THE DIAL CORPORATION v. SORIANO

 THE DIAL CORPORATION, C & T REFINERY INC., NALIN Sdn. Bhb. BERISFORD COMMODITIES, LTD., and PACIFIC MOLASSES COMPANY, petitioners vs. THE HON. CLEMENTE M. SORIANO, Presiding Judge, Regional Trial Court, Branch 3, MANILA PUBLIC RESPONDENT and IMPERIAL VEGETABLE OIL COMPANY, INC. IMPERIAL VEGETABLE OIL COMPANY, INC., respondent

FACTS:

The petitioners are foreign corporations organized and existing under the laws of the United States, the United Kingdom, and Malaysia, are not domiciled in the Philippines, nor do they have officers or agents, place of business, or property in the Philippines; they are not licensed to engage, and are not engaged, in business here.

The respondent Imperial Vegetable Oil Company, Inc. ("IVO") is a Philippine corporation. Its president Dominador Monteverde, had entered into several contracts for the delivery of coconut oil to the petitioners. Those contracts stipulate that any dispute between the parties will be settled through arbitration under the rules of either the Federation of Oils Seeds and Fats Association (FOSFA) or the National Institute of Oil Seed Products (NIOP). Because IVO defaulted under the contracts, the petitioners and 15 others, initiated arbitration proceedings abroad, and some have already obtained arbitration awards against IVO.

On April 8, 1987, IVO filed a complaint for injunction and damages against 19 foreign coconut oil buyers including the petitioners, with whom its president, Dominador Monteverde, had entered into contracts for the delivery of coconut oil. 

IVO repudiated Monteverde's contracts on the grounds that:

●     they were mere "paper trading in futures" as no actual delivery of the coconut oil was allegedly intended by the parties

●     that the Board of Directors of IVO convened in a special meeting on and removed Dominador Monteverde from his position and disowned the latter’s allegedly illegal and unauthorized acts;

●     that the defendants have allegedly "harassed" IVO to comply with Dominador's contracts and to come to a settlement with them.

IVO prayed for the issuance of a TRO or writ of preliminary injunction to stop the defendants from harassing IVO with their insistent demands to recognize the contracts entered into by Dominador Monteverde and from portraying the IVO as one that defaults on its contracts and obligations and has fallen into bad times and from interfering with IVO's normal conduct of business. IVO also prayed that the defendants pay it moral damages of P5 million, actual damages of P10 million, exemplary damages of P5 million, attorney's fees of P1 million, P3,000 per appearance of counsel, and litigation expenses.

Pursuant to an order, the petitioners were served with summons and copy of the complaint by DHL courier service.

Petitioners filed motions to dismiss the complaint against them on the ground that the extraterritorial service of summons to them was improper. Hence, the court did not acquire jurisdiction over them.

RTC: denied petitioners’ motions to dismiss

ISSUE:

Whether or not the extraterritorial service of summons to the petitioners was proper.

RULING:

No, the extraterritorial service of summons to the petitioners was not proper.

Only in four (4) instances is extraterritorial service of summons proper, namely:

(1)   when the action affects the personal status of the plaintiffs;

(2)   when the action 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;

(3)   when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines;

(4)   when the defendant nonresident's property has been attached within the Philippines"

The complaint in this case does not involve the personal status of the plaintiff, nor any property in the Philippines in which the defendants have or claim an interest, or which the plaintiff has attached. The action is purely an action for injunction to restrain the defendants from enforcing against IVO ("abusing and harassing") its contracts for the delivery of coconut oil to the defendants, and to recover from the defendants P21 million in damages for such "harassment." It is clearly a personal action as well as an action in personam, not an action in rem or quasi in rem.

An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself, instead of against the person." (Hernandez vs. Rural Bank of Lucena, Inc., 76 SCRA 85).

A personal action is one brought for the recovery of personal property, for the enforcement of some contract or recovery of damages for its breach, or for the recovery of damages for the commission of an injury to the person or property (Hernandez vs. Development Bank of the Philippines, 71 SCRA 292).

As it involves a personal action, personal or substituted service of summons on the defendants, not extraterritorial service, is necessary to confer jurisdiction on the court.

In an action for injunction, extraterritorial service of summons and complaint upon the non-resident defendants cannot subject them to the processes of the regional trial courts which are powerless to reach them outside the region over which they exercise their authority (Sec. 3-a, Interim Rules of Court; Sec. 21, subpar. 1, B.P. Blg. 129). Extraterritorial service of summons will not confer on the court jurisdiction or power to compel them to obey its orders.

Neither may the court by extraterritorial service of summons acquire jurisdiction to render and enforce a money judgment against a non-resident defendant who has no property in the Philippines for "the fundamental rule is that jurisdiction in personam over non-residents, so as to sustain a money judgment, must be based upon personal service within the state which renders the judgment" (Boudard vs. Tait , 67 Phil. 170, 174).

Respondents' contention that "the action below is related to property within the Philippines, specifically contractual rights that petitioners are enforcing against IVO" is specious for the "contractual rights" of the petitioners are not property found in the Philippines for the petitioners have not filed an action in the local courts to enforce said rights. They have not submitted to the jurisdiction of our courts.

The respondent court's finding that, by filing motions to dismiss, the petitioners hypothetically admitted the allegations of the complaint that they are doing business in the Philippines without any license, and that they may be served with summons and other court processes through their agents or representatives enumerated in paragraph 2 of the complaint, is contradicted by its order authorizing IVO to summon them by extraterritorial service, a mode of service which is resorted to when the defendant is not found in the Philippines, does not transact business here, and has no resident agent on whom the summons may be served.

WHEREFORE, We hold that the extraterritorial service of summons on the petitioners was improper, hence null and void.

The petition for certiorari is granted. The orders dated April 24, 1987 (Annex B) and December 15, 1987 (Annex II) of the respondent Judge are hereby set aside. The complaint in Civil Case No. 87-40166 is hereby dismissed as against the petitioners for failure of the court to acquire jurisdiction over them.