MERCANTILE INSURANCE v. YI

 

 MERCANTILE INSURANCE CO., INC. v. SARA YI, also known as SARAH YI

G.R. No. 234501, March 18, 2019

FACTS:

FAM MART Co., Inc. (FAM MART), owned and operated by Young C. Chun and Young H. Chun, (the Chuns) was secured by an insurance policy issued by petitioner Mercantile Insurance Company, Inc. (MIC), through its California surplus lines broker, Great Republic Insurance Agency (GRI).

1991- Yi was involved in an accident while within the premises of FAM MART, a business establishment located at El Cajon, California, USA. As a result of which, her right little finger was severed.

A memorandum from MIC, acknowledging that there is a valid policy in favor of FAM MART and that a contract existed between FAM MART and MIC, was issued.

1992 - (Civil Case No. 649705) Yi filed a personal injury action against the Chuns. Upon service of summons, FAM MART tendered the claim to its insurer, MIC.

OCT 1993 - the Superior Court of the State of California for the County of San Diego (Superior Court of California) issued a judgment in favor of Yi in the amount of $350,000.00.

NOV 1993 – (Civil Case No. 670417) Yi, together with the Chuns, filed a complaint for breach of insurance contract, breach of covenant of good faith and fair dealing, fraud and negligent misrepresentation and negligence against MIC. However, despite service of summons, MIC did not file any pleading.

1995 – Superior Court of California on September 22, 1995, thus:

Compensatory damages in favor of the Plaintiffs = $350,000.00

 

General Damages For Emotional Distress in favor of YOUNG CHUN arising out of Defendant MIC and GRI's breach of the covenant of good faith and fair dealing for failure to defend and indemnify Plaintiff YOUNG C. CHUN in the underlying action in the amount of 100,000.

 

Punitive damages ­in favor of the Plaintiffs = $150,000

 

Attorney’s fees and damages ­= $8,000

 

Plaintiff shall recover premiums from MIC and GRI $2,001.35

Said Judgment became final and executory as no appeal was filed by any of the parties.

2005 - a Notice of Renewal of Judgment was issued by the Superior Court of California allowing Yi to enforce the Judgment for an additional period of 10 years from the date of Application for Renewal of Judgment was filed. Per Attachment to the Renewal of Judgment, the adjusted amount inclusive of interest owed by MIC to Yi and the Chuns amounted to $1,552,664.67.

As Yi was not able to enforce the Judgment in California, she filed an action for enforcement of judgment before the RTC.

MIC filed an Answer, denying the claims of Yi and its alleged liability.

It averred that it has no privity of contract with Yi and FAM MART as it was not aware of any case of such nature considering that its operations are within the Philippines.

2013 – RTC dismissed the case for lack of merit.

RTC maintained that Yi was not able to prove her claim because the insurance policy was not presented in evidence and that it has no jurisdiction over MIC as the latter was not properly served with summons.

 

Case No. 649705 - The execution with respect to said judgment is denied because Sara Yi had compromised with the defendant the award in said judgment, thus[,] making it appear that there was satisfaction of judgment with respect to foreign judgment. Likewise, the defendant is not within the jurisdiction of the Philippines and was not served with Summons as the court has no jurisdiction over foreign entity with no resident agent in the Philippines.

 

Civil Case No. 670417 - The plaintiff was not able to prove with sufficient evidence that she is entitled to her claim. She was not able to show even the existence of the insurer policy which can be the basis of the liability/ies of the defendant and how defendant had been related to its sub-agent or insurance companies abroad in relation to the company and officers involved in such transaction. Failure to show such chain of transaction among the parties alleged [sic] insurance companies; its relationship with defendant company and her entitlement to the claims allegedly covered by a policy emanating from the defendant and/or its officers agents is fatal to her claims. (Failure of the plaintiff to show her insurable interest and how is the defendant liable to her). She was not even able to identify the policy that covers her insurable interests.

Yi filed an appeal via Rule 44 of the Rules of Court before the CA.

2017 - The CA reversed and set aside the ruling of the RTC and ordered MIC to pay the amount adjudged in the judgment rendered by the Superior Court of California. The CA maintained that in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself. Thus, it is not imperative on the part of Yi to provide proof of the insurance policy and her insurable interest.

 

ISSUE:

Whether or not the judgment issued by the Superior Court of California may be enforced in our jurisdiction.

 

RULING:

Yes, the judgment issued by the Superior Court of California may be enforced in our jurisdiction

In our jurisdiction, a judgment or final order of a foreign tribunal creates a right of action, and its non-satisfaction is the cause of action by which a suit can be brought upon for its enforcement.

Section 48, Rule 39 of the Rules of Court explicitly provides for the conditions for the recognition and enforcement of a foreign judgment, to wit:

 

SEC. 48. Effect of foreign judgments or final orders. — The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows:

 

(a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing; and

 

(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title.

 

In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

The causes of action arising from the enforcement of foreign judgment and that arising from the allegations that gave rise to said foreign judgment differs, such that the former stems from the foreign judgment itself, whereas the latter stems from the right in favor of the plaintiff and its violation by the defendant's act or omission. The evidence to be presented likewise differs. The case of Mijares v. Rañada illustrates in this wise:

 

There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment. They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives that are sought to be vindicated.

COMPLAINT FOR DAMAGES	COMPLAINT FOR ENFORCEMENT OF FOREIGN JUDGMENT
the cause of action emanates from the violation of the right of the complainant through the act or omission of the respondent	the cause of action derives not from the tortious act but from the foreign judgment itself
the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed	the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds.

Guided by the foregoing, what is indispensable in an action for the enforcement of a foreign judgment is the presentation of the foreign judgment itself as it comprises both the evidence and the derivation of the cause of action. Further, the above-cited rule provides that a foreign judgment against a person, i.e., an action in personam, as in this case, is merely a presumptive evidence of rights between the parties. Such judgment may be attacked by proving lack of jurisdiction, lack of notice to the party, collusion, fraud, or clear mistake of fact or law. Thus, contrary to MIC's position, the burden is upon MIC to prove its allegations against the validity of the foreign judgment sought to be enforced.

In disputing the foreign judgment, MIC argues that there was want of notice to it as there was no proper service of summons in the trial before the California court.

On this note, we highlight that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum, which is the State of California in this case. This Court is well aware that foreign laws are not a matter of judicial notice. Like any other fact, they must be alleged and proven.

Section 24, Rule 132 of the Rules of Court provides that the records of the official acts of a sovereign authority may be evidenced by an official publication thereof or by a copy attested by its legal custodian, his deputy, and accompanied with a certificate that such officer has a custody, in case the record is not kept in the Philippines. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of the embassy or legation, consul general, consul, vice-consul, or consular agent or by 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.

An exception to this rule, however, is recognized in the cases of Willamette Iron & Steel Works v. Muzzal, and Manufacturers Hanover Trust Co. v. Guerrero, wherein we emphatically ruled that the testimony under oath of an attorney-at-law of a foreign state, who quoted verbatim the applicable law and who stated that the same was in force at the time the obligations were contracted, was sufficient evidence to establish the existence of said law. In Manufacturers Hanover Trust, we stated that it is necessary to state the specific law on which the claim was based.

In this case, Atty. Robert G. Dyer (Atty. Dyer), member of the bar of the State of California for more than 30 years, testified as to the applicable law related to summons. In detail, he stated the exact pertinent provision under the California Code of Civil Procedure, to wit:

Section 415. A summons may be served on a person outside this state in any manner provided by this article or by sending a copy of the summons and of the complaint to the person to be served by first-class mail, postage prepaid, requiring a return receipt. Service of a summons by this form of mail is deemed complete on the 10th day after such mailing.

Indeed, pursuant to the above-proven law in the State of California, the service of summons by mail to MIC, an entity outside its state, was valid. As such law was sufficiently alleged and proven, it is beyond the province of this Court's authority to pass upon the issue as to the factual circumstances relating to the proper service of summons upon MIC in the case before the State of California.

It is also significant to note that MIC impeaches the credibility of Atty. Dyer as an expert witness for the first time on appeal.

MIC also contends that failure of Yi to implead the Chuns, who are indispensable parties, renders all actions of the court null and void.

We find that Yi need not implead her co-plaintiffs so as to be afforded the relief prayed for.

As aforementioned, the main consideration in an action for enforcement of a foreign judgment is to put such judgment into force. Verily, direct involvement or being the subject of the foreign judgment is sufficient to clothe a party with the requisite interest to institute an action before our courts for the recognition of the foreign judgment.

Here, it is apparent that the Chuns are not indispensable parties, whose inclusion is determinative of the final outcome of the case. Their legal presence will not render the resolution of the action incomplete and ineffective for there was a final judgment already rendered by the foreign court. As previously mentioned, what our courts will do is to recognize the foreign judgment as a fact37 and enforce the same as such foreign judgment creates a right of action in favor of Yi. Relevantly, MIC's failure to satisfy the terms of the foreign judgment engenders a cause of action as to Yi, who becomes clothed with requisite interest to institute an action for enforcement.

WHEREFORE, premises considered, the instant petition is hereby DENIED. Accordingly, the Decision dated May 19, 2017 and the Resolution dated August 25, 2017 of the Court of Appeals in CA-G.R. CV No. 102408 are AFFIRMED.