by the coercive power of legal process exerted
over their persons.
(2) When the defendant is a non-resident and refuses to appear voluntary,
the court cannot acquire jurisdiction over his person even if the summons be
served by publication, for he is beyond the reach of judicial process. No
tribunal established by one State can extend its process beyond its territory
so as to subject to its decisions either persons or property located in another
State. "There are many expressions in the American reports from which it
might be inferred that the court acquires personal jurisdiction over the person
of the defendant by publication and notice; but such is not the case. In truth,
the proposition that jurisdiction over the person of a non-resident cannot be
acquired by publication and notice was never clearly understood even in the
American courts until after the decision had been rendered by the Supreme
Court of the United States in the leading case of Pennoyer v. Nef (95 U.S.,
714; 24 Law. ed., 565). In the light of that decisions which have subsequently
been rendered in that and other courts, the proposition that jurisdiction over
the person cannot be thus acquired by publication and notice is no longer
open to question; and it is now fully established that a personal judgment
upon constructive or substituted service against a non-resident who does not
appear is wholly invalid. This doctrine applies to all kinds of constructive or
substituted process, including service by publication and personal service
outside of the jurisdiction in which the judgment is rendered; and the only
exception seems to be found in the case where the non-resident defendant
has expressly or impliedly consented to the mode of service. (Note to Raher
vs. Raher, 35 L. R. A. [N. S.], 292; see also L.R.A. 585; 35 L.R.A. [N.S.], 312.)
(3) The general rule, therefore, is that a suit against a non-resident cannot be
entertained by a Philippine court. Where, however, the action is in rem or
quasi in rem in connection with property located in the Philippines, the court
acquires jurisdiction over the res, and its jurisdiction over the person of the
non-resident is non-essential. In order that the court may exercise power over
the res, it is not necessary that the court should take actual custody of the
property, potential custody thereof being sufficient. There is potential custody

23
when, from the nature of the action brought, the power of the court over the
property is impliedly recognized by law. "An illustration of what we term
potential jurisdiction over the res, is found in the proceeding to register the
title of land under our system for the registration of land. Here the court,
without taking actual physical control over the property , assumes, at the
instance of some person claiming to be owner, to exercise a jurisdiction in
rem over the property and to adjudicate the title in favor of the petitioner
against all the world."
(4) As before stated, in an action in rem or quasi in rem against a nonresident defendant, jurisdiction over his person is non-essential, and if the
law requires in such case that the summons upon the defendant be served by
publication, it is merely to satisfy the constitutional requirement of due
process. If any be said, in this connection, that "may reported cases can be
cited in which it is assumed that the question of the sufficiency of publication
or notice in the case of this kind is a question affecting the jurisdiction of the
court, and the court is sometimes said to acquire jurisdiction by virtue of the
publication. This phraseology was undoubtedly originally adopted by the
court because of the analogy between service by publication and personal
service of process upon the defendant; and, as has already been suggested,
prior to the decision of Pennoyer v. Nef (supra), the difference between the
legal effects of the two forms of service was obscure. It is accordingly not
surprising that the modes of expression which had already been moulded into
legal tradition before that case was decided have been brought down to the
present day. But it is clear that the legal principle here involved is not
affected by the peculiar languages in which the courts have expounded their
ideas."lawphi1.net
The reason for the rule that Philippine courts cannot acquire jurisdiction over the
person of a non-resident, as laid down by the Supreme Court of the United States
in Pennoyer v. Nef, supra, may be found in a recognized principle of public law to
the effect that "no State can exercise direct jurisdiction and authority over persons
or property without its territory. Story, Confl. L., ch. 2; Wheat, Int. L., pt. 2, ch. 2. The
several States are of equal dignity and authority, and the independence of one
implies the exclusion of power from all others. And so it is laid down by jurists, as an
elementary principle, that the laws of one State have no operation outside of its
territory, except so far as is allowed by comity; and that no tribunal established by it
can extend its process beyond that territory so as to subject either persons or
property to its decisions. "Any exertion of authority of this sort beyond this limit,"
says Story, "is a mere nullity, and incapable of binding such persons or property in
any other tribunals." Story, Confl. L., sec. 539." (Pennoyer v. Neff, 95 U.S., 714; 24
Law. ed., 565, 568-569.).
When, however, the action relates to property located in the Philippines, the
Philippine courts may validly try the case, upon the principle that a "State, through
its tribunals, may subject property situated within its limits owned by non-residents
to the payment of the demand of its own citizens against them; and the exercise of
this jurisdiction in no respect infringes upon the sovereignty of the State where the
owners are domiciled. Every State owes protection to its citizens; and, when nonresidents deal with them, it is a legitimate and just exercise of authority to hold and
appropriate any property owned by such non-residents to satisfy the claims of its
citizens. It is in virtue of the State's jurisdiction over the property of the non-resident
situated within its limits that its tribunals can inquire into the non-resident's
obligations to its own citizens, and the inquiry can then be carried only to the extent

24
necessary to control the disposition of the property. If the non-resident has no
property in the State, there is nothing upon which the tribunals can adjudicate."
(Pennoyer v. Neff, supra.)
In the instant case, there can be no question that the action brought by Eugene
Arthur Perkins in his amended complaint against the petitioner, Idonah Slade
Perkins, seeks to exclude her from any interest in a property located in the
Philippines. That property consists in certain shares of stocks of the Benguet
Consolidated Mining Company, a sociedad anonima, organized in the Philippines
under the provisions of the Spanish Code of Commerce, with its principal office in
the City of Manila and which conducts its mining activities therein. The situs of the
shares is in the jurisdiction where the corporation is created, whether the
certificated evidencing the ownership of those shares are within or without that
jurisdiction. (Fletcher Cyclopedia Corporations, Permanent ed. Vol. 11, p. 95). Under
these circumstances, we hold that the action thus brought is quasi in rem, for while
the judgement that may be rendered therein is not strictly a judgment in rem, "it
fixes and settles the title to the property in controversy and to that extent partakes
of the nature of the judgment in rem." (50 C.J., p 503). As held by the Supreme
Court of the United States in Pennoyer v. Nef (supra);
It is true that, in a strict sense, a proceeding in rem is one taken directly
against property, and has for its object the disposition of the property,
without reference to the title of individual claimants; but , in a large and more
general sense, the terms are applied to actions between parties, where the
direct object is to reach and dispose of property owned by them, or of some
interest therein.
The action being in quasi in rem, The Court of First Instance of Manila has
jurisdiction over the person of the non-resident. In order to satisfy the constitutional
requirement of due process, summons has been served upon her by publication.
There is no question as to the adequacy of publication made nor as to the mailing of
the order of publication to the petitioner's last known place of residence in the
United States. But, of course, the action beingquasi in rem and notice having be
made by publication, the relief that may be granted by the Philippine court must be
confined to the res, it having no jurisdiction to render a personal judgment against
the non-resident. In the amended complaint filed by Eugene Arthur Perkins, no
money judgment or other relief in personam is prayed for against the petitioner. The
only relief sought therein is that she be declared to be without any interest in the
shares in controversy and that she be excluded from any claim thereto.
Petitioner contends that the proceeding instituted against her is one of
interpleading and is therefore an action in personam. Section 120 of our Code of
Civil Procedure provides that whenever conflicting claims are or may be made upon
a person for or relating to personal property, or the performance of an obligation or
any portion thereof, so that he may be made subject to several actions by different
persons, such person may bring an action against the conflicting claimants,
disclaiming personal interest in the controversy, and the court may order them to
interplead with one another and litigate their several claims among themselves,
there upon proceed to determine their several claims. Here, The Benguet
Consolidated Mining Company, in its answer to the complaint filed by Eugene Arthur
Perkins, averred that in connection with the shares of stock in question, conflicting
claims were being made upon it by said plaintiff, Eugene Arthur Perkins, his wife
Idonah Slade Perkins, and one named George H. Engelhard, and prayed that these
last two be made parties to the action and served with summons by publication, so

25
that the three claimants may litigate their conflicting claims and settle their rights
among themselves. The court has not issued an order compelling the conflicting
claimants to interplead with one another and litigate their several claims among
themselves, but instead ordered the plaintiff to amend his complaint including the
other two claimants as parties defendant. The plaintiff did so, praying that the new
defendants thus joined be excluded fro any interest in the shares in question, and it
is upon this amended complaint that the court ordered the service of the summons
by publication. It is therefore, clear that the publication of the summons was
ordered not in virtue of an interpleading, but upon the filing of the amended
complaint wherein an action quasi in rem is alleged.
Had not the complaint been amended, including the herein petitioner as an
additional defendant, and had the court, upon the filing of the answer of the
Benguet Consolidated Mining Company, issued an order under section 120 of the
Code of Civil Procedure, calling the conflicting claimants into court and compelling
them to interplead with one another, such order could not perhaps have validly
been served by publication or otherwise, upon the non-resident Idonah Slade
Perkins, for then the proceeding would be purely one of interpleading. Such
proceeding is a personal action, for it merely seeks to call conflicting claimants into
court so that they may interplead and litigate their several claims among
themselves, and no specific relief is prayed for against them, as the interpleader
have appeared in court, one of them pleads ownership of the personal property
located in the Philippines and seeks to exclude a non-resident claimant from any
interest therein, is a question which we do not decide not. Suffice it to say that here
the service of the summons by publication was ordered by the lower court by virtue
of an action quasi in rem against the non-resident defendant.
Respondents contend that, as the petitioner in the lower court has pleaded over the
subject-matter, she has submitted herself to its jurisdiction. We have noticed,
however, that these pleas have been made not as independent grounds for relief,
but merely as additional arguments in support of her contention that the lower court
had no jurisdiction over the person. In other words, she claimed that the lower court
had no jurisdiction over her person not only because she is a non-resident, but also
because the court had no jurisdiction over the subject-matter of the action and that
the issues therein involved have already been decided by the New York court and
are being relitigated in the California court. Although this argument is obviously
erroneous, as neither jurisdiction over the subject-matter nor res adjudicata nor lis
pendens has anything to do with the question of jurisdiction over her person, we
believe and so hold that the petitioner has not, by such erroneous argument,
submitted herself to the jurisdiction of the court. Voluntary appearance cannot be
implied from either a mistaken or superflous reasoning but from the nature of the
relief prayed for.
For all the foregoing, petition is hereby denied, with costs against petitioner.

26
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-825

July 20, 1948

ROMAN MABANAG, plaintiff-appellant,

vs.
JOSEPH M. GALLEMORE, defendant-appellee.
Santiago Catane for appellant.
No appearance for appellee.
TUASON, J.:
This case, here on appeal from an order dismissal by the Court of First Instance of
Occidental Misamis, raises the question of the court's jurisdiction. More specifically,
the question is whether the action is in personam or one in rem. The trial court
opined that it is the first and that it "has no authority nor jurisdiction to render
judgment against the herein defendant, Joseph M. Gallemore for being a nonresident.
The purpose of the action is to recover P735.18, an amount said to have been paid
by the plaintiff to the defendant for two parcels of land whose sale was afterward
annulled. The defendant is said to be residing in Los Angeles, California, U. S. A. He
has no property in the Philippine except an alleged debt owing him by a resident of
the municipality of Occidental Misamis. This debt, upon petition of the plaintiff, after
the filing of the complaint and before the suit was dismissed, was attached to the
extent of plaintiff's claim for the payment of which the action was brought. But the
attachment was dissolved in the same order dismissing the case.
It was Atty. Valeriano S. Kaamino who has amicus curi filed the motion to dismiss
and to set aside the attachment. There is no appearance before this Court to
oppose the appeal.
Section 2, Rule 5, of the Rules of Court provides:
If any of the defendants does not reside and is not found in the Philippines,
and the action effects the personal status of the plaintiff, or any property of
the defendant located in the Philippines, the action may be commenced and
tried in the province where the plaintiff resides or the property, or any portion
thereof, is situated or found.
The Philippine leading cases in which this Rule, or its counterpart in the former Code
of Civil Procedure, section 377 and 395, were cited and applied, are Banco EspaolFilipino vs. Palanca, 37 Phil. 921, and Slade Perkins vs. Dizon, 40 Off. Gaz., [3d
Suppl.], No. 7, p. 216. The gist of this Court's ruling in these cases, in so far as it is
relevant to the present issues, is given in I Moran's Comments on the Rules of Court,
2d Ed., 105:
As a general rule, when the defendant is not residing and is not found in the
Philippines, the Philippine courts cannot try any case against him because of

27
the impossibility of acquiring jurisdiction over his person, unless he
voluntarily appears in court. But, when the action affects the personal status
of the plaintiff residing in the Philippines, or is intended to seize or dispose of
any property, real or personal, of the defendant, located in the Philippines, it
may be validly tried by the Philippine courts, for then, they have jurisdiction
over the res, i.e., the personal status of the plaintiff or the property of the
defendant, and their jurisdiction over the person of the non-resident
defendant is not essential. Venue in such cases may be laid in the province
where the plaintiff whose personal status is in question resides, or where the
property of the defendant or a part thereof involved in the litigation is
located.
Literally this Court said:
Jurisdiction over the property which is the subject of litigation may result
either from a seizure of the property under legal process, whereby it is
brought into the actual custody of the law, or it may result from the
institution of legal proceedings wherein, under special provisions of law, the
power of the court over the property is recognized and made effective. In the
latter case the property, though at all times within the potential power of the
court, may never be taken into actual custody at all. An illustration of the
jurisdiction acquired by actual seizure is found in attachment proceedings,
where the property is seized at the beginning of the action, or some
subsequent stage of its progress, and held to abide the final event of the
litigation. An illustration of what we term potential jurisdiction over the res, is
found in the proceeding to register the title of land under our system for the
registration of land. Here the court, without taking actual physical control
over the property assumes, at the instance of some person claiming to be
owner, to exercise a jurisdiction in rem over the property and to adjudicate
the title in favor of the petitioner against all the world. (Banco Espaol-Filipino
vs. Palanca, supra, 927-928.).
In an ordinary attachment proceeding, if the defendant is not personally
served, the preliminary seizure is to be considered necessary in order to
confer jurisdiction upon the court. In this case the lien on the property is
acquired by the seizure; and the purpose of the proceeding is to subject the
property to that lien. If a lien already exists, whether created by mortgage,
contract, or statute, the preliminary seizure is not necessary; and the court
proceeds to enforce such lien in the manner provided by law precisely as
though the property had been seized upon attachment. (Roller vs. Holly, 176
U.S., 398, 405; 44 Law. ed., 520.) It results that the mere circumstance that in
an attachment the property may be seized at the inception of the
proceedings, while in the foreclosure suit it is not taken into legal custody
until the time comes for the sale, does not materially affect the fundamental
principle involved in both cases, which is that the court is here exercising a
jurisdiction over the property in a proceeding directed essentially in rem. (Id.,
929-930.).
When, however, the action relates to property located in the Philippines, the
Philippine courts may validly try the case, upon the principles that a "State,
through its tribunals, may subject property situated within its limit owned by
non-residents to the payment of the demand of its own citizens against them;
and the exercise of this jurisdiction in no respect infringes upon the
sovereignty of the State were the owners are domiciled. Every State owes

28
protection to its own citizens; and, when non-residents deal with them, it is a
legitimate and just exercise of authority to hold any appropriate any property
owned by such non-residents to satisfy the claims of its citizens. It is in virtue
of the State's jurisdiction over the property of the non-resident situated within
its limits that its tribunals can inquire into the non-resident's obligations to its
own citizens, and the inquiry can then be carried only to the extent necessary
to control disposition of the property. If the non-resident has no property in
the State, there is nothing upon which the tribunals can adjudicate. (Slade
Perkins vs. Dizon, 40 Off. Gaz. [3d Supplement], No. 7, p. 216.).
A fuller statement of the principle whereunder attachment or garnishment of
property of a non-resident defendant confers jurisdiction on the court in an
otherwise personal action, appears in two well known and authoritative works:
The main action in an attachment or garnishment suit is in rem until
jurisdiction of the defendant is secured. Thereafter, it is in personam and
also in rem, unless jurisdiction of the res is lost as by dissolution of the
attachment. If jurisdiction of the defendant is acquired but jurisdiction of the
res is lost, it is then purely in personam. . . a proceeding against property
without jurisdiction of the person of the defendant is in substance a
proceeding in rem; and where there is jurisdiction of the defendant, but the
proceedings against the property continues, that proceedings is none the less
necessarily in rem, although in form there is but a single proceeding. (4 Am.
Jur., 556-557.)
As the remedy is administered in some states, the theory of an attachment,
whether it is by process against or to subject the property or effects of a
resident or non-resident of the state, is that it partakes essentially of the
nature and character of the proceeding in personam and not of a
proceeding in rem. And if the defendant appears the action proceeds in
accordance with the practice governing proceedings in personam. But were
the defendant fails to appear in the action, the proceeding is to be considered
as one in the nature of a proceeding in rem. And where the court acts directly
on the property, the title thereof being charged by the court without the
intervention of the party, the proceeding unquestionably is one in rem in the
fullest meaning of the term.
In attachment proceedings against a non-resident defendant where personal
service on him is lacking, it is elementary that the court must obtain
jurisdiction of the property of the defendant. If no steps have been taken to
acquire jurisdiction of the defendant's person, and he has not appeared and
answered or otherwise submitted himself to the jurisdiction of the court, the
court is without jurisdiction to render judgment until there has been a lawful
seizure of property owned by him within the jurisdiction of the court. (2 R. C.
L., 800-804.).
Tested by the foregoing decisions and authorities, the Court has acquired
jurisdiction of the case at bar by virtue of the attachment of the defendant's credit.
Those authorities and decisions, so plain and comprehensive as to make any
discussion unnecessary, are in agreement that though no jurisdiction is obtained
over the debtor's person, the case may proceed to judgment if there is property in
the custody of the court that can be applied to its satisfaction.

29
It is our judgment that the court below erred in dismissing the case and dissolving
the attachment; and it is ordered that, upon petition of the plaintiff, it issue a new
writ of attachment and then proceed to trial. The costs of this appeal will be
charged to defendant and appellee.

30

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11390

March 26, 1918

EL BANCO ESPAOL-FILIPINO, plaintiff-appellant,

vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca
Tanquinyeng, defendant-appellant.
Aitken and DeSelms for appellant.
Hartigan and Welch for appellee.
STREET, J.:
This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to
foreclose a mortgage upon various parcels of real property situated in the city of
Manila. The mortgage in question is dated June 16, 1906, and was executed by the
original defendant herein, Engracio Palanca Tanquinyeng y Limquingco, as security
for a debt owing by him to the bank. Upon March 31, 1906, the debt amounted to
P218,294.10 and was drawing interest at the rate of 8 per centum per annum,
payable at the end of each quarter. It appears that the parties to this mortgage at
that time estimated the value of the property in question at P292,558, which was
about P75,000 in excess of the indebtedness. After the execution of this instrument
by the mortgagor, he returned to China which appears to have been his native
country; and he there died, upon January 29, 1810, without again returning to the
Philippine Islands.
As the defendant was a nonresident at the time of the institution of the present
action, it was necessary for the plaintiff in the foreclosure proceeding to give notice
to the defendant by publication pursuant to section 399 of the Code of Civil
Procedure. An order for publication was accordingly obtained from the court, and
publication was made in due form in a newspaper of the city of Manila. At the same
time that the order of the court should deposit in the post office in a stamped
envelope a copy of the summons and complaint directed to the defendant at his last
place of residence, to wit, the city of Amoy, in the Empire of China. This order was
made pursuant to the following provision contained in section 399 of the Code of
Civil Procedure:
In case of publication, where the residence of a nonresident or absent
defendant is known, the judge must direct a copy of the summons and
complaint to be forthwith deposited by the clerk in the post-office, postage
prepaid, directed to the person to be served, at his place of residence
Whether the clerk complied with this order does not affirmatively appear. There is,
however, among the papers pertaining to this case, an affidavit, dated April 4, 1908,
signed by Bernardo Chan y Garcia, an employee of the attorneys of the bank,
showing that upon that date he had deposited in the Manila post-office a registered
letter, addressed to Engracio Palanca Tanquinyeng, at Manila, containing copies of
the complaint, the plaintiff's affidavit, the summons, and the order of the court
directing publication as aforesaid. It appears from the postmaster's receipt that
Bernardo probably used an envelope obtained from the clerk's office, as the receipt
purports to show that the letter emanated from the office.
The cause proceeded in usual course in the Court of First Instance; and the
defendant not having appeared, judgment was, upon July 2, 1908, taken against

31
him by default. Upon July 3, 1908, a decision was rendered in favor of the plaintiff.
In this decision it was recited that publication had been properly made in a
periodical, but nothing was said about this notice having been given mail. The court,
upon this occasion, found that the indebtedness of the defendant amounted to
P249,355. 32, with interest from March 31, 1908. Accordingly it was ordered that
the defendant should, on or before July 6, 1908, deliver said amount to the clerk of
the court to be applied to the satisfaction of the judgment, and it was declared that
in case of the failure of the defendant to satisfy the judgment within such period,
the mortgage property located in the city of Manila should be exposed to public
sale. The payment contemplated in said order was never made; and upon July 8,
1908, the court ordered the sale of the property. The sale took place upon July 30,
1908, and the property was bought in by the bank for the sum of P110,200. Upon
August 7, 1908, this sale was confirmed by the court.
About seven years after the confirmation of this sale, or to the precise, upon June
25, 1915, a motion was made in this cause by Vicente Palanca, as administrator of
the estate of the original defendant, Engracio Palanca Tanquinyeng y Limquingco,
wherein the applicant requested the court to set aside the order of default of July 2,
1908, and the judgment rendered upon July 3, 1908, and to vacate all the
proceedings subsequent thereto. The basis of this application, as set forth in the
motion itself, was that the order of default and the judgment rendered thereon were
void because the court had never acquired jurisdiction over the defendant or over
the subject of the action.
At the hearing in the court below the application to vacate the judgment was
denied, and from this action of the court Vicente Planca, as administrator of the
estate of the original defendant, has appealed. No other feature of the case is here
under consideration than such as related to the action of the court upon said
motion.
The case presents several questions of importance, which will be discussed in what
appears to be the sequence of most convenient development. In the first part of this
opinion we shall, for the purpose of argument, assume that the clerk of the Court of
First Instance did not obey the order of the court in the matter of mailing the papers
which he was directed to send to the defendant in Amoy; and in this connection we
shall consider, first, whether the court acquired the necessary jurisdiction to enable
it to proceed with the foreclosure of the mortgage and, secondly, whether those
proceedings were conducted in such manner as to constitute due process of law.
The word "jurisdiction," as applied to the faculty of exercising judicial power, is used
in several different, though related, senses since it may have reference (1) to the
authority of the court to entertain a particular kind of action or to administer a
particular kind of relief, or it may refer to the power of the court over the parties, or
(2) over the property which is the subject to the litigation.
The sovereign authority which organizes a court determines the nature and extent
of its powers in general and thus fixes its competency or jurisdiction with reference
to the actions which it may entertain and the relief it may grant.
Jurisdiction over the person is acquired by the voluntary appearance of a party in
court and his submission to its authority, or it is acquired by the coercive power of
legal process exerted over the person.
Jurisdiction over the property which is the subject of the litigation may result either
from a seizure of the property under legal process, whereby it is brought into the
actual custody of the law, or it may result from the institution of legal proceedings
wherein, under special provisions of law, the power of the court over the property is
recognized and made effective. In the latter case the property, though at all times
within the potential power of the court, may never be taken into actual custody at
all. An illustration of the jurisdiction acquired by actual seizure is found in
attachment proceedings, where the property is seized at the beginning of the

32
action, or some subsequent stage of its progress, and held to abide the final event
of the litigation. An illustration of what we term potential jurisdiction over the res, is
found in the proceeding to register the title of land under our system for the
registration of land. Here the court, without taking actual physical control over the
property assumes, at the instance of some person claiming to be owner, to exercise
a jurisdiction in rem over the property and to adjudicate the title in favor of the
petitioner against all the world.
In the terminology of American law the action to foreclose a mortgage is said to be
a proceeding quasi in rem, by which is expressed the idea that while it is not strictly
speaking an action in rem yet it partakes of that nature and is substantially such.
The expression "action in rem" is, in its narrow application, used only with reference
to certain proceedings in courts of admiralty wherein the property alone is treated
as responsible for the claim or obligation upon which the proceedings are based.
The action quasi rem differs from the true action in rem in the circumstance that in
the former 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. All
proceedings having for their sole object the sale or other disposition of the property
of the defendant, whether by attachment, foreclosure, or other form of remedy, are
in a general way thus designated. The judgment entered in these proceedings is
conclusive only between the parties.
In speaking of the proceeding to foreclose a mortgage the author of a well known
treaties, has said:
Though nominally against person, such suits are to vindicate liens; they
proceed upon seizure; they treat property as primarily indebted; and, with the
qualification above-mentioned, they are substantially property actions. In the
civil law, they are styled hypothecary actions, and their sole object is the
enforcement of the lien against the res; in the common law, they would be
different in chancery did not treat the conditional conveyance as a mere
hypothecation, and the creditor's right ass an equitable lien; so, in both, the
suit is real action so far as it is against property, and seeks the judicial
recognition of a property debt, and an order for the sale of the res. (Waples,
Proceedings In Rem. sec. 607.)
It is true that in proceedings of this character, if the defendant for whom publication
is made appears, the action becomes as to him a personal action and is conducted
as such. This, however, does not affect the proposition that where the defendant
fails to appear the action is quasi in rem; and it should therefore be considered with
reference to the principles governing actions in rem.
There is an instructive analogy between the foreclosure proceeding and an action of
attachment, concerning which the Supreme Court of the United States has used the
following language:
If the defendant appears, the cause becomes mainly a suit in personam, with
the added incident, that the property attached remains liable, under the
control of the court, to answer to any demand which may be established
against the defendant by the final judgment of the court. But, if there is no
appearance of the defendant, and no service of process on him, the case
becomes, in its essential nature, a proceeding in rem, the only effect of which
is to subject the property attached to the payment of the defendant which
the court may find to be due to the plaintiff. (Cooper vs. Reynolds, 10 Wall.,
308.)
In an ordinary attachment proceeding, if the defendant is not personally served, the
preliminary seizure is to, be considered necessary in order to confer jurisdiction
upon the court. In this case the lien on the property is acquired by the seizure; and
the purpose of the proceedings is to subject the property to that lien. If a lien
already exists, whether created by mortgage, contract, or statute, the preliminary

33
seizure is not necessary; and the court proceeds to enforce such lien in the manner
provided by law precisely as though the property had been seized upon attachment.
(Roller vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere
circumstance that in an attachment the property may be seized at the inception of
the proceedings, while in the foreclosure suit it is not taken into legal custody until
the time comes for the sale, does not materially affect the fundamental principle
involved in both cases, which is that the court is here exercising a jurisdiction over
the property in a proceeding directed essentially in rem.
Passing now to a consideration of the jurisdiction of the Court of First Instance in a
mortgage foreclosure, it is evident that the court derives its authority to entertain
the action primarily from the statutes organizing the court. The jurisdiction of the
court, in this most general sense, over the cause of action is obvious and requires
no comment. Jurisdiction over the person of the defendant, if acquired at all in such
an action, is obtained by the voluntary submission of the defendant or by the
personal service of process upon him within the territory where the process is valid.
If, however, the defendant is a nonresident and, remaining beyond the range of the
personal process of the court, refuses to come in voluntarily, the court never
acquires jurisdiction over the person at all. Here the property itself is in fact the sole
thing which is impleaded and is the responsible object which is the subject of the
exercise of judicial power. It follows that the jurisdiction of the court in such case is
based exclusively on the power which, under the law, it possesses over the
property; and any discussion relative to the jurisdiction of the court over the person
of the defendant is entirely apart from the case. The jurisdiction of the court over
the property, considered as the exclusive object of such action, is evidently based
upon the following conditions and considerations, namely: (1) that the property is
located within the district; (2) that the purpose of the litigation is to subject the
property by sale to an obligation fixed upon it by the mortgage; and (3) that the
court at a proper stage of the proceedings takes the property into custody, if
necessary, and expose it to sale for the purpose of satisfying the mortgage debt. An
obvious corollary is that no other relief can be granted in this proceeding than such
as can be enforced against the property.
We may then, from what has been stated, formulated the following proposition
relative to the foreclosure proceeding against the property of a nonresident
mortgagor who fails to come in and submit himself personally to the jurisdiction of
the court: (I) That the jurisdiction of the court is derived from the power which it
possesses over the property; (II) that jurisdiction over the person is not acquired
and is nonessential; (III) that the relief granted by the court must be limited to such
as can be enforced against the property itself.
It is important that the bearing of these propositions be clearly apprehended, for
there are many expressions in the American reports from which it might be inferred
that the court acquires personal jurisdiction over the person of the defendant by
publication and notice; but such is not the case. In truth the proposition that
jurisdiction over the person of a nonresident cannot be acquired by publication and
notice was never clearly understood even in the American courts until after the
decision had been rendered by the Supreme Court of the United States in the
leading case of Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that
decision, and of other decisions which have subsequently been rendered in that and
other courts, the proposition that jurisdiction over the person cannot be thus
acquired by publication and notice is no longer open to question; and it is now fully
established that a personal judgment upon constructive or substituted service
against a nonresident who does not appear is wholly invalid. This doctrine applies to
all kinds of constructive or substituted process, including service by publication and
personal service outside of the jurisdiction in which the judgment is rendered; and
the only exception seems to be found in the case where the nonresident defendant
has expressly or impliedly consented to the mode of service. (Note to Raher vs.
Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312

34
The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the
process from the tribunals of one State cannot run into other States or countries
and that due process of law requires that the defendant shall be brought under the
power of the court by service of process within the State, or by his voluntary
appearance, in order to authorize the court to pass upon the question of his
personal liability. The doctrine established by the Supreme Court of the United
States on this point, being based upon the constitutional conception of due process
of law, is binding upon the courts of the Philippine Islands. Involved in this decision
is the principle that in proceedings in rem or quasi in rem against a nonresident who
is not served personally within the state, and who does not appear, the relief must
be confined to the res, and the court cannot lawfully render a personal judgment
against him. (Dewey vs. Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs.
Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore in an action to
foreclose a mortgage against a nonresident, upon whom service has been effected
exclusively by publication, no personal judgment for the deficiency can be entered.
(Latta vs. Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.)
It is suggested in the brief of the appellant that the judgment entered in the court
below offends against the principle just stated and that this judgment is void
because the court in fact entered a personal judgment against the absent debtor for
the full amount of the indebtedness secured by the mortgage. We do not so
interpret the judgment.
In a foreclosure proceeding against a nonresident owner it is necessary for the
court, as in all cases of foreclosure, to ascertain the amount due, as prescribed in
section 256 of the Code of Civil Procedure, and to make an order requiring the
defendant to pay the money into court. This step is a necessary precursor of the
order of sale. In the present case the judgment which was entered contains the
following words:
Because it is declared that the said defendant Engracio Palanca Tanquinyeng
y Limquingco, is indebted in the amount of P249,355.32, plus the interest, to
the 'Banco Espanol-Filipino' . . . therefore said appellant is ordered to deliver
the above amount etc., etc.
This is not the language of a personal judgment. Instead it is clearly intended
merely as a compliance with the requirement that the amount due shall be
ascertained and that the evidence of this it may be observed that according to the
Code of Civil Procedure a personal judgment against the debtor for the deficiency is
not to be rendered until after the property has been sold and the proceeds applied
to the mortgage debt. (sec. 260).
The conclusion upon this phase of the case is that whatever may be the effect in
other respects of the failure of the clerk of the Court of First Instance to mail the
proper papers to the defendant in Amoy, China, such irregularity could in no wise
impair or defeat the jurisdiction of the court, for in our opinion that jurisdiction rest
upon a basis much more secure than would be supplied by any form of notice that
could be given to a resident of a foreign country.
Before leaving this branch of the case, we wish to observe that we are fully aware
that many reported cases can be cited in which it is assumed that the question of
the sufficiency of publication or notice in a case of this kind is a question affecting
the jurisdiction of the court, and the court is sometimes said to acquire jurisdiction
by virtue of the publication. This phraseology was undoubtedly originally adopted by
the court because of the analogy between service by the publication and personal
service of process upon the defendant; and, as has already been suggested, prior to
the decision of Pennoyer vs. Neff (supra) the difference between the legal effects of
the two forms of service was obscure. It is accordingly not surprising that the modes
of expression which had already been molded into legal tradition before that case
was decided have been brought down to the present day. But it is clear that the

35
legal principle here involved is not effected by the peculiar language in which the
courts have expounded their ideas.
We now proceed to a discussion of the question whether the supposed irregularity in
the proceedings was of such gravity as to amount to a denial of that "due process of
law" which was secured by the Act of Congress in force in these Islands at the time
this mortgage was foreclosed. (Act of July 1, 1902, sec. 5.) In dealing with questions
involving the application of the constitutional provisions relating to due process of
law the Supreme Court of the United States has refrained from attempting to define
with precision the meaning of that expression, the reason being that the idea
expressed therein is applicable under so many diverse conditions as to make any
attempt ay precise definition hazardous and unprofitable. As applied to a judicial
proceeding, however, it may be laid down with certainty that the requirement of
due process is satisfied if the following conditions are present, namely; (1) There
must be a court or tribunal clothed with judicial power to hear and determine the
matter before it; (2) jurisdiction must be lawfully acquired over the person of the
defendant or over the property which is the subject of the proceeding; (3) the
defendant must be given an opportunity to be heard; and (4) judgment must be
rendered upon lawful hearing.
Passing at once to the requisite that the defendant shall have an opportunity to be
heard, we observe that in a foreclosure case some notification of the proceedings to
the nonresident owner, prescribing the time within which appearance must be
made, is everywhere recognized as essential. To answer this necessity the statutes
generally provide for publication, and usually in addition thereto, for the mailing of
notice to the defendant, if his residence is known. Though commonly called
constructive, or substituted service of process in any true sense. It is merely a
means provided by law whereby the owner may be admonished that his property is
the subject of judicial proceedings and that it is incumbent upon him to take such
steps as he sees fit to protect it. In speaking of notice of this character a distinguish
master of constitutional law has used the following language:
. . . if the owners are named in the proceedings, and personal notice is
provided for, it is rather from tenderness to their interests, and in order to
make sure that the opportunity for a hearing shall not be lost to them, than
from any necessity that the case shall assume that form. (Cooley on Taxation
[2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.)
It will be observed that this mode of notification does not involve any absolute
assurance that the absent owner shall thereby receive actual notice. The periodical
containing the publication may never in fact come to his hands, and the chances
that he should discover the notice may often be very slight. Even where notice is
sent by mail the probability of his receiving it, though much increased, is dependent
upon the correctness of the address to which it is forwarded as well as upon the
regularity and security of the mail service. It will be noted, furthermore, that the
provision of our law relative to the mailing of notice does not absolutely require the
mailing of notice unconditionally and in every event, but only in the case where the
defendant's residence is known. In the light of all these facts, it is evident that
actual notice to the defendant in cases of this kind is not, under the law, to be
considered absolutely necessary.
The idea upon which the law proceeds in recognizing the efficacy of a means of
notification which may fall short of actual notice is apparently this: Property is
always assumed to be in the possession of its owner, in person or by agent; and he
may be safely held, under certain conditions, to be affected with knowledge that
proceedings have been instituted for its condemnation and sale.
It is the duty of the owner of real estate, who is a nonresident, to take
measures that in some way he shall be represented when his property is
called into requisition, and if he fails to do this, and fails to get notice by the
ordinary publications which have usually been required in such cases, it is his

36
misfortune, and he must abide the consequences. (6 R. C. L., sec. 445 [p.
450]).
It has been well said by an American court:
If property of a nonresident cannot be reached by legal process upon the
constructive notice, then our statutes were passed in vain, and are mere
empty legislative declarations, without either force, or meaning; for if the
person is not within the jurisdiction of the court, no personal judgment can be
rendered, and if the judgment cannot operate upon the property, then no
effective judgment at all can be rendered, so that the result would be that the
courts would be powerless to assist a citizen against a nonresident. Such a
result would be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am.
Rep., 662, 667.)
It is, of course universally recognized that the statutory provisions relative to
publication or other form of notice against a nonresident owner should be complied
with; and in respect to the publication of notice in the newspaper it may be stated
that strict compliance with the requirements of the law has been held to be
essential. In Guaranty Trust etc. Co. vs. Green Cove etc., Railroad Co. (139 U. S.,
137, 138), it was held that where newspaper publication was made for 19 weeks,
when the statute required 20, the publication was insufficient.
With respect to the provisions of our own statute, relative to the sending of notice
by mail, the requirement is that the judge shall direct that the notice be deposited
in the mail by the clerk of the court, and it is not in terms declared that the notice
must be deposited in the mail. We consider this to be of some significance; and it
seems to us that, having due regard to the principles upon which the giving of such
notice is required, the absent owner of the mortgaged property must, so far as the
due process of law is concerned, take the risk incident to the possible failure of the
clerk to perform his duty, somewhat as he takes the risk that the mail clerk or the
mail carrier might possibly lose or destroy the parcel or envelope containing the
notice before it should reach its destination and be delivered to him. This idea
seems to be strengthened by the consideration that placing upon the clerk the duty
of sending notice by mail, the performance of that act is put effectually beyond the
control of the plaintiff in the litigation. At any rate it is obvious that so much of
section 399 of the Code of Civil Procedure as relates to the sending of notice by mail
was complied with when the court made the order. The question as to what may be
the consequences of the failure of the record to show the proof of compliance with
that requirement will be discussed by us further on.
The observations which have just been made lead to the conclusion that the failure
of the clerk to mail the notice, if in fact he did so fail in his duty, is not such an
irregularity, as amounts to a denial of due process of law; and hence in our opinion
that irregularity, if proved, would not avoid the judgment in this case. Notice was
given by publication in a newspaper and this is the only form of notice which the law
unconditionally requires. This in our opinion is all that was absolutely necessary to
sustain the proceedings.
It will be observed that in considering the effect of this irregularity, it makes a
difference whether it be viewed as a question involving jurisdiction or as a question
involving due process of law. In the matter of jurisdiction there can be no distinction
between the much and the little. The court either has jurisdiction or it has not; and
if the requirement as to the mailing of notice should be considered as a step
antecedent to the acquiring of jurisdiction, there could be no escape from the
conclusion that the failure to take that step was fatal to the validity of the judgment.
In the application of the idea of due process of law, on the other hand, it is clearly
unnecessary to be so rigorous. The jurisdiction being once established, all that due
process of law thereafter requires is an opportunity for the defendant to be heard;
and as publication was duly made in the newspaper, it would seem highly
unreasonable to hold that failure to mail the notice was fatal. We think that in

37
applying the requirement of due process of law, it is permissible to reflect upon the
purposes of the provision which is supposed to have been violated and the principle
underlying the exercise of judicial power in these proceedings. Judge in the light of
these conceptions, we think that the provision of Act of Congress declaring that no
person shall be deprived of his property without due process of law has not been
infringed.
In the progress of this discussion we have stated the two conclusions; (1) that the
failure of the clerk to send the notice to the defendant by mail did not destroy the
jurisdiction of the court and (2) that such irregularity did not infringe the
requirement of due process of law. As a consequence of these conclusions the
irregularity in question is in some measure shorn of its potency. It is still necessary,
however, to consider its effect considered as a simple irregularity of procedure; and
it would be idle to pretend that even in this aspect the irregularity is not grave
enough. From this point of view, however, it is obvious that any motion to vacate
the judgment on the ground of the irregularity in question must fail unless it shows
that the defendant was prejudiced by that irregularity. The least, therefore, that can
be required of the proponent of such a motion is to show that he had a good
defense against the action to foreclose the mortgage. Nothing of the kind is,
however, shown either in the motion or in the affidavit which accompanies the
motion.
An application to open or vacate a judgment because of an irregularity or defect in
the proceedings is usually required to be supported by an affidavit showing the
grounds on which the relief is sought, and in addition to this showing also a
meritorious defense to the action. It is held that a general statement that a party
has a good defense to the action is insufficient. The necessary facts must be
averred. Of course if a judgment is void upon its face a showing of the existence of
a meritorious defense is not necessary. (10 R. C. L., 718.)
The lapse of time is also a circumstance deeply affecting this aspect of the case. In
this connection we quote the following passage from the encyclopedic treatise now
in course of publication:
Where, however, the judgment is not void on its face, and may therefore be
enforced if permitted to stand on the record, courts in many instances refuse
to exercise their quasi equitable powers to vacate a judgement after the
lapse of the term ay which it was entered, except in clear cases, to promote
the ends of justice, and where it appears that the party making the
application is himself without fault and has acted in good faith and with
ordinary diligence. Laches on the part of the applicant, if unexplained, is
deemed sufficient ground for refusing the relief to which he might otherwise
be entitled. Something is due to the finality of judgments, and acquiescence
or unnecessary delay is fatal to motions of this character, since courts are
always reluctant to interfere with judgments, and especially where they have
been executed or satisfied. The moving party has the burden of showing
diligence, and unless it is shown affirmatively the court will not ordinarily
exercise its discretion in his favor. (15 R. C. L., 694, 695.)
It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y
Limquingco, died January 29, 1910. The mortgage under which the property was
sold was executed far back in 1906; and the proceedings in the foreclosure were
closed by the order of court confirming the sale dated August 7, 1908. It passes the
rational bounds of human credulity to suppose that a man who had placed a
mortgage upon property worth nearly P300,000 and had then gone away from the
scene of his life activities to end his days in the city of Amoy, China, should have
long remained in ignorance of the fact that the mortgage had been foreclosed and
the property sold, even supposing that he had no knowledge of those proceedings
while they were being conducted. It is more in keeping with the ordinary course of
things that he should have acquired information as to what was transpiring in his
affairs at Manila; and upon the basis of this rational assumption we are authorized,

38
in the absence of proof to the contrary, to presume that he did have, or soon
acquired, information as to the sale of his property.
The Code of Civil Procedure, indeed, expressly declares that there is a presumption
that things have happened according to the ordinary habits of life (sec. 334 [26]);
and we cannot conceive of a situation more appropriate than this for applying the
presumption thus defined by the lawgiver. In support of this presumption, as applied
to the present case, it is permissible to consider the probability that the defendant
may have received actual notice of these proceedings from the unofficial notice
addressed to him in Manila which was mailed by an employee of the bank's
attorneys. Adopting almost the exact words used by the Supreme Court of the
United States in Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say
that in view of the well-known skill of postal officials and employees in making
proper delivery of letters defectively addressed, we think the presumption is clear
and strong that this notice reached the defendant, there being no proof that it was
ever returned by the postal officials as undelivered. And if it was delivered in Manila,
instead of being forwarded to Amoy, China, there is a probability that the recipient
was a person sufficiently interested in his affairs to send it or communicate its
contents to him.
Of course if the jurisdiction of the court or the sufficiency of the process of law
depended upon the mailing of the notice by the clerk, the reflections in which we
are now indulging would be idle and frivolous; but the considerations mentioned are
introduced in order to show the propriety of applying to this situation the legal
presumption to which allusion has been made. Upon that presumption, supported
by the circumstances of this case, ,we do not hesitate to found the conclusion that
the defendant voluntarily abandoned all thought of saving his property from the
obligation which he had placed upon it; that knowledge of the proceedings should
be imputed to him; and that he acquiesced in the consequences of those
proceedings after they had been accomplished. Under these circumstances it is
clear that the merit of this motion is, as we have already stated, adversely affected
in a high degree by the delay in asking for relief. Nor is it an adequate reply to say
that the proponent of this motion is an administrator who only qualified a few
months before this motion was made. No disability on the part of the defendant
himself existed from the time when the foreclosure was effected until his death; and
we believe that the delay in the appointment of the administrator and institution of
this action is a circumstance which is imputable to the parties in interest whoever
they may have been. Of course if the minor heirs had instituted an action in their
own right to recover the property, it would have been different.
It is, however, argued that the defendant has suffered prejudice by reason of the
fact that the bank became the purchaser of the property at the foreclosure sale for
a price greatly below that which had been agreed upon in the mortgage as the
upset price of the property. In this connection, it appears that in article nine of the
mortgage which was the subject of this foreclosure, as amended by the notarial
document of July 19, 1906, the parties to this mortgage made a stipulation to the
effect that the value therein placed upon the mortgaged properties should serve as
a basis of sale in case the debt should remain unpaid and the bank should proceed
to a foreclosure. The upset price stated in that stipulation for all the parcels involved
in this foreclosure was P286,000. It is said in behalf of the appellant that when the
bank bought in the property for the sum of P110,200 it violated that stipulation.
It has been held by this court that a clause in a mortgage providing for a tipo, or
upset price, does not prevent a foreclosure, nor affect the validity of a sale made in
the foreclosure proceedings. (Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep.,
402; Banco-Espaol Filipino vs. Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both
the cases here cited the property was purchased at the foreclosure sale, not by the
creditor or mortgagee, but by a third party. Whether the same rule should be
applied in a case where the mortgagee himself becomes the purchaser has
apparently not been decided by this court in any reported decision, and this
question need not here be considered, since it is evident that if any liability was

39
incurred by the bank by purchasing for a price below that fixed in the stipulation, its
liability was a personal liability derived from the contract of mortgage; and as we
have already demonstrated such a liability could not be the subject of adjudication
in an action where the court had no jurisdiction over the person of the defendant. If
the plaintiff bank became liable to account for the difference between the upset
price and the price at which in bought in the property, that liability remains
unaffected by the disposition which the court made of this case; and the fact that
the bank may have violated such an obligation can in no wise affect the validity of
the judgment entered in the Court of First Instance.
In connection with the entire failure of the motion to show either a meritorious
defense to the action or that the defendant had suffered any prejudice of which the
law can take notice, we may be permitted to add that in our opinion a motion of this
kind, which proposes to unsettle judicial proceedings long ago closed, can not be
considered with favor, unless based upon grounds which appeal to the conscience
of the court. Public policy requires that judicial proceedings be upheld. The
maximum here applicable is non quieta movere. As was once said by Judge Brewer,
afterwards a member of the Supreme Court of the United States:
Public policy requires that judicial proceedings be upheld, and that titles
obtained in those proceedings be safe from the ruthless hand of collateral
attack. If technical defects are adjudged potent to destroy such titles, a
judicial sale will never realize that value of the property, for no prudent man
will risk his money in bidding for and buying that title which he has reason to
fear may years thereafter be swept away through some occult and not readily
discoverable defect. (Martin vs. Pond, 30 Fed., 15.)
In the case where that language was used an attempt was made to annul certain
foreclosure proceedings on the ground that the affidavit upon which the order of
publication was based erroneously stated that the State of Kansas, when he was in
fact residing in another State. It was held that this mistake did not affect the validity
of the proceedings.
In the preceding discussion we have assumed that the clerk failed to send the
notice by post as required by the order of the court. We now proceed to consider
whether this is a proper assumption; and the proposition which we propose to
establish is that there is a legal presumption that the clerk performed his duty as
the ministerial officer of the court, which presumption is not overcome by any other
facts appearing in the cause.
In subsection 14 of section 334 of the Code of Civil Procedure it is declared that
there is a presumption "that official duty has been regularly performed;" and in
subsection 18 it is declared that there is a presumption "that the ordinary course of
business has been followed." These presumptions are of course in no sense
novelties, as they express ideas which have always been recognized. Omnia
presumuntur rite et solemniter esse acta donec probetur in contrarium. There is
therefore clearly a legal presumption that the clerk performed his duty about
mailing this notice; and we think that strong considerations of policy require that
this presumption should be allowed to operate with full force under the
circumstances of this case. A party to an action has no control over the clerk of the
court; and has no right to meddle unduly with the business of the clerk in the
performance of his duties. Having no control over this officer, the litigant must
depend upon the court to see that the duties imposed on the clerk are performed.
Other considerations no less potent contribute to strengthen the conclusion just
stated. There is no principle of law better settled than that after jurisdiction has
once been required, every act of a court of general jurisdiction shall be presumed to
have been rightly done. This rule is applied to every judgment or decree rendered in
the various stages of the proceedings from their initiation to their completion
(Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the record is
silent with respect to any fact which must have been established before the court

40
could have rightly acted, it will be presumed that such fact was properly brought to
its knowledge. (The Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.)
In making the order of sale [of the real state of a decedent] the court are
presumed to have adjudged every question necessary to justify such order or
decree, viz: The death of the owners; that the petitioners were his
administrators; that the personal estate was insufficient to pay the debts of
the deceased; that the private acts of Assembly, as to the manner of sale,
were within the constitutional power of the Legislature, and that all the
provisions of the law as to notices which are directory to the administrators
have been complied with. . . . The court is not bound to enter upon the record
the evidence on which any fact was decided. (Florentine vs. Barton, 2 Wall.,
210; 17 L. ed., 785.) Especially does all this apply after long lapse of time.
Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an
instructive discussion in a case analogous to that which is now before us. It there
appeared that in order to foreclose a mortgage in the State of Kentucky against a
nonresident debtor it was necessary that publication should be made in a
newspaper for a specified period of time, also be posted at the front door of the
court house and be published on some Sunday, immediately after divine service, in
such church as the court should direct. In a certain action judgment had been
entered against a nonresident, after publication in pursuance of these provisions.
Many years later the validity of the proceedings was called in question in another
action. It was proved from the files of an ancient periodical that publication had
been made in its columns as required by law; but no proof was offered to show the
publication of the order at the church, or the posting of it at the front door of the
court-house. It was insisted by one of the parties that the judgment of the court was
void for lack of jurisdiction. But the Supreme Court of the United States said:
The court which made the decree . . . was a court of general jurisdiction.
Therefore every presumption not inconsistent with the record is to be
indulged in favor of its jurisdiction. . . . It is to be presumed that the court
before making its decree took care of to see that its order for constructive
service, on which its right to make the decree depended, had been obeyed.
It is true that in this case the former judgment was the subject of collateral , or
indirect attack, while in the case at bar the motion to vacate the judgment is direct
proceeding for relief against it. The same general presumption, however, is indulged
in favor of the judgment of a court of general jurisdiction, whether it is the subject
of direct or indirect attack the only difference being that in case of indirect attack
the judgment is conclusively presumed to be valid unless the record affirmatively
shows it to be void, while in case of direct attack the presumption in favor of its
validity may in certain cases be overcome by proof extrinsic to the record.
The presumption that the clerk performed his duty and that the court made its
decree with the knowledge that the requirements of law had been complied with
appear to be amply sufficient to support the conclusion that the notice was sent by
the clerk as required by the order. It is true that there ought to be found among the
papers on file in this cause an affidavit, as required by section 400 of the Code of
Civil Procedure, showing that the order was in fact so sent by the clerk; and no such
affidavit appears. The record is therefore silent where it ought to speak. But the
very purpose of the law in recognizing these presumptions is to enable the court to
sustain a prior judgment in the face of such an omission. If we were to hold that the
judgment in this case is void because the proper affidavit is not present in the file of
papers which we call the record, the result would be that in the future every title in
the Islands resting upon a judgment like that now before us would depend, for its
continued security, upon the presence of such affidavit among the papers and
would be liable at any moment to be destroyed by the disappearance of that piece
of paper. We think that no court, with a proper regard for the security of judicial
proceedings and for the interests which have by law been confided to the courts,
would incline to favor such a conclusion. In our opinion the proper course in a case

41
of this kind is to hold that the legal presumption that the clerk performed his duty
still maintains notwithstanding the absence from the record of the proper proof of
that fact.
In this connection it is important to bear in mind that under the practice prevailing
in the Philippine Islands the word "record" is used in a loose and broad sense, as
indicating the collective mass of papers which contain the history of all the
successive steps taken in a case and which are finally deposited in the archives of
the clerk's office as a memorial of the litigation. It is a matter of general information
that no judgment roll, or book of final record, is commonly kept in our courts for the
purpose of recording the pleadings and principal proceedings in actions which have
been terminated; and in particular, no such record is kept in the Court of First
Instance of the city of Manila. There is, indeed, a section of the Code of Civil
Procedure which directs that such a book of final record shall be kept; but this
provision has, as a matter of common knowledge, been generally ignored. The
result is that in the present case we do not have the assistance of the recitals of
such a record to enable us to pass upon the validity of this judgment and as already
stated the question must be determined by examining the papers contained in the
entire file.
But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y
Garcia showing that upon April 4, 1908, he sent a notification through the mail
addressed to the defendant at Manila, Philippine Islands, should be accepted as
affirmative proof that the clerk of the court failed in his duty and that, instead of
himself sending the requisite notice through the mail, he relied upon Bernardo to
send it for him. We do not think that this is by any means a necessary inference. Of
course if it had affirmatively appeared that the clerk himself had attempted to
comply with this order and had directed the notification to Manila when he should
have directed it to Amoy, this would be conclusive that he had failed to comply with
the exact terms of the order; but such is not this case. That the clerk of the
attorneys for the plaintiff erroneously sent a notification to the defendant at a
mistaken address affords in our opinion very slight basis for supposing that the clerk
may not have sent notice to the right address.
There is undoubtedly good authority to support the position that when the record
states the evidence or makes an averment with reference to a jurisdictional fact, it
will not be presumed that there was other or different evidence respecting the fact,
or that the fact was otherwise than stated. If, to give an illustration, it appears from
the return of the officer that the summons was served at a particular place or in a
particular manner, it will not be presumed that service was also made at another
place or in a different manner; or if it appears that service was made upon a person
other than the defendant, it will not be presumed, in the silence of the record, that it
was made upon the defendant also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier
vs. Sullivan, 97 U. S., 444, 449). While we believe that these propositions are
entirely correct as applied to the case where the person making the return is the
officer who is by law required to make the return, we do not think that it is properly
applicable where, as in the present case, the affidavit was made by a person who,
so far as the provisions of law are concerned, was a mere intermeddler.
The last question of importance which we propose to consider is whether a motion
in the cause is admissible as a proceeding to obtain relief in such a case as this. If
the motion prevails the judgment of July 2, 1908, and all subsequent proceedings
will be set aside, and the litigation will be renewed, proceeding again from the date
mentioned as if the progress of the action had not been interrupted. The proponent
of the motion does not ask the favor of being permitted to interpose a defense. His
purpose is merely to annul the effective judgment of the court, to the end that the
litigation may again resume its regular course.
There is only one section of the Code of Civil Procedure which expressly recognizes
the authority of a Court of First Instance to set aside a final judgment and permit a
renewal of the litigation in the same cause. This is as follows:

42
SEC. 113. Upon such terms as may be just the court may relieve a party or
legal representative from the judgment, order, or other proceeding taken
against him through his mistake, inadvertence, surprise, or excusable
neglect; Provided, That application thereof be made within a reasonable time,
but in no case exceeding six months after such judgment, order, or
proceeding was taken.
An additional remedy by petition to the Supreme Court is supplied by section 513 of
the same Code. The first paragraph of this section, in so far as pertinent to this
discussion, provides as follows:
When a judgment is rendered by a Court of First Instance upon default, and a
party thereto is unjustly deprived of a hearing by fraud, accident, mistake or
excusable negligence, and the Court of First Instance which rendered the
judgment has finally adjourned so that no adequate remedy exists in that
court, the party so deprived of a hearing may present his petition to the
Supreme Court within sixty days after he first learns of the rendition of such
judgment, and not thereafter, setting forth the facts and praying to have
judgment set aside. . . .
It is evident that the proceeding contemplated in this section is intended to
supplement the remedy provided by section 113; and we believe the conclusion
irresistible that there is no other means recognized by law whereby a defeated party
can, by a proceeding in the same cause, procure a judgment to be set aside, with a
view to the renewal of the litigation.
The Code of Civil Procedure purports to be a complete system of practice in civil
causes, and it contains provisions describing with much fullness the various steps to
be taken in the conduct of such proceedings. To this end it defines with precision the
method of beginning, conducting, and concluding the civil action of whatever
species; and by section 795 of the same Code it is declared that the procedure in all
civil action shall be in accordance with the provisions of this Code. We are therefore
of the opinion that the remedies prescribed in sections 113 and 513 are exclusive of
all others, so far as relates to the opening and continuation of a litigation which has
been once concluded.
The motion in the present case does not conform to the requirements of either of
these provisions; and the consequence is that in our opinion the action of the Court
of First Instance in dismissing the motion was proper.
If the question were admittedly one relating merely to an irregularity of procedure,
we cannot suppose that this proceeding would have taken the form of a motion in
the cause, since it is clear that, if based on such an error, the came to late for relief
in the Court of First Instance. But as we have already seen, the motion attacks the
judgment of the court as void for want of jurisdiction over the defendant. The idea
underlying the motion therefore is that inasmuch as the judgment is a nullity it can
be attacked in any way and at any time. If the judgment were in fact void upon its
face, that is, if it were shown to be a nullity by virtue of its own recitals, there might
possibly be something in this. Where a judgment or judicial order is void in this
sense it may be said to be a lawless thing, which can be treated as an outlaw and
slain at sight, or ignored wherever and whenever it exhibits its head.
But the judgment in question is not void in any such sense. It is entirely regular in
form, and the alleged defect is one which is not apparent upon its face. It follows
that even if the judgment could be shown to be void for want of jurisdiction, or for
lack of due process of law, the party aggrieved thereby is bound to resort to some
appropriate proceeding to obtain relief. Under accepted principles of law and
practice, long recognized in American courts, a proper remedy in such case, after
the time for appeal or review has passed, is for the aggrieved party to bring an
action to enjoin the judgment, if not already carried into effect; or if the property
has already been disposed of he may institute suit to recover it. In every situation of

43
this character an appropriate remedy is at hand; and if property has been taken
without due process, the law concedes due process to recover it. We accordingly old
that, assuming the judgment to have been void as alleged by the proponent of this
motion, the proper remedy was by an original proceeding and not by motion in the
cause. As we have already seen our Code of Civil Procedure defines the conditions
under which relief against a judgment may be productive of conclusion for this court
to recognize such a proceeding as proper under conditions different from those
defined by law. Upon the point of procedure here involved, we refer to the case of
People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not lie to
vacate a judgment after the lapse of the time limited by statute if the judgment is
not void on its face; and in all cases, after the lapse of the time limited by statute if
the judgment is not void on its face; and all cases, after the lapse of such time,
when an attempt is made to vacate the judgment by a proceeding in court for that
purpose an action regularly brought is preferable, and should be required. It will be
noted taken verbatim from the California Code (sec. 473).
The conclusions stated in this opinion indicate that the judgment appealed from is
without error, and the same is accordingly affirmed, with costs. So ordered.
Arellano, C.J., Torres, Carson, and Avancea, JJ., concur.

Separate Opinions
MALCOLM, J., dissenting:
I dissent. It will not make me long to state my reasons. An immutable attribute
the fundamental idea of due process of law is that no man shall be condemned in
his person or property without notice and an opportunity of being heard in his
defense. Protection of the parties demands a strict and an exact compliance with
this constitutional provision in our organic law and of the statutory provisions in
amplification. Literally hundreds of precedents could be cited in support of these
axiomatic principles. Where as in the instant case the defendant received no notice
and had no opportunity to be heard, certainly we cannot say that there is due
process of law. Resultantly, "A judgment which is void upon its face, and which
requires only an inspection of the judgment roll to demonstrate its want of vitality is
a dead limb upon the judicial tree, which should be lopped off, if the power so to do
exists. It can bear no fruit to the plaintiff, but is a constant menace to the
defendant." (Mills vs. Dickons, 6 Rich [S. C.], 487.)

44

45
Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION
SPOUSES WILLIAM GENATO
and REBECCA GENATO,
Petitioners,

- versus -

G.R. No. 169706

Present:
CARPIO, J., Chairperson,
BRION,
DEL CASTILLO
ABAD, and
PEREZ, JJ.

RITA VIOLA,
Promulgated:
Respondent.
February 5, 2010
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
When there is a conflict between the title of the case and the allegations in the complaint,
the latter prevail in determining the parties to the action. Jurisprudence directs us to look
beyond the form and into the substance so as to render substantial justice to the parties
and determine speedily and inexpensively the actual merits of the controversy with least
regard to technicalities.
In the present Petition for Review, petitioners assail the September 9, 2005 Decision [1] of
the Court of Appeals (CA) in CA-G.R. SP No. 89466 which affirmed the Decision of the
Office of the President. The Office of the President affirmed the Decision of the Housing
and Land Use Regulatory Board (HLURB), First Division which granted the motion to quash
the writ of execution issued in HLURB Case No. REM-102491-4959 (REM-A-950426-0059).
Factual Antecedents
In October 1991, a complaint titled "VILLA REBECCA HOMEOWNERS ASSOCIATION, INC.
versus MR. WILLIAM GENATO and spouse REBECCA GENATO" was filed with the
HLURB. The said complaint was verified by 34 individuals, including the respondent herein,
who referred to themselves as the "Complainants" who "caused the preparation of the
foregoing Complaint".[2] The complaint stated that on various dates, complainants
executed Contracts to Sell and/or Lease Purchase Agreements with the Sps. Genato
pertaining to housing units in Villa Rebecca Homes Subdivision. Sometime thereafter the
HLURB issued a cease and desist order (CDO) enjoining the collection of amortization
payments. This CDO was subsequently lifted. Thereafter, complainants went to the Sps.
Genato with the intention of resuming their amortization payments. The latter however
refused to accept their payments and instead demanded for a lump sum payment of all
the accrued amortizations which fell due during the effectivity of the CDO.

46

From the disorganized, bordering on incomprehensible, complaint, it can be gleaned that

the following reliefs are prayed for: 1) That Sps. Genato accept the complainants' monthly
amortization payments corresponding to the period of effectivity of the (subsequently
lifted) CDO, without any penalty; 2) That the computation of interest on delinquent
payments be at 3% per month and not compounded; 3) That Sps. Genato be responsible
for correcting the deficiencies in the construction and replacement of sub-standard
materials to conform with the plans and specifications; 4) That Sps. Genato be held
answerable/liable to make good their undertaking to provide individual deep wells for the
homeowners; 5) That Sps. Genato be responsible for maintaining the street lights and
payment of the corresponding electric bills; 6) That Sps. Genato maintain the contract
price of the units for sale and not increase the prices; and 7) That Sps. Genato be made
accountable for the unregistered dwelling units.
On March 8, 1995, the Housing Arbiter rendered a Decision, the dispositive portion of
which states:
WHEREFORE, all the foregoing premises being considered, judgment is
hereby rendered ordering complainants to resume payment of their monthly
amortization from date hereof pursuant to the agreement.Likewise, it is
hereby ordered that respondents correct the deficiencies in the construction
of the complaining occupants' units so as to conform to that which is
specified in the plans and specification of the buildings, as well as observe
proper drainage requirements pursuant to law. Likewise, respondents are
hereby directed to immediately put up commercial wells and/or water
pumps or facilities in the Villa Rebecca Subdivision and to reimburse
complainants and unit occupants of their total expenditures incurred for
their water supply.[3]
On appeal to the HLURB Board of Commissioners, the Decision was modified, inter alia, by
the additional directive for the complainants to pay 3% interest per month for the unpaid
amortizations due from June 29, 1991. The dispositive portion of the Decision of the
HLURB Board of Commissioners states:
WHEREFORE, premises considered, the decision of the Arbiter is hereby
MODIFIED to read as follows:
1. Ordering complainants to pay respondent the remaining balance of the
purchase price. Complainant must pay 3% interest per month for unpaid
amortizations due from June 29, 1991. Thereafter complainant must pay its
amortization in accordance with the original term of the contract. These
must be complied with upon finality of this decision.
2. Ordering the respondent to:
a. Accept the amortization payment;
b. Provide drainage outfall;
c. Provide the project with water facilities; and
d. Reimburse complainant the following:
d.1 Electric Bills in the amount of P3,146.66
d.2 Cost of construction of water supply to be determined by an appraiser
mutually acceptable to the parties.

47
Number 2.d to 2.e [sic] must be complied with within thirty (30) days from
finality of this decision.
SO ORDERED.[4]
This Decision, after being revised and then reinstated, subsequently became final and
executory.
On May 26, 2000, Arbiter Marino Bernardo M. Torres issued the Writ of Execution. In
connection therewith, the sheriff seized Rita Viola's two delivery trucks and 315 sacks of
rice.Respondent Viola then filed an Urgent Motion to Quash Execution, with Prayers for
Issuance of Temporary Restraining Order, Clarification and Computation of Correct Amount
of Money Judgment and Allowance of Appeal.
After various incidents and pleadings by the opposing parties, the two trucks were ordered
released. The 315 sacks of rice, however, were sold at public auction to the highest bidder,
[5]

petitioner Rebecca Genato in the amount of P189,000.00.[6]

On December 15, 2000, Arbiter Torres issued an Order denying respondent Viola's motion
to quash the writ of execution and directed her to pay the Sps. Genato the amount
of P739,133.31.The dispositive portion of the Order reads:
WHEREFORE, premises considered, the motion to quash writ of execution is
hereby DENIED.
Movant Rita Viola is hereby directed to pay to the respondents the amount
of P739,133.31 in payment of their amortizations up to August 2000.
The bond posted by the movant in compliance with the directive of this
Office is likewise ordered cancelled.
SO ORDERED.[7]
Viola appealed the said Order and on January 10, 2003, the HLURB, First Division rendered
a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the movants' respective Motions to
Quash the Writ of Execution are hereby GRANTED. Accordingly, the Orders
dated December 15, [2000] are hereby SET ASIDE. The respondents are
directed to credit as payment the value of the 315 sacks of rice in the
amount of P318,500.00, which were seized and auctioned to the account of
movant Viola.
SO ORDERED.[8]
The Sps. Genato appealed the said Decision to the Office of the President. On November
8, 2004, the Office of the President affirmed in toto the Decision of the HLURB, First
Division. The motion for reconsideration filed by the Sps. Genato was denied. They thus
elevated the case to the CA. As previously mentioned, the CA affirmed the Decision of the
Office of the President and disposed as follows:

48
WHEREFORE, premises considered, the petition is DENIED and the assailed
decision dated November 4, 2004 and resolution dated March 31, 2005 of
the Office of the President in O.P. Case No. 03-B-057 are hereby AFFIRMED.
SO ORDERED.[9]
The Sps. Genato no longer filed a motion for reconsideration, they instead filed the present
petition for review.
Issues
Petitioners raise the following issues:
1. WHETHER THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
THE HLURB HAS NOT ACQUIRED JURISDICTION OVER THE PERSON OF
RESPONDENT RITA VIOLA.
2. WHETHER AFTER THE DECISION HAS BECOME FINAL AND EXECUTORY
THE HLURB COULD STILL RULE ON THE LACK OF JURISDICTION OVER
THE PERSON OF RITA VIOLA.
3. WHETHER RESPONDENT VIOLA CAN CLAIM AN AMOUNT HIGHER THAN
WHAT APPEARS ON SHERIFF'S CERTIFICATE OF SALE.
4. WHETHER THE RULE THAT FINDINGS OF FACTS AND CONCLUSIONS OF
ANY ADJUDICATIVE BODY SHOULD BE CONSIDERED AS BINDING AND
CONCLUSIVE ON THE APPELLATE COURT, IS APPLICABLE IN THE CASE AT
BAR.[10]
Petitioners' Arguments

Petitioners contend that the CA erred in applying the case of Duero v. Court of Appeals,
[11]

which held that the lack of jurisdiction of the court over an action cannot be

waived. They submit that "jurisdiction of the court over an action" is different from
"jurisdiction over the person". They say that the latter was what the HLURB was referring
to because it stated that Rita Viola was never impleaded. They contend that jurisdiction
over the person can be conferred by consent expressly or impliedly given, as in the case of
Rita Viola.
Petitioners also assert that the HLURB Decision subject of the writ of execution has long
been final and executory, hence, said Decision can no longer be modified. They further
assert that the execution of the said Decision is a ministerial duty of the HLURB.
Petitioners further argue that the best evidence of the value of the 315 sacks of rice seized
and auctioned off is the Sheriff's Certificate of Sale; hence the Board's ruling crediting to
the account of Viola an amount other than that stated in the Certificate of Sale has no
sound basis.

49

Finally, the petitioners contend that the findings and conclusions of an adjudicative body
resulting from an erroneous application of law are not binding on the appellate courts.
Respondent's Arguments

On the other hand, respondent contends that the HLURB did not acquire jurisdiction over
her person since she was not a party to the case; hence, the HLURB decision is a nullity as
against her and therefore never acquired finality. With a void judgment, the resultant
execution was likewise void.
She also argues that, since the levy and auction were illegal, the correct valuation of the
315 sacks of rice is not the price paid at the auction but its actual value of P318,500.00.
Our Ruling
The petition has merit.
At the outset, it is worth mentioning that except for respondent Rita Viola, all the other
individual members/buyers/owners of the respective housing units have already paid and
settled their obligations with Sps. Genato.[12] Hence, in the present case we only focus on
the matters involving Rita Viola.
For a more orderly presentation, we address the fourth issue raised by petitioners first.
Non-applicability of the doctrine on the
binding efect of findings of facts and
conclusions of an adjudicative body

Indeed findings of fact and conclusions of an adjudicative body like the HLURB, which can
be considered as a trier of facts on specific matters within its field of expertise, should be
considered as binding and conclusive upon the appellate courts. This is in addition to the
fact that it was in a better position to assess and evaluate the credibility of the contending
parties and the validity of their respective evidence. However, these doctrines hold true
only when such findings and conclusions are supported by substantial evidence.[13]
In the present case, we find it difficult to find sufficient evidential support for the HLURB's
conclusion that it did not acquire jurisdiction over the person of Viola. We are thus
persuaded that there is ample justification to disturb the findings of the HLURB.
The HLURB acquired jurisdiction over
Viola

It is not the caption of the pleading but the allegations therein that are controlling. [14] The
inclusion of the names of all the parties in the title of a complaint is a formal requirement
under Section 3, Rule 7 of the Rules of Court. However, the rules of pleadings require

50

courts to pierce the form and go into the substance.[15] The non-inclusion of one or some of
the names of all the complainants in the title of a complaint, is not fatal to the case,
provided there is a statement in the body of the complaint indicating that such
complainant/s was/were made party to such action. This is specially true before the HLURB
where the proceedings are summary in nature without regard to legal technicalities
obtaining in the courts of law[16] and where the pertinent concern is to promote public
interest and to assist the parties in obtaining just, speedy and inexpensive determination
of every action, application or other proceedings.[17]
Respondent Viola, although her name did not appear in the title as a party, was one of the
persons who caused the preparation of the complaint and who verified the same. The
allegations in the body of the complaint indicate that she is one of the complainants. She
categorically considered, and held out, herself as one of the complainants from the time of
the filing of the complaint and up to the time the decision in the HLURB case became final
and executory. To repeat, the averments in the body of the complaint, not the title, are
controlling.[18] Hence, having been set forth in the body of the complaint as a complainant,
Viola was a party to the case.
For clarity, the complaint should have been amended to reflect in the title the individual
complainants. There being a "defect in the designation of the parties", its correction could
be summarily made at any stage of the action provided no prejudice is caused thereby to
the adverse party.[19] In the present case, the specification of the individual complainants in
the title of the case would not constitute a change in the identity of the parties. Only their
names were omitted in the title but they were already parties to the case, most
importantly, they were heard through their counsel whom they themselves chose to
prepare the complaint and represent them in the case before the HLURB. No unfairness or
surprise to the complainants, including Viola, or to the Sps. Genato would result by
allowing the amendment, the purpose of which is merely to conform to procedural rules or
to correct a technical error.[20]
It is now too late to dismiss this petition, and, in effect, nullify all proceedings had before
the HLURB on the ground that Viola does not appear to have been impleaded as a
party. The error or defect is merely formal and not substantial and an amendment to cure
such defect is expressly authorized by Sec. 4, Rule 10 of the Rules of Court.[21]
Moreover, it was only when the final and executory judgment of the HLURB was already
being executed against Viola that she, for the first time, reversed her position; and claimed
that she was not a party to the case and that the HLURB did not acquire jurisdiction over
her. Viola is estopped[22] from taking such inconsistent positions. Where a party, by his or
her deed or conduct, has induced another to act in a particular manner, estoppel
effectively bars the former from adopting an inconsistent position, attitude or course of
conduct that causes loss or injury to the latter. The doctrine of estoppel is based upon the
grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid
one to speak against his own act, representations, or commitments to the injury of one to

51

whom they were directed and who reasonably relied thereon. After petitioners had
reasonably relied on the representations of Viola that she was a complainant and entered
into the proceedings before the HLURB, she cannot now be permitted to impugn her
representations to the injury of the petitioners.
At this point, it may be beneficial to elaborate on the matter of jurisdiction. Jurisdiction is
defined as the power and authority of a court to hear, try and decide a case.[23] In order for
the court or an adjudicative body to have authority to dispose of the case on the merits, it
must acquire jurisdiction over the subject matter and the parties.[24] Elementary is the
distinction between jurisdiction over the subject matter and jurisdiction over the
person. Jurisdiction over the subject matter is conferred by the Constitution or by law. In
contrast, jurisdiction over the person is acquired by the court by virtue of the party's
voluntary submission to the authority of the court or through the exercise of its coercive
processes. Jurisdiction over the person is waivable unlike jurisdiction over the subject
matter which is neither subject to agreement nor conferred by consent of the parties. [25] In
civil case, courts acquire jurisdiction over the plaintiffs upon the filing of the complaint,
while jurisdiction over the defendants 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.[26]
The act of filing the complaint with the HLURB is unequivocally a voluntary submission by
the complainants, including Viola, to the authority of the HLURB. Clearly, the HLURB
acquired jurisdiction over Viola, who was one of the complainants, upon the filing of their
complaint.
Final and executory judgment may no
longer be modified
The April 27, 1999 HLURB Resolution,[27] reinstating the December 18, 1996 Decision,
[28]

has long been final and executory. Nothing is more settled in the law than that a

decision that has acquired finality becomes immutable and unalterable and may no longer
be modified in any respect even if the modification is meant to correct erroneous
conclusions of fact or law and whether it was made by the court that rendered it or by the
highest court of the land.[29] The only recognized exceptions to the general rule are the
correction of clerical errors, the so-callednunc pro tunc entries which cause no prejudice to
any party, void judgments, and whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable.[30] None of the exceptions is
present in this case. The HLURB decision cannot be considered a void judgment, as it was
rendered by a tribunal with jurisdiction over the subject matter of the complaint and, as
discussed above, with jurisdiction over the parties. Hence, the same can no longer be
modified.
Amount to be credited on account
of the sale of property levied upon

52

After a judgment has gained finality, it becomes the ministerial duty of the court or quasijudicial tribunal to order its execution.[31] In the present case, the final and executory
HLURB decision was partially executed by the sale of the 315 sacks of rice belonging to
Viola.
In determining the amount to be credited to the account of Viola, we look at the Sheriff's
Partial Report and the Sheriff's Certificate of Sale. Both documents state that in the auction
sale of the 315 sacks of rice, Mrs. Rebecca Genato submitted the highest bid in the
amount of P189,000.00. Drawing from Section 19, Rule 39 of the Rules of Court which
states that "all sales of property under execution must be made at public auction, to the
highest bidder," it naturally follows that the highest bid submitted is the amount that
should be credited to the account of the judgment debtor.
WHEREFORE, the petition is GRANTED. The assailed September 9, 2005 Decision of the
Court of Appeals is REVERSED and SET ASIDE and the December 15, 2000 Order of
Arbiter Marino Bernardo M. Torres is REINSTATED and AFFIRMED.
SO ORDERED.

53

54
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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 in the 24 August 1990 Decision 1 of 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 the defendant Antonio Heras praying that said defendant be
ordered to pay to the plaintiff the amounts awarded by the Hong Kong
Court Judgment dated December 28, 1984 and amended on April 13,
1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong
Kong currency at the time of payment with
legal interest from December 28, 1984 until
fully paid;
2) interest on the sum of US$1,500.00 at
9.875% per annum 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 court could resolve the said motion, a fire which partially
razed the Quezon City Hall Building on 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
Motion for Reconstitution of Case Records. The Court, after allowing the
defendant to react thereto, granted the said Motion and admitted the
annexes attached thereto as the reconstituted records of this case per
Order dated September 6, 1988. Thereafter, the Motion to Dismiss, the
resolution of which had been deferred; was denied by the Court in its
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

55
arrive at any settlement. However, they agreed on the following
stipulations of facts:
1. The defendant admits the existence of the
judgment dated December 28, 1984 as well
as its amendment dated April 13, 1987, but
not necessarily the authenticity or validity
thereof;
2. The plaintiff is not doing business and is
not licensed to do business in the Philippines;
3. The residence of defendant,
Heras, is New Manila, Quezon City.

Antonio

The only issue for this Court to determine is, whether or not the
judgment of the Hong Kong Court has been repelled by evidence of
want of jurisdiction, want of notice to the party, collusion, fraud or
clear mistake of law or fact, such as to overcome the presumption
established in Section 50, Rule 39 of the Rules of Court in favor of
foreign judgments.
In view of the admission by the defendant of the existence of the
aforementioned judgment (Pls. See Stipulations of Facts in the Order
dated January 5, 1989 as amended by the Order of January 18, 1989),
as well as the legal presumption in favor of the plaintiff as provided for
in paragraph (b); Sec. 50, (Ibid.), the plaintiff presented only
documentary
evidence
to
show
rendition,
existence,
and
authentication of such judgment by the proper officials concerned (Pls.
See Exhibits "A" thru "B", with their submarkings). In addition, the
plaintiff presented testimonial and documentary evidence to show its
entitlement to attorney's fees and other expenses of litigation. . . . .
On the other hand, the defendant presented two witnesses, namely.
Fortunata dela Vega and Russel Warren Lousich.
The gist of Ms. dela Vega's testimony is to the effect that no writ of
summons or copy of a statement of claim of Asiavest Limited was ever
served in the office of the Navegante Shipping Agency Limited and/or
for Mr. Antonio Heras, and that no service of the writ of summons was
either served on the defendant at his residence in New Manila, Quezon
City. Her knowledge is based on the fact that she was the personal
secretary of Mr. Heras during his JD Transit days up to the latter part of
1972 when he shifted or diversified to shipping business in Hong Kong;
that she was in-charge of all his letters and correspondence, business
commitments, undertakings, conferences and appointments, until
October 1984 when Mr. Heras left Hong Kong for good; that she was
also the Officer-in-Charge or Office Manager of Navegante Shipping
Agency LTD, a Hong Kong registered and based company acting as
ships agent, up to and until the company closed shop sometime in the
first quarter of 1985, when shipping business collapsed worldwide; that
the said company held office at 34-35 Connaught Road, Central Hong
Kong and later transferred to Carton House at Duddel Street, Hong
Kong, until the company closed shop in 1985; and that she was certain

56
of such facts because she held office at Caxton House up to the first
quarter of 1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong, and
as a representative of the law office of the defendant's counsel who
made a verification of the record of the case filed by the plaintiff in
Hong Kong against the defendant, as well as the procedure in serving
Court processes in Hong Kong.
In his affidavit (Exh. "2") which constitutes his direct testimony, the
said witness stated that:
The defendant was sued on the basis of his personal
guarantee of the obligations of Compania Hermanos de
Navegacion S.A. There is no record that a writ of
summons was served on the person of the defendant in
Hong Kong, or that any such attempt at service was
made. Likewise, there is no record that a copy of the
judgment of the High Court was furnished or served on
the defendant; anyway, it is not a legal requirement to do
so under Hong Kong laws;
a) The writ of summons or claim can be
served by the solicitor (lawyer) of the
claimant or plaintiff. In Hong Kong 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 not contested, the claimant or
the plaintiff is not required to present proof
of his claim or complaint nor present
evidence under oath of the claim in order to
obtain a Judgment.
c) There is no legal requirement that such a
Judgment or decision rendered by the Court
in Hong Kong [to] make a recitation of the
facts or the law upon which the claim is
based.
d) There is no necessity to furnish the
defendant with a copy of the Judgment or
decision rendered against him.
e) In an action based on a guarantee, there
is no established legal requirement or
obligation under Hong Kong laws that the
creditor must first bring proceedings against
the principal debtor. The creditor can
immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was
commissioned by the law firm of the defendant's counsel as an expert

57
witness and to verify the records of the Hong Kong case, he had been
acting as counsel for the defendant in a number of commercial
matters; 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 authorizing service upon Heras outside of Hong
Kong, particularly in Manila or any other place in the Philippines (p. 9,
TSN, 2/14/90); that there must be adequate proof of service of
summons, 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 that there was service of
summons; that in this case, it is not just a presumption because there
was an affidavit stating that service was effected in [sic] a particular
man here in Manila; that such affidavit was filed by one Jose R.
Fernandez of the firm Sycip Salazar on the 21st of December 1984, and
stated in essence that "on Friday, the 23rd of November 1984 he
served the 4th defendant at No. 6 First Street, Quezon City by leaving
it at that address with Mr. Dionisio Lopez, the son-in-law of the 4th
defendant the copy of the writ and Mr. Lopez informed me and I barely
believed that he would bring the said 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 that if
the summons or claim is not contested, the claimant of the plaintiff is
not required to present proof of his claim or complaint or present
evidence under oath of the claim in order to obtain judgment; and that
such judgment can be enforced in the same manner as a judgment
rendered after full hearing.
The trial court held that since the Hong Kong court judgment had been duly proved,
it is a presumptive evidence of a right as between the parties; hence, the party
impugning it had the burden to prove want of jurisdiction over his person. HERAS
failed to discharge that burden. He did not testify to state categorically and under
oath that he never received summons. Even his own witness Lousich admitted that
HERAS was served with summons in his Quezon City residence. As to De la Vega's
testimony regarding 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 procedural laws 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
not required under Hong Kong laws. The trial Court also debunked HERAS'
contention that the principle of excussion under Article 2058 of the Civil Code of the
Philippines was violated. It declared that matters of substance are subject to the law
of the place where the transaction occurred; in this case, Hong Kong laws must
govern.
The trial court concluded that the Hong Kong court judgment should be recognized
and given effect in this jurisdiction for failure of HERAS to overcome the legal
presumption in favor of the foreign judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay
to the plaintiff the following sums or their equivalents in Philippine
currency at the time of payment: US$1,810,265.40 plus interest on the

58
sum of US$1,500,000.00 at 9.875% per annum from October 31, 1984
to December 28, 1984, and HK$905 as fixed cost, with legal interests
on the aggregate amount from December 28, 1984, and to pay
attorney's fees in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an award of
judicial costs and an increase in attorney's fees in the amount of US$19,346.45 with
interest until full payment of the said obligations. On the other hand, HERAS no
longer opposed the motion and instead appealed the decision to the Court of
Appeals, which docketed the appeal as CA-G.R. CV No. 29513.
In its order 2 of 2 November 1990, the trial court granted ASIAVEST's motion for
reconsideration by increasing the award of attorney's fees to "US$19,345.65 OR ITS
EQUIVALENT IN PHILIPPINE CURRENCY, 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 filing fees. However, it later
withdrew its appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision 3 reversing the decision
of the trial court and dismissing ASIAVEST's complaint without prejudice. It
underscored the fact that a foreign judgment does not of itself have any
extraterritorial application. For it to be given effect, the foreign tribunal should have
acquired 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 those relating 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 Kong law, 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 with Philippine laws. It then stressed that where the action is in
personam and the defendant is in the Philippines, the summons should be
personally served on the defendant pursuant to Section 7, Rule 14 of the Rules of
Court. 4 Substituted 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 Salazar Hernandez & Gatmaitan law
office, who was not authorized by the judge of the court issuing the summons,
ASIAVEST should have asked for leave of the local courts to have the foreign
summons served by the sheriff or other court officer of the place where service was
to be made, or for special reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside the state to a
non-resident is unavailing to give jurisdiction in an action against him personally for
money recovery." Summons should have 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 serve summons on HERAS
in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over
HERAS. 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

59
discussion, there is a need to deviate front the findings of the lower
court in the interest of justice and fair play. This, however, is without
prejudice to whatever 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 the validity 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
"SUPPORTING THE 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
HONG KONG;
IV.
. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH
LEAVE OF PHILIPPINE COURTS;
V.
. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THE
PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court, 5 which was the
governing law at the time this case was decided by the trial court and respondent
Court of Appeals, a foreign judgment against a person rendered by a court having
jurisdiction to pronounce the judgment is presumptive evidence of a right as
between the parties and their successors in interest by the subsequent title.
However, the judgment 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 the contrary, a court, or judge acting as such, whether in the
Philippines or elsewhere, is presumed to have acted in the lawful exercise of
jurisdiction.

60
Hence, once the authenticity of the foreign judgment is proved, the burden to repel
it on grounds provided for in paragraph (b) of Section 50, Rule 39 of the Rules of
Court is on the party challenging the foreign judgment HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong Kong
judgment. On the other hand, ASIAVEST presented evidence to prove rendition,
existence, and authentication of the judgment by the proper officials. The judgment
is thus presumed to be valid and binding in the country from which it comes, until
the contrary is shown. 6 Consequently, the first ground relied upon by ASIAVEST has
merit. The presumption of validity accorded foreign judgment would be rendered
meaningless were the party seeking 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 not acquire jurisdiction over the person of HERAS. This involves
the issue of whether summons was properly and validly served on HERAS. It is
settled that matters of remedy and procedure such as those relating to the service
of process upon the defendant are governed by the lex fori or the law of the
forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that according to his
witness Mr. Lousich, who was presented as an expert on Hong Kong laws, there was
no valid service of summons on him.
In his counter-affidavit, 8 which served as his direct testimony per agreement of the
parties, 9 Lousich declared that the record of the Hong Kong case failed to show that
a writ of summons was served upon HERAS 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 of
summons could be served by the solicitor of the claimant or plaintiff; and (b) where
the said writ or claim was not contested, the claimant or plaintiff was not required to
present proof under oath in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong
Kong court authorized service of summons on HERAS outside of its jurisdiction,
particularly in the Philippines. He admitted also the existence of an affidavit of one
Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law firm 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 it was 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 an expert on the Hong Kong law. Under Sections 24 and 25, Rule 132
of the New Rules of Evidence, the record of public documents of a sovereign
authority, tribunal, official body, or public officer may be proved by (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 officer has 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 in
the foreign country in which the record is kept, and authenticated by the seal of his
office. The attestation must state, in substance, that the copy is a correct copy of
the original, or a specific part thereof, as the case may be, and must be under the
official seal of the attesting officer.

61
Nevertheless, the testimony of an expert witness may be allowed to prove a foreign
law. An authority 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
of Willamette Iron and Steel Works v. Muzzal, 13 that 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 of a foreign law. In that case, the Supreme Court considered
the testimony under oath of an attorney-at-law of San Francisco,
California, who quoted verbatim a section of California Civil Code and
who stated that the same was in force at the time the obligations were
contracted, as sufficient evidence to establish the existence of said
law. Accordingly, in line with this view, the Supreme Court in
theCollector of Internal Revenue v. Fisher et al., 14 upheld the Tax Court
in considering the pertinent law of California as proved by the
respondents' witness. In that case, the counsel for respondent
"testified that as an active member of the California Bar since 1951, he
is familiar with the revenue and taxation laws 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 cited
Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue
Code as published in Derring's California Code, a publication of
Bancroft-Whitney Co., Inc. And as part of his testimony, 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 law of a foreign country on reciprocity regarding the acquisition
of citizenship, although not meeting the prescribed rule of practice,
may be allowed and used as basis for favorable action, if, in the light of
all the circumstances, the Court is "satisfied of the authenticity of the
written proof offered." 15 Thus, in, a number of decisions, mere
authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent 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 or in personam, and where the defendant is either a resident or nonresident of
Hong Kong. In view of the absence of proof of the Hong Kong law on this particular
issue, the presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the Hong Kong law
on the matter is similar to the Philippine law. 17
As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to determine first
whether the action is in personam, in rem, or quasi in rem because the rules on
service of summons under Rule 14 of the Rules of 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 in rem is an action against the thing itself instead of against the
person. 19 An 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

62
In an action in personam, jurisdiction over the person of the defendant is necessary
for the court to validly try and decide the case. Jurisdiction over the person of
a resident defendant who does not voluntarily appear in court can be acquired by
personal service of summons as provided under Section 7, Rule 14 of the Rules of
Court. If he cannot be personally served with summons within a reasonable time,
substituted service 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 Section 8; 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
However, in an action in personam wherein the defendant is a non-resident who
does not voluntarily submit himself to the authority of the court, personal service of
summons within the state is essential to the acquisition of jurisdiction over her
person. 24 This 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
his person and therefore cannot validly try and decide the case against him. 25 An
exception was laid down in Gemperle v. Schenker 26 wherein a non-resident was
served with summons through his wife, who was a resident of the Philippines and
who was his representatives and attorney-in-fact in a prior civil case filed by him;
moreover, the second case was a mere offshoot of the first case.
On the other hand, in a proceeding in rem or 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. Nonetheless summons
must be served upon the defendant not for the purpose of vesting the court with
jurisdiction but merely for satisfying the due process requirements. 27 Thus, where
the defendant is a non-resident who is not found in the Philippines and (1) the
action affects the personal status of the plaintiff; (2) the action relates to, or the
subject matter of which is property in the Philippines in which the defendant has or
claims a lien or interest; (3) the action seeks the exclusion of the defendant from
any interest in the property located in the Philippines; or (4) the property of the
defendant has been attached in the Philippines 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. 28
In the case at bar, the action filed in Hong Kong against HERAS was in personam,
since it was based on his 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 that HERAS was the President and part owner of a shipping
company in Hong Kong during all those times that she served as his secretary. He
had in his employ a staff of twelve. 30 He had "business commitments, undertakings,
conferences, and appointments until October 1984 when [he] left Hong Kong for
good," 31 HERAS'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 of Hong Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, 33 as well as in his
Answer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court
judgment, HERAS maintained that the Hong Kong court did not have jurisdiction

63
over him because the fundamental rule is that jurisdiction in personam over nonresident defendants, so as to sustain a money judgment, must be based 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 36 contended: "The
question of Hong Kong 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 Kong when the suit was filed or that he did not
voluntarily submit 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 over his 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 admission amounted 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 was that "the residence of defendant, Antonio Heras, is New
Manila, Quezon City." 39
We note that the residence of HERAS insofar as the action for the enforcement of
the Hong Kong court judgment is concerned, was never in issue. He never
challenged the service of summons on him through a security guard in his Quezon
City residence and through a lawyer in his office in that city. In his Motion to
Dismiss, he did not question the jurisdiction of the Philippine court over his person
on the ground of invalid service of summons. What was in issue was his residence
as far as the Hong Kong suit was concerned. We therefore conclude that the
stipulated fact that HERAS "is a resident of New Manila, Quezon City, Philippines"
refers to his residence at the time jurisdiction over his person was being sought by
the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that
HERAS was a resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the action against
him was, indisputably, one in personam, summons should have been personally
served on him in Hong Kong. The extraterritorial service in the Philippines was
therefore invalid and did not confer on the Hong Kong court jurisdiction over his
person. It follows that the Hong Kong court judgment cannot be given force and
effect here in the Philippines for having been rendered without jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer
so in November 1984 when the extraterritorial service of summons was attempted
to be made on him. As declared by his secretary, which statement was not disputed
by ASIAVEST, HERAS left Hong Kong in October 1984 "for good." 40 His absence in
Hong Kong must have been the reason why summons was not served on him
therein; thus, ASIAVEST was constrained to apply for leave to effect service in the
Philippines, and upon obtaining a favorable action on the matter, it commissioned
the Sycip Salazar Hernandez & Gatmaitan law firm to serve the summons here in
the Philippines.
In Brown v. Brown, 41 the defendant was previously a resident of the Philippines.
Several days after a criminal action for concubinage was filed against him, he
abandoned the Philippines. Later, a proceeding quasi in rem was instituted against

64
him. Summons in the latter case was served on the defendant's attorney-in-fact at
the latter's address. The Court held that under the facts of the case, it could not be
said that the defendant was "still a resident of the Philippines because he ha[d]
escaped to his country and [was] therefore an absentee in the Philippines." As such,
he should have been "summoned in the same manner as one who does not reside
and is not found in the Philippines."
Similarly, HERAS, who was also an absentee, should have been served with
summons in the same manner as a non-resident not found in Hong Kong. Section
17, Rule 14 of the Rules of Court providing for extraterritorial service will not apply
because the suit against him was in personam. Neither can we apply Section 18,
which allows extraterritorial service on a resident defendant who is temporarily
absent from the country, because even if HERAS be considered as a resident of
Hong Kong, the undisputed fact remains that he left Hong Kong not only
"temporarily" but "for good."
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the
petition in this case and AFFIRMING the assailed judgment of the Court of Appeals in
CA-G.R. CV No. 29513.
No costs.
SO ORDERED.

65
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 108538

January 22, 1996

LOURDES A. VALMONTE and ALFREDO D. VALMONTE, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, THIRD DIVISION and ROSITA
DIMALANTA, respondents.
DECISION
MENDOZA, J.:
Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in an
action for partition filed against her and her husband, who is also her attorney,
summons intended for her may be served on her husband, who has a law office in
the Philippines. The Regional Trial Court of Manila, Branch 48, said no and refused to
declare Lourdes A. Valmonte in default, but the Court of Appeals said yes. Hence
this petition for review on certiorari.
The facts of the case are as follows:
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife.
They are both residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A.
Petitioner Alfredo D. Valmonte, who is a member of the Philippine bar, however,
practices his profession in the Philippines, commuting for this purpose between his
residence in the state of Washington and Manila, where he holds office at S-304
Gedisco Centre, 1564 A. Mabini Ermita, Manila.
On March 9, 1992, private respondent Rosita Dimalanta, who is the sister of
petitioner Lourdes A. Valmonte, filed a complaint for partition of real property and
accounting of rentals against petitioners Lourdes A. Valmonte and Alfredo D.
Valmonte before the Regional Trial Court of Manila, Branch 48. The subject of the
action is a three-door apartment located in Paco, Manila.
In her Complaint, private respondent alleged:
The plaintiff is of legal age, a widow and is at present a resident of 14823
Conway Road, Chesterfield, Missouri, U.S.A., while the defendants are
spouses, of legal age and at present residents of 90222 Carkeek Drive, South
Seattle, Washington, U.S.A., but, for purposes of this complaint may be
served with summons at Gedisco Center, Unit 304, 1564 A. Mabini St., Ermita,
Manila where defendant Alfredo D. Valmonte as defendant Lourdes Arreola
Valmonte's spouse holds office and where he can be found.
Apparently, the foregoing averments were made on the basis of a letter previously
sent by petitioner Lourdes A. Valmonte to private respondent's counsel in which, in
regard to the partition of the property in question, she referred private respondent's
counsel to her husband as the party to whom all communications intended for her
should be sent. The letter reads:

66
July 4, 1991
Dear Atty. Balgos:
This is in response to your letter, dated 20 June 1991, which I received on 3
July 1991. Please address all communications to my lawyer, Atty. Alfredo D.
Valmonte, whose address, telephone and fax numbers appear below.
c/o Prime Marine
Gedisco Center, Unit 304
1564 A. Mabini, Ermita
Metro Manila
Telephone: 521-1736
Fax: 521-2095
Service of summons was then made upon petitioner Alfredo D. Valmonte, who at the
time, was at his office in Manila. Petitioner Alfredo D. Valmonte accepted the
summons, insofar as he was concerned, but refused to accept the summons for his
wife, Lourdes A. Valmonte, on the ground that he was not authorized to accept the
process on her behalf. Accordingly the process server left without leaving a copy of
the summons and complaint for petitioner Lourdes A. Valmonte.
Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim.
Petitioner Lourdes A. Valmonte, however, did not file her Answer. For this reason
private respondent moved to declare her in default. Petitioner Alfredo D. Valmonte
entered a special appearance in behalf of his wife and opposed the private
respondent's motion.
In its Order dated July 3, 1992, the trial court, denied private respondent's motion to
declare petitioner Lourdes A. Valmonte in default. A motion for reconsideration was
similarly denied on September 23, 1992. Whereupon, private respondent filed a
petition for certiorari, prohibition and mandamus with the Court of Appeals.
On December 29, 1992, the Court of Appeals rendered a decision granting the
petition and declaring Lourdes A. Valmonte in default. A copy of the appellate
court's decision was received by petitioner Alfredo D. Valmonte on January 15, 1993
at his Manila office and on January 21, 1993 in Seattle, Washington. Hence, this
petition.
The issue at bar is whether in light of the facts set forth above, petitioner Lourdes A.
Valmonte was validly served with summons. In holding that she had been, the Court
of Appeals stated:1
[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the
aforementioned counsel of Dimalanta to address all communications (evidently
referring to her controversy with her sister Mrs. Dimalanta over the Paco property,
now the subject of the instant case) to her lawyer who happens also to be her
husband. Such directive was made without any qualification just as was her
choice/designation of her husband Atty. Valmonte as her lawyer likewise made
without any qualification or reservation. Any disclaimer therefore on the part of Atty.
Valmonte as to his being his wife's attorney (at least with regard to the dispute visa-vis (sic) the Paco property) would appear to be feeble or trifling, if not incredible.

67
This view is bolstered by Atty. Valmonte's subsequent alleged special appearance
made on behalf of his wife. Whereas Mrs. Valmonte had manifestly authorized her
husband to serve as her lawyer relative to her dispute with her sister over the Paco
property and to receive all communications regarding the same and subsequently to
appear on her behalf by way of a so-called special appearance, she would
nonetheless now insist that the same husband would nonetheless had absolutely no
authority to receive summons on her behalf. In effect, she is asserting that
representation by her lawyer (who is also her husband) as far as the Paco property
controversy is concerned, should only be made by him when such representation
would be favorable to her but not otherwise. It would obviously be inequitable for
this Court to allow private respondent Lourdes A. Valmonte to hold that her husband
has the authority to represent her when an advantage is to be obtained by her and
to deny such authority when it would turn out to be her disadvantage. If this be
allowed, Our Rules of Court, instead of being an instrument to promote justice would
be made use of to thwart or frustrate the same.
xxx

xxx

xxx

Turning to another point, it would not do for Us to overlook the fact that the
disputed summons was served not upon just an ordinary lawyer of private
respondent Lourdes A. Valmonte, but upon her lawyer husband. But that is
not all, the same lawyer/husband happens to be also her co-defendant in the
instant case which involves real property which, according to her
lawyer/husband/co-defendant, belongs to the conjugal partnership of the
defendants (the spouses Valmonte). It is highly inconceivable and certainly it
would be contrary to human nature for the lawyer/husband/co-defendant to
keep to himself the fact that they (the spouses Valmonte) had been sued with
regard to a property which, he claims to be conjugal. Parenthetically, there is
nothing in the records of the case before Us regarding any manifestation by
private respondent Lourdes A. Valmonte about her lack of knowledge about
the case instituted against her and her lawyer/husband/co-defendant by her
sister Rosita. . . .
PREMISES CONSIDERED, the instant petition for certiorari, prohibition
and mandamus is given due course. This Court hereby Resolves to nullify the
orders of the court a quo dated July 3, 1992 and September 23, 1992 and
further declares private respondent Lourdes Arreola Valmonte as having been
properly served with summons.
Petitioners assail the aforequoted decision, alleging that the Court of Appeals erred
(1) in refusing to apply the provisions of Rule 14, 17 of the Revised Rules of Court
and applying instead Rule 14, 8 when the fact is that petitioner Lourdes A.
Valmonte is a nonresident defendant; and (2) because even if Rule 14, 8 is the
applicable provision, there was no valid substituted service as there was no strict
compliance with the requirement by leaving a copy of the summons and complaint
with petitioner Alfredo D. Valmonte. Private respondent, upon the other hand,
asserts that petitioners are invoking a technicality and that strict adherence to the
rules would only result in a useless ceremony.
We hold that there was no valid service of process on Lourdes A. Valmonte.
To provide perspective, it will be helpful to determine first the nature of the action
filed against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private
respondent, whether it is an action in personam, in rem or quasi in rem. This is

68
because the rules on service of summons embodied in Rule 14 apply according to
whether an action is one or the other of these actions.
In an action in personam, personal service of summons or, if this is not possible and
he cannot be personally served, substituted service, as provided in Rule 14, 7-8 2 is
essential for the acquisition by the court of jurisdiction over the person of a
defendant who does not voluntarily submit himself to the authority of the court. 3 If
defendant cannot be served with summons because he is temporarily abroad, but
otherwise he is a Philippine resident, service of summons may, by leave of court, be
made by publication.4 Otherwise stated, a resident defendant in an action in
personam, who cannot be personally served with summons, may be summoned
either by means of substituted service in accordance with Rule 14, 8 or by
publication as provided in 17 and 18 of the same Rule. 5
In all of these cases, it should be noted, defendant must be a resident of the
Philippines, otherwise an action in personam cannot be brought because jurisdiction
over his person is essential to make a binding decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction over the
person of the defendant is not essential for giving the court jurisdiction so long as
the court acquires jurisdiction over the res. If the defendant is a nonresident and he
is not found in the country, summons may be served exterritorially in accordance
with Rule 14, 17, which provides:
17. Extraterritorial service. - When the defendant does not reside and is not
found in the Philippines and the action affects the personal status of the
plaintiff or relates to, or the subject of which is, property within the
Philippines, in which the defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in part, in
excluding the defendant from any interest therein, or the property of the
defendant has been attached within the Philippines, service may, by leave of
court, be effected out of the Philippines by personal service as under section
7; or by publication in a newspaper of general circulation in such places and
for such time as the court may order, in which case a copy of the summons
and order of the court shall be sent by registered mail to the last known
address of the defendant, or in any other manner the court may deem
sufficient. Any order granting such leave shall specify a reasonable time,
which shall not be less than sixty (60) days after notice, within which the
defendant must answer..
In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is
that it has jurisdiction over theres, i.e. the personal status of the plaintiff who is
domiciled in the Philippines or the property litigated or attached.
Service of summons in the manner provided in 17 is not for the purpose of vesting
it with jurisdiction but for complying with the requirements of fair play or due
process, so that he 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. 6
Applying the foregoing rules to the case at bar, private respondent's action, which is
for partition and accounting under Rule 69, is in the nature of an action quasi in
rem. Such an action is essentially for the purpose of affecting the defendant's

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interest in a specific property and not to render a judgment against him. As
explained in the leading case of Banco Espaol Filipino v. Palanca :7
[An action quasi in rem is] an action which while not strictly speaking an action in
rem partakes of that nature and is substantially such. . . . The action quasi in
rem differs from the true action in rem in the circumstance that in the former 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. All proceedings
having for their sole object the sale or other disposition of the property of the
defendant, whether by attachment, foreclosure, or other form of remedy, are in a
general way thus designated. The judgment entered in these proceedings is
conclusive only between the parties.
As petitioner Lourdes A. Valmonte is a nonresident who is not found in the
Philippines, service of summons on her must be in accordance with Rule 14, 17.
Such service, to be effective outside the Philippines, must be made either (1) by
personal service; (2) by publication in a newspaper of general circulation in such
places and for such time as the court may order, in which case a copy of the
summons and order of the court should be sent by registered mail to the last known
address of the defendant; or (3) in any other manner which the court may deem
sufficient.
Since in the case at bar, the service of summons upon petitioner Lourdes A.
Valmonte was not done by means of any of the first two modes, the question is
whether the service on her attorney, petitioner Alfredo D. Valmonte, can be justified
under the third mode, namely, "in any . . . manner the court may deem sufficient."
We hold it cannot. This mode of service, like the first two, must be made outside the
Philippines, such as through the Philippine Embassy in the foreign country where the
defendant resides.8 Moreover, there are several reasons why the service of
summons on Atty. Alfredo D. Valmonte cannot be considered a valid service of
summons on petitioner Lourdes A. Valmonte. In the first place, service of summons
on petitioner Alfredo D. Valmonte was not made upon the order of the court as
required by Rule 14, 17 and certainly was not a mode deemed sufficient by the
court which in fact refused to consider the service to be valid and on that basis
declare petitioner Lourdes A. Valmonte in default for her failure to file an answer.
In the second place, service in the attempted manner on petitioner was not made
upon prior leave of the trial court as required also in Rule 14, 17. As provided in
19, such leave must be applied for by motion in writing, supported by affidavit of
the plaintiff or some person on his behalf and setting forth the grounds for the
application.
Finally, and most importantly, because there was no order granting such leave,
petitioner Lourdes A. Valmonte was not given ample time to file her Answer which,
according to the rules, shall be not less than sixty (60) days after notice. It must be
noted that the period to file an Answer in an action against a resident defendant
differs from the period given in an action filed against a nonresident defendant who
is not found in the Philippines. In the former, the period is fifteen (15) days from
service of summons, while in the latter, it is at least sixty (60) days from notice.
Strict compliance with these requirements alone can assure observance of due
process. That is why in one case, 9 although the Court considered publication in the
Philippines of the summons (against the contention that it should be made in the

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foreign state where defendant was residing) sufficient, nonetheless the service was
considered insufficient because no copy of the summons was sent to the last known
correct address in the Philippines..
Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-463
(1975), in which it was held that service of summons upon the defendant's husband
was binding on her. But the ruling in that case is justified because summons were
served upon defendant's husband in their conjugal home in Cebu City and the wife
was only temporarily absent, having gone to Dumaguete City for a vacation. The
action was for collection of a sum of money. In accordance with Rule 14, 8,
substituted service could be made on any person of sufficient discretion in the
dwelling place of the defendant, and certainly defendant's husband, who was there,
was competent to receive the summons on her behalf. In any event, it appears that
defendant in that case submitted to the jurisdiction of the court by instructing her
husband to move for the dissolution of the writ of attachment issued in that case.
On the other hand, in the case of Gemperle v. Schenker, 10 it was held that service
on the wife of a nonresident defendant was found sufficient because the defendant
had appointed his wife as his attorney-in-fact. It was held that although defendant
Paul Schenker was a Swiss citizen and resident of Switzerland, service of summons
upon his wife Helen Schenker who was in the Philippines was sufficient because she
was her husband's representative and attorney-in-fact in a civil case, which he had
earlier filed against William Gemperle. In fact Gemperle's action was for damages
arising from allegedly derogatory statements contained in the complaint filed in the
first case. As this Court said, "[i]n other words, Mrs. Schenker had authority to sue,
and had actually sued, on behalf of her husband, so that she was, also, empowered
to represent him in suits filed against him, particularly in a case, like the one at bar,
which is a consequence of the action brought by her on his behalf" 11 Indeed, if
instead of filing an independent action Gemperle filed a counterclaim in the action
brought by Mr. Schenker against him, there would have been no doubt that the trial
court could have acquired jurisdiction over Mr. Schenker through his agent and
attorney-in-fact, Mrs. Schenker.
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint her
husband as her attorney-in-fact. Although she wrote private res- pondent's attorney
that "all communications" intended for her should be addressed to her husband who
is also her lawyer at the latter's address in Manila, no power of attorney to receive
summons for her can be inferred therefrom. In fact the letter was written seven
months before the filing of this case below, and it appears that it was written in
connection with the negotiations between her and her sister, respondent Rosita
Dimalanta, concerning the partition of the property in question. As is usual in
negotiations of this kind, the exchange of correspondence was carried on by counsel
for the parties. But the authority given to petitioner's husband in these negotiations
certainly cannot be construed as also including an authority to represent her in any
litigation.
For the foregoing reasons, we hold that there was no valid service on petitioner
Lourdes A. Valmonte in this case.
WHEREFORE, the decision appealed from is REVERSED and the orders dated July 3,
1992 and September 23, 1992 of the Regional Trial Court of Manila, Branch 48 are
REINSTATED.
SO ORDERED.

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