On February 7, 1990, Quisumbing opposed SLDC's motion for intervention.
He
[G.R. No. 106194. January 28, 1997]
SANTIAGO LAND DEVELOPMENT CORPORATION, petitioner, vs. The
HONORABLE COURT OF APPEALS and the HEIRS OF NORBERTO J.
QUISUMBING, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals,
annulling certain orders issued by the Regional Trial Court of Makati, Branch 62 in
Civil Case No. 10513, entitled Norberto J. Quisumbing v. Philippine National Bank, to
wit:
(1) Order, dated March 30, 1990, granting petitioner Santiago Land
Development Corporation's motion for intervention and order admitting its
answer in intervention;
(2) Order, dated March 21, 1991, denying private respondent Quisumbing's
motion to quash or disallow interrogatories and
(3) Order, dated July 30, 1991, denying Quisumbing's motion for
reconsideration.
The facts are as follows:
Norberto J. Quisumbing brought an action against the Philippine National Bank
to enforce an alleged right to redeem certain real properties foreclosed by the Philippine
National Bank.Quisumbing brought the suit as assignee of the mortgagor, Komatsu
Industries (Phils.), Incorporated.
On November 21, 1989, with notice of the pending civil action,[1] petitioner
Santiago Land Development Corporation purchased from PNB one of the properties
subject of the litigation, situated along Pasong Tamo Extension in Makati, for P90
Million.[2]
On December 11, 1989, petitioner SLDC filed a motion to intervene, with its
answer in intervention attached, alleging that it was the transferee pendente lite of the
property and that any adverse ruling or decision which might be rendered against PNB
would necessarily affect it (petitioner).[3] In its attached answer, SLDC, aside from
adopting the answer filed by PNB, raised as affirmative defenses the trial court's lack of
jurisdiction based on the alleged failure of plaintiff Quisumbing to pay the docket fee
and Quisumbing's alleged lack of cause of action against the PNB due to the invalidity
of the deed of assignment to him.[4]
1
argued that SLDC's interest in the subject property was a mere contingency or
expectancy, which was dependent on any judgment which might be rendered for or
against PNB as transferor. He further argued that the allowance of SLDC's motion
would only make the proceedings complicated, expensive and interminable.[5]
On March 30, 1990, the lower court issued an order granting petitioner's motion
for intervention and admitting its answer in intervention. The court also directed the
substitution of heirs in view of Norberto J. Quisumbing's demise and submitted for
resolution PNB's motion to dismiss.[6]
Petitioner SLDC, as intervenor, then served interrogatories upon private
respondents and moved for the production, inspection and copying of certain
documents.[7] SLDC wanted to know whether there were documents to show that a
consideration had been paid for the assignment of the right of redemption; if so,
whether payment was made in cash or by check; and, if it was by check, in what
banks the checking accounts were kept and whether the checks were still in its
custody or possession.
Private respondents filed a motion to quash or disallow the interrogatories, which
petitioner opposed. Subsequently, private respondents filed a reply to which petitioner
SLDC responded by filing a rejoinder.[8]
On March 21, 1991, the trial court denied private respondents' motion to quash
or disallow interrogatories and instead granted petitioner SLDC's motion for the
production, inspection and copying of certain documents.[9] Private respondents moved
for a reconsideration, but their motion was denied by the lower court in its order of
July 30, 1991. Private respondents therefore filed a petition for certiorari with the
Court of Appeals which rendered the decision, now the subject of this review, setting
aside the orders dated March 30, 1990, March 21, 1991, and July 30, 1991 of the trial
court.
In its petition before the Court, SLDC contends that the Court of Appeals erred
thus:
[1] THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION,
EXCEEDED ITS JURISDICTION AND/OR WAS PATENTLY IN ERROR IN TAKING
COGNIZANCE OF AND RULING UPON THE FIRST ISSUE RAISED BY PRIVATE
RESPONDENTS IN CA-G.R. SP NO. 25826 WHEN THIS ISSUE WAS NOT EVEN
RAISED BY THEM BEFORE THE TRIAL COURT.
[2] THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION
EXCEEDED ITS JURISDICTION AND/OR WAS PATENTLY IN ERROR IN TAKING
COGNIZANCE OF THE PETITION RAISED BY PRIVATE RESPONDENTS IN CA-
G.R. SP NO. 25826 SINCE THEY DID NOT RAISE ANY JURISDICTIONAL ERROR
THEREIN BUT ONLY RAISED QUESTIONS AS TO PROCEDURAL ORDERS
ISSUED BY THE TRIAL COURT IN THE RIGHTFUL EXERCISE OF ITS
JURISDICTION AND DISCRETION.
[3] EVEN IF THE COURT OF APPEALS WAS AUTHORIZED TO PASS UPON
THE PROCEDURAL QUESTION RAISED BY PRIVATE RESPONDENTS IN CA-G.R.
SP NO. 25826, IT ERRED IN BARRING THE TRIAL COURT, IN THE SOUND
EXERCISE OF ITS SOUND DISCRETION, FROM ALLOWING PETITIONER TO
INTERVENE IN ONE OF THE CLASSIC OR RECOGNIZED INSTANCES OF
INTERVENTION IN THE CIVIL ACTION UNDER SECTION 2 OF RULE 12 OF THE
RULES OF COURT DESPITE COMPLIANCE WITH THE STANDARDS FOR
INTERVENTION PRESCRIBED THEREIN.
[4] THE COURT OF APPEALS DENIED PETITIONER OF THE RIGHT TO
GENUINELY OR EFFECTIVELY DEFEND ITSELF IN THE CIVIL ACTION DESPITE
ITS HAVING ACQUIRED A REAL AND SUBSTANTIVE INTEREST IN THE
SUBJECT MATTER OF THE CIVIL ACTION.
[5] PRIVATE RESPONDENTS FAILED TO OBJECT TO THE
INTERROGATORIES IN THE MANNER PRESCRIBED BY THE RULES OF COURT
AND THEY WERE THEREFORE BARRED FROM RAISING THEIR OBJECTIONS
TO THE INTERROGATORIES.
[6] THE TRIAL COURT CORRECTLY DENIED PRIVATE RESPONDENTS'
MOTION TO QUASH PETITIONER'S INTERROGATORIES.[10]
Petitioner's contentions are without merit.
Petitioner's first contention is without basis in fact. The fact is that the issue
regarding the propriety of petitioner's motion for intervention was raised by private
respondents before the trial court in their opposition to said motion.[11] Moreover,
petitioner SLDC is estopped from questioning the appellate court's ruling on this issue
since petitioner did not object to its consideration by the court in its comment on the
petition filed in that court.[12]
Nor is it true that private respondents' petition for certiorari in the Court of
Appeals did not raise a jurisdictional question. The petition specifically charged the
RTC with gravely abusing its discretion in issuing its questioned orders, in granting
petitioner's motion for intervention and in denying private respondents' motion to
quash or disallow interrogatories. Clearly, the Court of Appeals correctly took
cognizance of the issue regarding the propriety of petitioner SLDC's motion for
intervention.
This brings us to the main question raised in the third and fourth assignments of
errors, namely, whether petitioner, as transferee pendente lite of the property in
litigation has a right to intervene.
Rule 12, 2 of the Rules of Court provides:
Sec. 2. Intervention. A person may, before or during a trial be permitted by the court, in
its discretion, to intervene in an action, if he has legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both, or when
he is so situated as to be adversely affected by a distribution or other disposition of
property in the custody of the court or of an officer thereof.
The question is whether this provision applies to petitioner in view of Rule 3, 20
governing transfers of interest pendente lite such as was alleged in the trial court by
petitioner. This provision reads:
Sec. 20. Transfer of interest. In case of any transfer of interest, the action may be
continued by or against the original party, unless the court upon motion directs the
person to whom the interest is transferred to be substituted in the action or joined
with the original party.
2
In applying the rule on transfer of interest pendente lite (Rule 3, 20) rather than
the rule on intervention (Rule 12, 2), the Court of Appeals stated:
While it may be that respondent SLDC has a legal interest in the subject matter of the
litigation, its interest as transferee pendente lite is different from that of an
intervenor. Section 2 of Rule 12 refers to all other persons or entities whose legal
interests stand to be affected by a litigation, but it does not cover a transferee pendente
lite because such transferee is already specifically governed by Section 20 of Rule 3.
Otherwise, Section 20 of Rule 3 on transferees pendente lite would be rendered
ineffectual and useless. Since it specifically covers transferees pendente lite, any such
transferee cannot just disregard said provision and instead, opt to participate as an
intervenor when it is more convenient for it to do so. Indeed, there has never been a
rule, authority or decision holding that a transferee pendente lite has the option to
avail of either Rule 3, Section 20 or Rule 12, Section 2.
. . . It has been consistently held that a transferee pendente lite stands in exactly the
same position as its predecessor-in-interest, that is, the original defendant. . . .
However, should the transferee pendente litechoose to participate in the proceedings, it
can only do so as a substituted defendant or as a joint party-defendant. The
transferee pendente lite is a proper but not an indispensable party as it would in any
event be bound by the judgment against his predecessor-in-interest. This would be
true even if respondent SLDC is not formally included as a party-defendant through an
amendment of the complaint. As such the transferee pendente lite is bound by the
proceedings already had in the case before the property was transferred to it (Jocson
vs. CA, 183 SCRA 589, citing Fetalino vs. Sanz, 44 Phil. 691; Associacion de
Agricultores de Talisay Silay, Inc. vs. Talisay Silay Milling Co., Inc., 88 SCRA 294)
Petitioner asserts that Rule 12, 2 and Rule 3, 20 can be applied interchangeably
and that the Court of Appeals is in error in its insistence on the application of Rule 3,
20 solely.Petitioner thus overlooks a substantial difference in the nature and
consequences of the two rules. The purpose of Rule 12, 2 on intervention is to enable a
stranger to an action to become a party to protect his interest and the court
incidentally to settle all conflicting claims.[13] On the other hand, the purpose of Rule 3,
20 is to provide for the substitution of the transferee pendente lite precisely because he
is not a stranger but a successor-in-interest of the transferor, who is a party to the
action. As such, a transferee's title to the property is subject to the incidents and
results of the pending litigation and is in no better position than the vendor in whose
shoes he now stands.[14] As held in Fetalino v. Sanz:[15]
As such, he stands exactly in the shoes of his predecessor in interest, the original
defendant, and is bound by the proceedings had in the case before the property was
transferred to him. He is a proper, but not an indispensable, party as he would, in any
event, have been bound by the judgment against his predecessor.
How then can it legally be possible for a transferee pendente lite to still intervene
when, for all intents and purposes, the law already considers him joined or substituted
in the pending action, commencing at the exact moment when the transfer of interest
is perfected between the original party-transferor and the transferee pendente lite? And
this even if the transferee is not formally joined as a party in the action. On the other
hand, one who intervenes has a choice not to intervene and thus not to be concluded
by any judgment that may be rendered between the original parties to the action.
 Because the transferee pendente lite simply takes the place of the transferor, he
is barred from presenting a new or different claim. The appellate court therefore
properly refused to pass upon petitioner's attempt to inquire into the consideration
paid for the assignment of the right of redemption to the late Norberto J. Quisumbing,
as well as petitioner's claim that the transfer of interest to Quisumbing was made in
violation of Art. 1491(5) of the Civil Code, prohibiting attorneys from acquiring property
or interest which is the object of the litigation in which they take part as such. This
matter was never alleged by PNB in its answer to Quisumbing's complaint.
Since petitioner is a transferee pendente lite with notice of the pending litigation
between Quisumbing and PNB, petitioner stands exactly in the shoes of defendant PNB
and is bound by any judgment or decree which may be rendered for or against
PNB.[16] Under Rule 3, 20, the action may be continued against PNB, the original
defendant. In the alternative although it was not essential that the transferee be
substituted and the latter insist on such substitution the trial court could have
directed that petitioner be either substituted as party-defendant or joined with
defendant PNB.[17]
But petitioner could not be allowed to intervene for the reason already stated that
the conditions under which one may be allowed to intervene are significantly far
different from the conditions under which a transferee pendente lite is substituted in
place of the original party. For the fact is that an intervenor can withdraw and refuse
to be bound by any decision that may be rendered in the case but the fortunes of a
transferee pendente lite, although not formally impleaded as a party, are bound up
with those of his transferor.
With respect to the fifth and sixth assignments of errors, suffice it to say that
because petitioner did not have a right to intervene, it did not have the right to file
interrogatories or seek the production of documents by private respondents, either.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 182970 July 23, 2014
EMILIANO S. SAMSON, Petitioner,
vs.
SPOUSES JOSE and GUILLERMINA GABOR, TANAY RURAL BANK, INC., and
REGISTER OF DEEDS OF MORONG, RIZAL, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Order1 dated August 18, 2006 of the
Regional Trial Court (RTC) of Pasig City in Civil Case No. 70750 and Decision2 dated
May 9, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 88335.
The antecedents of the case are as follows:
3
Respondent spouses Jose and Guillermina Gabor are the registered owners of a parcel
of land with an area of Sixty-One Thousand Eighty-Five (61,085) square meters, more
or less, situated at Barrio Mapunso, Tanay, Rizal Province, and covered by Transfer
Certificate of Title (TCT) No. M-25565 issued by the Register of Deeds of Morong.3
On November 14, 1985, the Spouses Gabor executed a Deed of Assignment
transferring Twenty Thousand Six Hundred Thirty-One (20,631) square meters
undivided portion of the aforementioned parcel of land in favor of petitioner Emiliano
S. Samson as attorney’s fees in payment for the services rendered by the latter for the
former.
On October 22, 1987, petitioner Samson executed a Deed of Assignment transferring
the same undivided portion in favor of Ma. Remedios P. Ramos. Upon learning of the
sale, respondent spouses filed an action for legal redemption with the RTC of Tanay,
Rizal. Immediately thereafter, petitioner Samson and Ramos executed an Agreement of
Rescission revoking the transfer of the undivided portion.4 On July 25, 1989, the RTC
dismissed the suit for legal redemption. On appeal, however, the CA, in CA-G.R. CV
No. 25530, reversed the decision of the RTC and upheld the Spouses Gabor’s right of
legal redemption. No further appeals were pursued.
Instead, during the pendency of CA-G.R. CV No. 25530, petitioner Samson filed an
action for Partition of Real Property and Damages5 against respondent spouses with
the RTC of Morong, Rizal, which dismissed the same on the ground that the finalityof
CA-G.R. CV No. 25530 effectively barred the action for partition.6 Agreeing with the
RTC, the CA, in CA-G.R. CV No. 38373,7 upheld the lower court’s decision, in the
following wise:
The appeal is not meritorious. In view of the final and executory decision in CA-G.R.
No. 25530 upholding the right of defendantsappellees to exercise their right oflegal
redemption over the 20,631 square meters involved, plaintiff-appellant is devoid of any
legal right or personality to ask for partition of [the] subject property formerly owned in
common. Having assigned his undivided share therein to Ma. Remedios P. Ramos,
plaintiff-appellant ceased to be a co-owner. By exercising their right of legal
redemption, which thisCourt upheld by final judgment, defendants-appellees now own
the entire area covered by TCT No. M-25565.
The subsequent execution of the Agreement of Rescission by plaintiff-appellant and
Ma. Remedios P. Ramos did not divest defendantsappellees of the right of legal
redemption vested in them upon the consummation of the assignment plaintiff-
appellant made to Ma. Remedios P. Ramos. x x x
When the pending appeal in CA-G.R. No. CV 25530 was decided and judgment therein
became final and executory, the lower court had to follow what was adjudged by this
Court,and while plaintiff-appellant was not a party in the said Civil CaseNo. 125-T and
CA-G.R. CV No. 25530, plaintiff-appellant is bound by the judgment therein because
he was fully aware of the pendency of such cases. Asa matter of fact, he testified in
Civil Case No. 125-T. Therefore, the Agreement of Rescission he later entered into with
Ma. Remedios P. Ramos during the pendency of the said case, did not deprive
defendants-appellees of their right of legal redemption. The supposed re-acquisition by
plaintiff-appellant of his undivided share in question, having been effected pendente
lite, the same was subject to the outcome of the case.8
Petitioner Samson then appealed to this Court via petition for review on certiorari,but
the same was dismissed in a minute resolution9 dated June 8, 1994 for failure to
submit an affidavit of service. This court further denied Samson’s motion for
reconsideration with finality in its Resolution10 dated July 25, 1994 for having no
compelling reason to warrant the reconsideration sought.
On April 4, 2006, petitioner Samson filed a Complaint11 before the RTC of Pasig City
for Recovery of Property or its Value against respondent spouses, Tanay Rural Bank,
Inc., and the Register of Deeds of Morong, Rizal, claiming that he had been payinghis
one-third (1/3) share of realty taxes covering the subject portion of land for the years
2002 to 2004. In 2005, however, his payment was rejected by the Municipal Treasurer
of Tanay, Rizal, at such time he discovered that respondent spouses had already
mortgaged the entire property in favor of respondent Bank back in November 2002.
On August 18, 2006, the RTC of Pasig City dismissed the complaint on the grounds of
improper venue, res judicata, and that the complaint states no cause of action.12 It
held that the suit is a real action which should be filed in the RTC of Morong, Rizal,
where the property subject of the case is situated. Moreover, the lower court pointed
out that as early as 1991, herein petitioner had already filed a Complaint for Partition
of Real Property and Damages involving the same subject property against the same
parties, which complaint was already dismissed by this Court with finality. Thus, the
principle of res judicataapplies. Finally, the trial court held that petitioner’s complaint
states no cause ofaction against herein respondent Bank as it does not allege any
details as to the liability or any violation of petitioner’s rights.
Claiming that the lower court erred in dismissing his complaint, petitioner Samson
filed an appeal with the CA, which likewise dismissed the same for having been
improperly brought before it. The appellate court ruled in its Decision13dated May 9,
2008 that since petitioner’s appeal raised only issues purely of law, it should be
dismissed outright.
Undaunted, petitioner filed the instant petition invoking the following arguments:
I.
THE COURT OF APPEALS HAS JURISDICTION OVER PETITIONER’S APPEAL
FROM THE ORDER OF THE REGIONAL TRIAL COURT OF PASIG CITY.
II.
SINCE THE PETITIONER’S COMPLAINT IS BOTH REAL AND PERSONAL, IT
WAS PROPERLY FILED WITH THE REGIONAL TRIAL COURT OF PASIG CITY.
III.
PETITIONER’S COMPLAINT STATES A CAUSE OF ACTION.
IV.
4
PETITIONER’S COMPLAINT IS NOT BARRED BY RES JUDICATA.
The petition lacks merit.
We agree with the CA’s decision to dismiss petitioner’s appeal, pursuant to Section 2,
Rule 50 of the 1997 Rules of Civil Procedure which mandates the dismissal of an
appeal that raises only questions of law.14 The appeal of petitioner, as correctly held by
the CA, essentially raised issues purely of law.
Time and again, this Court has distinguished cases involving pure questions of law
from those of pure questions of fact in the following manner:
A question of fact exists when a doubt or difference arises as to the truth or falsity of
alleged facts. If the query requires a re-evaluation of the credibility of witnesses or the
existence or relevance of surrounding circumstances and their relation to each other,
the issue in that query is factual. On the other hand, there is a question of law when
the doubt or difference arises as to what the law is on certain state of facts and which
does not call for an existence of the probative value of the evidence presented by the
parties-litigants. In a case involving a question of law, the resolution of the issue rests
solely on what the law provides on the given set of circumstances. Ordinarily, the
determination of whether an appeal involves only questions of law or both questions of
law and fact is best left to the appellate court.All doubts as to the correctness of the
conclusions of the appellate court will be resolved in favor of the CA unless it commits
an error or commits a grave abuse of discretion.15
In the instant case, petitioner appealed the Order of the trial court which dismissed his
complaint for improper venue, lack of cause of action, and res judicata.16 Dismissals
based on these grounds do not involve a review of the facts of the case but merely the
application of the law, specifically in this case, Rule 16 of the Revised Rules of Civil
Procedure. The issue to be resolved is limited towhether or not saidrule was properly
applied, which will only involve a reviewof the complaint, the motions to dismiss, and
the trial court’s order of dismissal, but not the probative value of the evidence
submitted nor the truthfulness or falsity of the facts. Considering, therefore, that the
subjectappeal raised only questions of law, the CA committed no error in dismissing
the same.
We, likewise, agree with the decision of the RTC of Pasig City dismissing petitioner’s
complaint on the ground that the same should have been filed in the RTC of Morong,
Rizal, where the property subject of this case is situated. Petitioner claims that as
shown by the caption of his complaint which reads "For Recovery of Property or its
Value," his cause of action is in the alternative, both real and personal. As such, his
action may be commenced and tried where the petitioner resides or where any of the
respondents resides, at the election of the petitioner.17 Petitioner’s argument is
misplaced. In Latorre v. Latorre,18 we ruled that:
Sections 1 and 2, Rule 4 of the 1997 Rules of Civil Procedure provide an answer to the
issue of venue. Actions affecting title to or possession of real property or an interest
therein (real actions) shall be commenced and tried in the proper court that has
territorial jurisdiction over the area where the real property is situated. On the other
hand, all other actions (personal actions) shall be commenced and tried in the proper
courts where the plaintiff or any of the principal plaintiffs resides or where the
defendant or any of the principal defendants resides. x x x.
In this jurisdiction, we adhere to the principle that the nature of an action is
determined by the allegations in the Complaint itself, rather than by its title or
heading. Itis also a settled rule that what determines the venue of a case is the primary
objective for the filing of the case. x x x 19 While the complaint of the petitioner was
denominated as one for "Recovery of Property or its Value," all of his claims are
actually anchored on his claim of ownership over the one-third (1/3) portion of the
subject property. In his complaint, petitioner sought the return of the portion of the
subject property or its value on the basis of his co-ownership thereof. Necessarily, his
alternative claim for the value of the property is still dependent on the determination of
ownership, which is an action affecting title to or possession of real property or an
interest therein. Clearly, petitioner’s claim is a realaction which should have been filed
in the court where the property lies, which in this case, is the RTC of Morong, Rizal.
We further agree with the RTC of Pasig City when it dismissed petitioner’s complaint
on the ground that the same states no cause of action in the following wise:
The complaint states no cause of action as herein defendant was impleaded without
stating any details ofits liabilities nor any allegation of its violations to the plaintiff’s
rights. The only allegation of the rights violated are Articles 19, 20, and 21 of the Civil
Code. More importantly, there are no allegations in the complaint that defendant TRB
has violated the aforesaid laws. There is no detailon why the defendant TRB has been
impleaded in the instant case.20
A perusal of the complaint would show that aside from the fact that respondent
spouses had mortgaged the property subject herein to respondent bank, there is no
other allegation of an act or omission on the part of respondent Bank in violation ofa
right of petitioner. In Spouses Zepeda v. China Banking Corporation,21 We had
occasion to discuss the definition of the term "cause of action," to wit:
A cause of action is a formal statement of the operative facts that give rise to a
remedial right. The question of whether the complaint states a cause of action is
determined by its averments regarding the acts committed by the defendant. Thus it
"must contain a concise statement of the ultimate or essential facts constituting the
plaintiff’s cause of action." Failure to make a sufficient allegation of a cause of action in
the complaint "warrants its dismissal."
As defined in Section 2, Rule 2 of the Rules of Court, a cause of action is the act or
omission by which a party violates the right of another. Its essential elements are as
follows:
1. A right in favor of the plaintiff by whatever means and under whatever law
it arises or is created;
2. An obligation on the part of the named defendant to respect or not to
violate such right; and
5
3. Act or omission on the part of such defendant in violation of the right of
the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages
or other appropriate relief.
It is, thus, only upon the occurrence of the last element that a cause of action arises,
giving the plaintiff the right to maintain an action in court for recovery of damages or
other appropriate relief. In determining whether an initiatory pleading states a cause
ofaction, "the test is as follows: admitting the truth of the facts alleged, can the court
render a valid judgment in accordance with the prayer?" To be taken into account are
only the material allegations in the complaint; extraneous facts and circumstances or
other matters aliundeare not considered. The court may consider in addition to the
complaint the appended annexes or documents, other pleadings of the plaintiff, or
admissions in the records.22
As already mentioned, there is nothing in the complaint herein which states specific
overt acts to show thatrespondent Bank acted in disregard of the petitioner’s rights.
Nowhere in the complaint was it alleged that respondent Bank had knowledge nor
could have known with the exercise of due diligence that respondent spouses had
acted illegally, in order to commit a wrong against the petitioner. Petitioner should
have at least specified the details of his cause of action against respondent Bank. The
complaint of petitioner in Nacua-Jao v. China Banking Corporation,23 sheds light on
the specific allegations which must at least bestated to constitute a statement of cause
of action, to wit:
We are unable to subscribe to the foregoing view of the CA. Even a cursory reading of
the Complaint readily reveals a clear statement of the cause of action of petitioner. The
Complaint reads:
"x x x xxx xxx
3. That plaintiff is the lawfulowner of Lot No. 561 and its improvements xxx
covered by Title No. T-525552 issued in her name xxx.
xxx xxx xxx
9. That sometime this year, plaintiff was only shocked to learn that a falsified
and fraudulent Deed of Absolute Sale executed on January 19, 1996 was
presented to the Register of Deeds xxx in order to cause the cancellation of
plaintiff's title x x x.
10. That consequently, TCT No. T-525552 xxx was illegally cancelled and
replaced by TCT No. T-602202 in the name of defendant Gan spouses x x x.
xxx xxx xxx
12. That Lot No. 561, now covered by TCT No. T-602202 (Annex "H") in the
name of defendantGan spouses is presently mortgaged to defendant China
Banking Corporation in the amount of ₱1,600,000.00; the mortgage is
 annotated at the backof Annex "H" and the annotation is marked as Annex
"H-1"; all the proceeds thereof went to defendant Gan Spouses.
13. That on knowing the falsification and the illegal cancellation of her title,
plaintiff wrote defendant Jackson Gan and defendant China Banking
Corporation protesting against the unlawful transactions that not
onlyinvolved Lot No. 561 at Ternate, Cavite but also Lot No. 9, Blk. 89 at
Parañaque, Metro Manila; machine copies of the letter-protestsare hereto
attached as Annexes "I" and "J", respectively, and made integral parts hereof;
xxx xxx xxx
15. That from the foregoing, therefore, it is very evident that defendants had
connived and conspired to effect the so-called sale and mortgage of Lot No.
561 and the transfer of the title thereof to Gan spouses' name. (Emphasis
ours)
xxxx
It appears that the aforementioned properties were unlawfully and criminally
mortgaged to your Bankby one Jackson Gan xxx who forged or caused to be forged
and/or falsified or caused to be falsified two (2) separate instruments of sale in his
favor, covering the aforesaid properties making it appear that the said instruments
were signed by our client when in truth and in fact were not."
In sum, the Complaint recites that (1) petitioner was the registered owner of the
subject property; (2) she was defrauded of her rights to the property when title thereto
was transferred in the name of Spouses Gan based on a forged deed of sale; and (3)
she was further defrauded of her rights to the property when respondentaccepted the
same as security for the payment of a loan acquiredby Spouses Gan even when the
latter's title to the property is void.x x x24
In contrast, the most that petitioner’s complaint herein stated was Articles 19, 20, and
21 of the Civil Code and that "he found out that in November 2002, defendants Gabor
mortgaged the whole property x x x in favor of the defendant bank."25 Said bare
allegation is insufficient to establish any right or cause of action in favor of the
petitioner.
Going now to the fourth and final argument, petitioner insists that his current action
for Recovery of Property or its Value is not barred by res judicata. He claims that not
all the elements of the principle of res judicata are present in this case, since the
decision of this Court in the prior partition case was not a judgment on the merits but
due to sheer technicality and that the cause of action in the prior case is partition
while the cause of action herein is for recovery of property.26
We disagree. In order for res judicata to bar the institution of a subsequent action, the
following requisites must concur: (1) the judgment sought to bar the new action must
be final; (2) the decision must have been rendered by a court having jurisdiction over
the subject matter and the parties; (3) the disposition of the case must be a judgment
on the merits; and (4) there must be as between the first and second action, identity of
6
parties, subject matter, causes of action as are present in the civil cases below. The
foundation principle upon which the doctrine of res judicatarests is that parties ought
not to be permitted to litigate the same issue more than once; that when a right or fact
has been judicially tried and determined by a court of competent jurisdiction, so long
asit remains unreversed, it should be conclusive upon the parties and those in privity
with them in law or estate.27
In Selga v. Brar,28 we held that:
Res judicatameans "a matter adjudged; a thing judicially acted upon or decided; a
thing ormatter settled by judgment." It lays the rule that an existing final judgment or
decree rendered on the merits, without fraud or collusion, by a court of competent
jurisdiction, upon any matter within its jurisdiction, is conclusive ofthe rights of the
parties or their privies, in all other actions or suits in the same or any other judicial
tribunal of concurrent jurisdiction on the points and matters in issue in the first suit.
It must be remembered that it is to the interest of the public that there should be an
end to litigation by the parties over a subject fully and fairly adjudicated. The doctrine
of res judicatais a rule that pervades every well-regulated system of jurisprudence and
is founded upon two grounds embodied in various maxims of the common law,
namely: (1) public policy and necessity, which dictates that it would be in the interest
of the State that there should be an end to litigation – republicae ut sit litium; and (2)
the hardship on the individual that he should be vexed twice for the same cause –
nemo debet bis vexari pro una et eadem causa. A contrary doctrine would subject
public peace and quiet to the will and neglect of individuals and prefer the gratification
of the litigious disposition on the part ofsuitors to the preservation of public tranquility
and happiness.
Res judicatahas two concepts. The first is bar by prior judgment under Rule 39,
Section 47(b), and the second is conclusiveness of judgment under Rule 39, Section
47(c).These concepts differ as to the extent of the effect of a judgment or final order as
follows:
SEC. 47. Effect of judgments or final orders. - The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment
or final order, may be as follows:
xxxx
(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors-in-
interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the
same capacity; and
(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment or
final order which appears upon its face to have been so adjudged, or which
was actually and necessarily included therein or necessary thereto.
Jurisprudence taught uswell that res judicata under the first concept or as a bar
against the prosecution of a second action exists when there is identity of parties,
subject matter and cause of action in the first and second actions. The judgment in the
first action is final as to the claim or demand in controversy, including the parties and
those in privity with them, not only as to every matter which was offered and received
to sustain or defeat the claim or demand, but as to any other admissible matter which
might have been offered for that purpose and of all matters that could have been
adjudged in that case. In contrast, res judicata under the second concept or estoppel
by judgment exists when there is identity of parties and subject matter but the causes
of action are completely distinct. The first judgment is conclusive only as to those
matters actually and directly controverted and determined and not as to matters
merely involved herein.29
Guided by the above discussion, Weobserve that the case at hand satisfies the
essential requisites of res judicataunder the first concept. With respect to the first
three (3) requisites,We find that the judgment sought to bar the instant case was a
judgment on the merits by a court having jurisdiction over the subject matter and the
parties, which properly obtained its finality. As the records reveal, the decision to
dismiss petitioner’s earlier complaint for Partition ofReal Property and Damages 30 was
rendered by the RTC of Morong, Rizal, having jurisdiction over the subject matter and
the parties, after a consideration of the evidence or stipulations submitted by the
parties at the trial of the case. Saidjudgment was rendered based on the evidence and
witnesses presented by the parties who were given ample opportunity to be heard as
well as a valid judgment by the CA, in the separate legal redemption case upholding
spouses Gabor’s right of legal redemption, which became final and executory upon the
expiration of the period of appealing the same, the parties pursuing no further appeal.
In the same way, petitioner’s complaint for partition likewise obtained finality when it
was dismissed by this Court of last resort.1âwphi1 Petitioner contends that his
Petition for Review on Certiorari was dismissed in a minute resolution 31dated June 8,
1994 for failure to submit an affidavit of service, a sheer technicality, which is not a
judgment on the merits. He failed to mention, however, that this Court further denied
his motion for reconsideration with finality in its Resolution32 dated July 25, 1994 for
having no compelling reason to warrantthe reconsideration sought. Thus, while this
Court initially dismissed petitioner’s appeal on a mere technicality, it had sufficient
opportunity to reverse its dismissal on motion for reconsideration if it found that any
error or injustice has been committed. It, however, did not and in fact evenaffirmed the
dismissal by further denying petitioner’s motion for reconsideration. There is no
question, therefore, that the dismissal of petitioner’s partition case is final and
executory.
Anent the fourth and final requisite, it is undisputed that there exists an identity of the
parties and subjectmatter between the prior action for partition and the instant
subsequent action for recovery of property, the same being filed by herein petitioner
against the same spouses Gabor over the same portion of land in Tanay, Rizal. The fact
that respondents Bank and Register of Deeds were only impleaded in the subsequent
case is of no moment since absolute identity of parties is not required; mere
substantial identity of parties, or a community of interests between the party in the
first case and the party in the subsequent case, shall suffice.33
7
Petitioner, however, contends that the causes of action in both cases differ inasmuch
as in the prior case, the cause of action is partition while in the case at hand, the
cause of action is the recovery of property or its value.34
Petitioner is mistaken. In Philippine National Bank v. Gateway Property Holdings,
Inc.,35 we have laid down certain guidelines in determining whether there is identity of
causes of action in the following manner:
The crux of the controversy in the instant case is whether there is an identity of causes
of action inCivil Case Nos. TM-1022 and TM-1108.
Section 2, Rule 2 of the Rules of Court defines a cause of action as "the act or omission
by which a party violates a right of another." Section 3 of Rule 2 provides that "[a]
party may not institute more than one suit for a single cause of action." Anent the act
of splitting a single cause of action, Section 4 of Rule 2 explicitly states that "[i]f two or
more suits are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal of the
others."
Apropos, Carlet v. Court of Appealsstates that:
As regards identity of causes ofaction, the test often used in determining whether
causes of action are identical is to ascertain whether the same evidence which is
necessary to sustain the second action would have been sufficient toauthorize a
recovery in the first, even if the forms or nature of the two actions be different. If the
same facts or evidence would sustain both actions, the two actions are considered the
same within the rule that the judgment in the former is a bar to the subsequent action;
otherwise, it is not.36
Applying the above guideline to the instant case, while the two cases are captioned
differently, petitioner cannot claim that there is no res judicata by simply changing the
title of the action from "Complaint for Partition of Real Property and Damages" to a
"Complaint for Recovery of Property or its Value." The records clearlyreveal that the
evidence submitted by the parties in both cases are identical. Petitioner, in claiming
that he had either the right to partition or to recover the subject property, submitted
the same Deed of Assignment37 transferring in his favor the subject property as
payment for his legal services as well as the same Agreement of Rescission of his
earlier transfer of the subject property to Ms. Ramos. As previously mentioned, all of
his claims in both actions are actually anchored on his claim of ownership over the
one-third (1/3) portion of the subject property. If it be proven that he is not a co-owner
of the subject portion, he will neither have the right to partition in the prior action nor
will he have the right to recover the subject property or its value in the
subsequentaction. Hence, the ultimate question which the trial court had to resolve in
both cases was whether or not petitioner is a co-owner ofthe subject property.
Contrary to petitioner’s allegation thatan action of partition is merely a possessory
action which could not bar a subsequent action, the issue of ownership or co-
ownership is necessarilyresolved before the trial court may issue an order of
partition,as we have held in Reyes-De Leon v. Del Rosario,38 viz.:
The issue of ownership or co-ownership, to be more precise, must first be resolved in
order to effect a partition of properties. This should be done in the action for partition
itself.As held in the case of Catapusan v. Court of Appeals:
In actions for partition, the court cannot properly issue an order to divide the property,
unless it first makes a determination as to the existence of co -ownership. The court
must initially settle the issue of ownership, the first stage in an action for partition.
Needless to state, an action for partition will not lie if the claimant has no rightful
interest over the subject property.In fact, Section 1 of Rule 69 requires the party filing
the action to state in his complaint the "nature and extent of his title" to the real
estate. Until and unless the issue of ownership is definitely resolved, it would be
premature to effect a partition of the properties. x x x.39
Considering, therefore, that the RTC of Morong had long before resolved the issue of
co-ownership against petitioner in his complaint for Partition of Real Property, which
was affirmed with finality by this Court, no less, petitioner’s subsequent claim for
Recovery ofProperty or its Value must likewise necessarily fail. To reiterate, even if the
forms or nature of actions in both cases are different, since the issues raised
essentially involve the claim of ownership over the subjectproperty, there isidentity of
the causes of action.40
It is, therefore, clear from the discussion above that since all of the elements of res
judicata are present, the instant suit for Recovery of Property or its Value is barred by
said principle. As we have consistently held, a udgment which has acquired finality
becomes immutable and unalterable, hence, may no longer be modified in any respect
except to correct clerical errors or mistakes, all the issues between the parties being
deemed resolved and laid to rest.41 It is a fundamental principle in our judicial system
that every litigation must end and terminate sometime and somewhere, and it is
essential to an effective and efficient administration of justice that, once a judgment
has become final, the winning party be, not through a mere subterfuge, deprived of the
fruits of the verdict.42
Exceptions to the immutability of final judgment are allowed only under the most
extraordinary of circumstances.43Yet, when petitioner is given ample opportunity to be
heard, unbridled access to the appellate comis, as well as unbiased judgments
rendered after a consideration of evidence presented by the parties, as in the case at
hand, We cannot recklessly reverse the findings of the courts below.
In view of the foregoing, we find no compelling reason to disturb the findings of the
RTC of Pasig City and CA. The RTC of Pasig City correctly dismissed the complaint on
the grounds of improper venue, res judicata, and that the complaint states no cause of
action. The CA likewise correctly dismissed petitioner's appeal for raising only issues
purely of law.
WHEREFORE, premises considered, the instant petition is DENIED. The Order dated
August 18, 2006 of the Regional Trial Court of Pasig City in Civil Case No. 70750 and
Decision dated May 9, 2008 of the Court of Appeals in CA-G.R. CV No. 88335 are
hereby AFFIRMED.
SO ORDERED.
8
[G.R. No. 151037. June 23, 2005]
SAN MIGUEL CORPORATION, petitioner, vs. TROY FRANCIS L.
MONASTERIO, respondent.
RESOLUTION
QUISUMBING, J.:
This appeal by certiorari seeks to reverse and set aside the Decision[1] dated July
16, 2001, and the Resolution[2] dated November 27, 2001, of the Court of Appeals in
CA-G.R. SP No. 52622. The Court of Appeals dismissed the special civil action
for certiorari filed by San Miguel Corporation (SMC)[3] assailing the Orders[4]of the
Regional Trial Court of Naga City, Branch 20, which denied its Motion to Dismiss on
the ground of improper venue and the subsequent Motion for Reconsideration in Civil
Case No. RTC98-4150.
The facts are as follows:
On August 1, 1993, petitioner SMC entered into an Exclusive Warehouse
Agreement[5] (hereafter EWA for brevity) with SMB Warehousing Services (SMB),
represented by its manager, respondent Troy Francis L. Monasterio. SMB undertook to
provide land, physical structures, equipment and personnel for storage, warehousing
and related services such as, but not limited to, segregation of empty bottles, stock
handling, and receiving SMC products for its route operations at Sorsogon, Sorsogon
and Daet, Camarines Norte.
The agreement likewise contained a stipulation on venue of actions, to wit:
26. GENERAL PROVISIONS
...
b. Should it be necessary that an action be brought in court to
enforce the terms of this Agreement or the duties or rights of the
parties herein, it is agreed that the proper court should be in the
courts of Makati or Pasig, Metro Manila, to the exclusion of the other
courts at the option of the COMPANY.[6] [Underscoring supplied.]
...
On November 3, 1998, respondent Monasterio, a resident of Naga City, filed a
complaint docketed as Civil Case No. RTC98-4150 for collection of sum of money
against petitioner before the Regional Trial Court of Naga City, Branch 20.
In his Complaint,[7] Monasterio claimed P900,600 for unpaid cashiering fees. He
alleged that from September 1993 to September 1997 and May 1995 to November
1997, aside from rendering service as warehouseman, he was given the additional task
of cashiering in SMCs Sorsogon and Camarines Norte sales offices for which he was
promised a separate fee. He claims that of approximately 290 million pesos in cash
and checks of the sales office and the risks of pilferage, theft, robbery and hold-up, he
had assumed what amounted to approximately 35 million pesos per annum for
Sorsogon, Sorsogon, and 60 million pesos for Daet, Camarines Norte. He also said that
he hired personnel for the job. Respondent added that it was only on December 1,
1997, that petitioner SMC started paying him P11,400 per month for his cashiering
services.
Monasterio demanded P82,959.32 for warehousing fees, P11,400 for cashiering
fees for the month of September, 1998, as well as exemplary damages, and attorneys
fees in the amount of P500,000 and P300,000, respectively.[8]
On November 19, 1998, SMC filed a Motion to Dismiss [9] on the ground of
improper venue. SMC contended that respondents money claim for alleged unpaid
cashiering services arose from respondents function as warehouse contractor thus the
EWA should be followed and thus, the exclusive venue of courts of Makati or Pasig,
Metro Manila is the proper venue as provided under paragraph 26(b) of the Exclusive
Warehouse Agreement. SMC cites in its favor Section 4(b) in relation to Section 2 of
Rule 4[10] of the Rules of Court allowing agreement of parties on exclusive venue of
actions.
Respondent filed an Opposition[11] contending that the cashiering service he
rendered for the petitioner was separate and distinct from the services under the EWA.
Hence, the provision on venue in the EWA was not applicable to said services. Hence,
respondent insists that in accordance with Section 2 of Rule 4 of the Rules of Court
the venue should be in Naga City, his place of residence.
On February 22, 1999, the Regional Trial Court, of Naga City, Branch 20 issued
an Order[12] denying petitioners motion to dismiss. The court held that the services
agreed upon in said contract is limited to warehousing services and the claim of
plaintiff in his suit pertains to the cashiering services rendered to the defendant, a
relationship which was not documented, and is certainly a contract separate and
independent from the exclusive warehousing agreements.[13]
SMCs subsequent Motion for Reconsideration was likewise denied.[14] While the
motion was pending, the respondent filed an Amended Complaint[15] deleting his claim
for unpaid warehousing and cashiering fees but increasing the exemplary damages
from P500,000 to P1,500,000.[16]
Petitioner elevated the controversy to the Court of Appeals by way of a special
civil action for certiorari with a prayer for the issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction, imputing grave abuse of discretion on the
RTC Naga City for denying its motion to dismiss and subsequent motion for
reconsideration.
On June 11, 1999, during the pendency of the certiorari petition SMC filed before
the trial court an answer ex abundanti cautela[17] with a compulsory counterclaim for
moral and exemplary damages and attorneys fees. SMC averred lack of cause of action,
payment, waiver, abandonment and extinguishment.
In its decision dated July 16, 2001, the Court of Appeals found respondents
claim for cashiering services inseparable from his claim for warehousing services, thus,
the venue stipulated in the EWA is the proper venue. However, the Court of Appeals
noted that prior to the filing of SMCs petition, respondent Monasterio filed an amended
complaint to which SMC filed an answer. Thus, the Court of Appeals dismissed San
Miguels petition for certiorari, stating that the case was already moot and academic.
9
Petitioner filed a motion for reconsideration which was denied by the Court of
Appeals. Hence, this petition wherein petitioner raises the following as issues:[18]
1. Whether or not this Honorable Court may review the finding of the Court
of Appeals that the Complaint and Amended Complaint were filed in the
wrong venue.
2. Assuming arguendo that this Honorable Court may review the finding of
the Court of Appeals that the Complaint and Amended Complaint were
filed in the wrong venue, whether or not such finding should be
reversed.
3. Whether or not the Court of Appeals gravely erred in ruling that SMCs
Petition For Certiorari has become moot and academic in view of the
filing of Monasterios Amended Complaint and SMCs Answer (Ex
Abundanti Cautela).[19]
In our view, two issues only require resolution: (1) Did the RTC of Naga City err in
denying the motion to dismiss filed by SMC alleging improper venue? (2) Did the CA
gravely err in ruling that SMCs petition for certiorari has become moot?
On disputes relating to the enforcement of the rights and duties of the
contracting parties, the venue stipulation in the EWA should be construed as
mandatory. Nothing therein being contrary to law, morals, good custom or public
policy, this provision is binding upon the parties.[20] The EWA stipulation on venue is
clear and unequivocal, thus it ought to be respected.
However, we note that the cause of action in the complaint filed by the
respondent before the RTC of Naga was not based on the EWA, but concern services
not enumerated in the EWA. Records show also that previously, respondent received a
separate consideration of P11,400 for the cashiering service he rendered to SMC.
Moreover, in the amended complaint, the respondents cause of action was specifically
limited to the collection of the sum owing to him for his cashiering service in favor of
SMC. He already omitted petitioners non-payment of warehousing fees. As previously
ruled, allegations in the complaint determines the cause of action or the nature of the
case.[21] Thus, given the circumstances of this case now before us, we are constrained
to hold that it would be erroneous to rule, as the CA did, that the collection suit of the
respondent did not pertain solely to the unpaid cashiering services but pertain likewise
to the warehousing services.[22]
Exclusive venue stipulation embodied in a contract restricts or confines parties
thereto when the suit relates to breach of the said contract. But where the exclusivity
clause does not make it necessarily all encompassing, such that even those not related
to the enforcement of the contract should be subject to the exclusive venue, the
stipulation designating exclusive venues should be strictly confined to the specific
undertaking or agreement. Otherwise, the basic principles of freedom to contract might
work to the great disadvantage of a weak party-suitor who ought to be allowed free
access to courts of justice.
Restrictive stipulations are in derogation of the general policy of making it more
convenient for the parties to institute actions arising from or in relation to their
agreements.[23] Thus, the restriction should be strictly construed as relating solely to
the agreement for which the exclusive venue stipulation is embodied. Expanding the
scope of such limitation on a contracting party will create unwarranted restrictions
which the parties might find unintended or worse, arbitrary and oppressive.
 Moreover, since convenience is the raison detre of the rules on venue,[24] venue
stipulation should be deemed merely permissive, and that interpretation should be
adopted which most serves the parties convenience.[25] Contrawise, the rules mandated
by the Rules of Court should govern.[26] Accordingly, since the present case for the
collection of sum of money filed by herein respondent is a personal action, [27] we find
no compelling reason why it could not be instituted in the RTC of Naga City, the place
where plaintiff resides.
Having settled the issue on venue, we need not belabor the issue of whether
SMCs petition has become moot.
WHEREFORE, it is hereby ruled that no reversible error was committed by
the Regional Trial Court of Naga City, Branch 20, in denying petitioners motion to
dismiss. Said RTC is the proper venue of the amended complaint for a sum of money filed
by respondent against petitioner San Miguel Corporation, in connection with his
cashiering services. The case is hereby REMANDED to the RTC of Naga City, Branch 20,
for further proceedings on respondents amended complaint, without further delay.
Costs against petitioner.
SO ORDERED.
FIRST DIVISION
ANTONIO T. CHUA,
Petitioner,
- versus -
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS),
INC.,
Respondent.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review on certiorari is the decision[1] dated November 28, 2001 of the Court of
Appeals and its resolution[2] of April 1, 2002 in CA-G.R. SP No. 62592. The assailed
decision and resolution dismissed the special civil action for certiorari against the
orders of August 9, 2000[3] and October 6, 2000[4]issued by Judge Lorifel Lacap
Pahimna in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS)
lodged a complaint for annulment of contracts of loan and real estate mortgage against
herein petitioner Antonio T. Chua before the Regional Trial Court of Pasig City. The
case was docketed as Civil Case No. 67736 and was raffled to the sala of Judge Lorifel
Lacap Pahimna.
The said suit sought to annul a loan contract allegedly extended by petitioner to
respondent TOPROS in the amount of ten million four hundred thousand pesos
(P10,400,000) and the accessory real estate mortgage contract covering two parcels of
land situated in Quezon City as collateral.
It appeared on the face of the subject contracts that TOPROS was represented by its
president John Charles Chang, Jr. However, TOPROS alleged that the purported loan
and real estate mortgage contracts were fictitious, since it never authorized anybody,
not even its president, to enter into said transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper
venue. He contended that the action filed by TOPROS affects title to or possession of
the parcels of land subject of the real estate mortgage. He argued that it should thus
have been filed in the Regional Trial Court of Quezon City where the encumbered real
properties are located, instead of Pasig City where the parties reside.
G.R. No. 152808 On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss.
She reasoned that the action to annul the loan and mortgage contracts is a personal
Present: action and thus, the venue was properly laid in the RTC of Pasig City where the parties
reside.
Davide, Jr., C.J.,
(Chairman),
Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied
Quisumbing,
in its order of October 6, 2000. Hence, petitioner filed with the Court of Appeals a
Ynares-Santiago,
special civil action for certiorari alleging:
Carpio, and
Azcuna, JJ. THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE
OF DISCRETION IN DISREGARDING THE RULING OF THE
SUPREME COURT IN PASCUAL VS. PASCUAL REGARDING THE
Promulgated: RULE ON PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO
BE A PERSONAL ACTION A CIVIL COMPLAINT FOR THE
September 30, 2005 ANNULMENT OF AN ALLEGEDLY FICTITIOUS CONTRACT.[5]
The Court of Appeals dismissed said petition in its decision dated November 28, 2001.
It held that the authorities relied upon by petitioner, namely Pascual v.
Pascual[6] and Banco Espaol-Filipino v. Palanca,[7] are inapplicable in the instant case.
The appellate court instead applied Hernandez v. Rural Bank of Lucena, Inc.[8] wherein
we ruled that an action for the cancellation of a real estate mortgage is a personal
action if the mortgagee has not foreclosed the mortgage and the mortgagor is in
possession of the premises, as neither the mortgagors title to nor possession of the
property is disputed.
Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals
denied for lack of merit in its resolution of April 1, 2002.
10
Undeterred, petitioner now comes to us on a petition for review raising the following
issues:
WHETHER AN ACTION TO ANNUL A LOAN AND
MORTGAGE CONTRACT DULY ALLEGED AS FICTITIOUS FOR
BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL
ACTION OR REAL ACTION?
WHETHER IN AN ACTION TO ANNUL A LOAN AND
MORTGAGE CONTRACT DULY ALLEGED AS FICTITIOUS FOR
BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON
ALLEGED TO HAVE [LACKED] AUTHORITY TO ENTER INTO SAID
CONTRACTS IS AN INDISPENSABLE PARTY?[9]
Petitioner contends that Hernandez should not be applied here because in the said
case: (1) venue was improperly laid at the outset; (2) the complaint recognized the
validity of the principal contract involved; and (3) the plaintiff sought to compel
acceptance by the defendant of plaintiffs payment of the latters mortgage debt. He
insists that the Pascual case should be applied instead. He invokes our
pronouncement in Pascual, to wit:
It appearing, however, that the sale is alleged to be fictitious, with
absolutely no consideration, it should be regarded as a non-existent,
not merely null, contract. And there being no contract between the
deceased and the defendants, there is in truth nothing to annul by
action. The action brought cannot thus be for annulment of
contract, but is one for recovery of a fishpond, a real action that
should be, as it has been, brought in Pampanga, where the property
is located.[10]
Petitioner likewise cites the Banco Espaol-Filipino case, thus:
Where the defendant in a mortgage foreclosure lives out of the
Islands and refuses to appear or otherwise submit himself to the
authority of the court, the jurisdiction of the latter is limited to the
mortgaged property, with respect to which the jurisdiction of the
court is based upon the fact that the property is located within the
district and that the court, under the provisions of law applicable in
such cases, is vested with the power to subject the property to the
obligation created by the mortgage. In such case personal
jurisdiction over the nonresident defendant is nonessential and in
fact cannot be acquired.[11]
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS, who
allegedly entered into the questioned loan and real estate mortgage contracts, is an
indispensable party who has not been properly impleaded.
TOPROS, however, maintains that the appellate court correctly sustained the lower
courts finding that the instant complaint for annulment of loan and real estate
mortgage contracts is a personal action. TOPROS points out that a complaint for the
11
declaration of nullity of a loan contract for lack of consent and consideration remains a
personal action even if the said action will necessarily affect the accessory real estate
mortgage.
TOPROS argues that Pascual is inapplicable because the subject contract therein was
a contract of sale of a parcel of land where title and possession were already
transferred to the defendant. TOPROS further contends that Banco Espaol-Filipino is
also inapplicable since the personal action filed therein was one which affected the
personal status of a nonresident defendant.
Considering the facts and the submission of the parties, we find the petition bereft of
merit.
Well-settled is the rule that an action to annul a contract of loan and its accessory real
estate mortgage is a personal action. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contractor the recovery of
damages.[12] In contrast, in a real action, the plaintiff seeks the recovery of real
property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real
action is an action affecting title to real property or for the recovery of possession, or for
partition or condemnation of, or foreclosure of mortgage on, real property.[13]
In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was
assailed as fictitious for lack of consideration. We held that there being no contract to
begin with, there is nothing to annul. Hence, we deemed the action for annulment of
the said fictitious contract therein as one constituting a real action for the recovery of
the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant case. Note that
in Pascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the instant
case, ownership of the parcels of land subject of the questioned real estate mortgage
was never transferred to petitioner, but remained with TOPROS. Thus, no real action
for the recovery of real property is involved. This being the case, TOPROS action for
annulment of the contracts of loan and real estate mortgage remains a personal action.
Petitioners reliance on the Banco Espaol-Filipino case is likewise misplaced. That case
involved a foreclosure of real estate mortgage against a nonresident. We held therein
that jurisdiction is determined by the place where the real property is located and that
personal jurisdiction over the nonresident defendant is nonessential and, in fact,
cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco
Espaol-Filipino case. In the first place, this is not an action involving foreclosure of real
estate mortgage. In the second place, none of the parties here is a nonresident. We find
no reason to apply here our ruling in Banco Espaol-Filipino.
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena,
Inc. provides the proper precedent in this case. In Hernandez, appellants contended
that the action of the Hernandez spouses for the cancellation of the mortgage on their
lots was a real action affecting title to real property, which should have been filed in
the place where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then
Rules of Court, was applied, to wit:
 SEC. 2. Venue in Courts of First Instance. (a) Real actions.
Actions affecting title to, or for recovery of possession, or for
partition or condemnation of, or foreclosure of mortgage on, real
property, shall be commenced and tried in the province where the
property or any part thereof lies.
The Court pointed out in the Hernandez case that with respect to mortgage,
the rule on real actions only mentions an action for foreclosure of a real estate
mortgage. It does not include an action for the cancellation of a real estate
mortgage. Exclusio unios est inclusio alterius. The latter thus falls under the catch-all
provision on personal actions under paragraph (b) of the above-cited section, to wit:
SEC. 2 (b) Personal actions. All other actions may be
commenced and tried where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff.
In the same vein, the action for annulment of a real estate mortgage in the
present case must fall under Section 2 of Rule 4, to wit:
SEC. 2. Venue of personal actions. All other actions may be
commenced and tried where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where
he may be found, at the election of the plaintiff.[14]
Thus, Pasig City, where the parties reside, is the proper venue of the action to
nullify the subject loan and real estate mortgage contracts. The Court of Appeals
committed no reversible error in upholding the orders of the Regional Trial Court
denying petitioners motion to dismiss the case on the ground of improper venue.
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court
provides:
SEC. 7. Compulsory joinder of indispensable parties. Parties
in interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants. (Emphasis
ours)
The presence of indispensable parties is necessary to vest the court with
jurisdiction. The absence of an indispensable party renders all subsequent actuations
of the court null and void, because of that courts want of authority to act, not only as
to the absent parties but even as to those present.[15] Thus, whenever it appears to the
court in the course of a proceeding that an indispensable party has not been joined, it
is the duty of the court to stop the trial and order the inclusion of such party.[16]
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the other parties, so that
12
it will not necessarily be directly or injuriously affected by a decree which does
complete justice between them.[17]
Is John Charles Chang, Jr., the president of TOPROS who allegedly entered
into the disputed contracts of loan and real estate mortgage, an indispensable party in
this case?
We note that although it is Changs signature that appears on the assailed
real estate mortgage contract, his participation is limited to being a representative of
TOPROS, allegedly without authority. The document[18]which constitutes as the
contract of real estate mortgage clearly points to petitioner and TOPROS as the sole
parties-in-interest to the agreement as mortgagee and mortgagor therein, respectively.
Any rights or liabilities arising from the said contract would therefore bind only the
petitioner and TOPROS as principal parties. Chang, acting as mere representative of
TOPROS, acquires no rights whatsoever, nor does he incur any liabilities, arising from
the said contract between petitioner and TOPROS. Certainly, in our view, the only
indispensable parties to the mortgage contract are petitioner and TOPROS alone.
We thus hold that John Charles Chang, Jr., is not an indispensable party in
Civil Case No. 67736. This is without prejudice to any separate action TOPROS may
institute against Chang, Jr., in a proper proceeding.
WHEREFORE, the petition is DENIED. The assailed decision dated November
28, 2001 and resolution dated April 1, 2002 of the Court of Appeals upholding the
Orders of Judge Lorifel Lacap Pahimna are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. L-49252 November 13, 1946
FERNANDO GUEVARRA, and MARCOS GUEVARRA, petitioners,
vs.
VICENTE DEL ROSARIO, Judge of First Instance of Tayabas, HERMOGENES
CALUAG, PASTOR C. JAVIER, CARLOS A. BUENDIA, and SEBASTIAN A.
LIWAG, respondents.
Alidio Lainez and Eligir for petitioners.
Office of the Solicitor Vicente Arguelles for respondent Judge.
PADILLA, J.:
Fernando Guevarra and Marcos Guevarra pray for a writ of mandamus to compel the
respondent court to conduct a preliminary investigation upon a complaint filed by
them on June 28, 1944, charging Hermogenes Calaug, Provincial Fiscal of Tayabas,
Pastor C. Javier, Municipal Mayor of Candelaria, Tayabas, Carlos A. Buendia, Justice
of the Peace of Sariaya and Candelaria, Tayabas, and Sebastian A. Liwag, Clerk of
Court of the Justice of the Peace of Candelaria, Tayabas, with the crime of falsification
of public documents, defined and punished under article 171 of the Revised Penal
Code. They also pray that the respondent court be compelled to communicate on the
subject matter of the complaint with the Secretary of Justice so that the latter may
appoint an acting fiscal in view of the incumbent's disqualification to act in the case.
Two days after the filing of the complaint referred to, the respondent court acting
thereon ordered the return of the complaint to the petitioners, for the reason that the
Ministry of Justice or the Bureau of Public Prosecution of the Republic of the
Philippines should first be heard before the complaint might be entertained. A motion
for reconsideration of the order was denied on July 14, 1944.
The Director of Prisons reports in CA-G.R. No. 77 that the petitioners died in Bilibid
Prisons. Emilio Guevarra and Ciriaco Guevarra, son and brother of the petitioners,
pray to be allowed to substitute the petitioners in this case.
The substitution prayed for calls for determination of the question whether, upon the
death of the petitioners, the action brought in this proceeding survived to their heirs or
legal representatives. The action survived if the cause of action survived. The cause of
action, upon which this proceeding in mandamus is predicated, arose from the failure
of the respondent court to conduct a preliminary investigation upon a complaint filed
by the petitioners charging certain officers with the crime of falsification of public
documents. The right of the petitioners to file a complaint charging the commission of
a crime is personal. It is so, because as required in section 2, Rule 106, a complaint
charging a person with an offense must be subscribed by the offended party. The right
being personal, the complaint filed by the petitioners with the respondent court abated
upon their death.
Likewise, the cause of action, upon which this proceeding in mandamus is based, is
personal. The failure of the respondent court to conduct a preliminary investigation
which gave rise to this proceeding was upon petitioners' complaint. The heirs or legal
representatives of the late petitioners could not justly complain of the failure of the
respondent court to conduct a preliminary investigation, because they had filed no
complaint. It was the complaint of the deceased petitioners. The cause of action in this
proceeding did not survive to the heirs or legal representatives of the late petitioners,
because the complaint filed by the petitioners with the respondent court, from which
the cause of action in this proceeding arose, abated upon the death of said petitioners.
Hence this proceeding cannot be prosecuted or continued by the heirs or legal
representatives of the late petitioners, for the cause of action upon which it is
predicated is personal and did not survive to said heirs and legal representatives.
Motion for substitution is denied and petition for a writ of mandamus abated, without
costs.
G.R. No. 204444, January 14, 2015
VIRGILIO C. BRIONES, Petitioner, v. COURT OF APPEALS AND CASH ASIA CREDIT
CORPORATION, Respondents.
DECISION
PERLAS-BERNABE, J.:
13
Assailed in this petition for certiorari1 are the Decision2 dated March 5, 2012 and the
Resolution3 dated October 4, 2012 of the Court of Appeals(CA) in CA-G.R. SP No.
117474, which annulled the Orders dated September 20, 2010 4 and October 22,
20105 of the Regional Trial Court of Manila, Branch 173 (RTC) in Civil Case No. 10-
124040, denying private respondent Cash Asia Credit Corporation�s (Cash Asia)
motion to dismiss on the ground of improper venue.cralawred
The Facts
The instant case arose from a Complaint6 dated August 2, 2010 filed by Virgilio C.
Briones (Briones) for Nullity of Mortgage Contract, Promissory Note, Loan Agreement,
Foreclosure of Mortgage, Cancellation of Transfer Certificate of Title (TCT) No.290846,
and Damages against Cash Asia before the RTC.7 In his complaint, Briones alleged that
he is the owner of a property covered by TCT No. 160689 (subject property),and that,
on July 15, 2010, his sister informed him that his property had been foreclosed and a
writ of possession had already been issued in favor of Cash Asia.8 Upon investigation,
Briones discovered that: (a) on December 6, 2007, he purportedly executed a
promissory note,9 loan agreement,10 and deed of real estate mortgage 11covering the
subject property (subject contracts) in favor of Cash Asia in order to obtain a loan in
the amount of P3,500,000.00 from the latter;12 and (b) since the said loan was left
unpaid, Cash Asia proceeded to foreclose his property.13 In this relation, Briones
claimed that he never contracted any loans from Cash Asia as he has been living and
working in Vietnam since October 31, 2007. He further claimed that he only went back
to the Philippines on December 28, 2007 until January 3, 2008 to spend the holidays
with his family, and that during his brief stay in the Philippines, nobody informed him
of any loan agreement entered into with Cash Asia. Essentially, Briones assailed the
validity of the foregoing contracts claiming his signature to be
forged.14chanRoblesvirtualLawlibrary
For its part, Cash Asia filed a Motion to Dismiss15 dated August 25, 2010, praying for
the outright dismissal of Briones�s complaint on the ground of improper venue.16 In
this regard, Cash Asia pointed out the venue stipulation in the subject contracts
stating that �all legal actions arising out of this notice in connection with the Real
Estate Mortgage subject hereof shall only be brought in or submitted to the jurisdiction
of the proper court of Makati City.�17 In view thereof, it contended that all actions
arising out of the subject contracts may only be exclusively brought in the courts of
Makati City, and as such, Briones�s complaint should be dismissed for having been
filed in the City of Manila.18chanRoblesvirtualLawlibrary
In response, Briones filed an opposition,19 asserting, inter alia, that he should not be
covered by the venue stipulation in the subject contracts as he was never a party
therein. He also reiterated that his signatures on the said contracts were
forgeries.20chanRoblesvirtualLawlibrary
The RTC Ruling
In an Order21 dated September 20, 2010, the RTC denied Cash Asia�s motion to
dismiss for lack of merit. In denying the motion, the RTC opined that the parties must
be afforded the right to be heard in view of the substance of Briones�s cause of action
against Cash Asia as stated in the complaint.22chanRoblesvirtualLawlibrary
Cash Asia moved for reconsideration23 which was, however, denied in an Order24 dated
October 22, 2010. Aggrieved, it filed a petition for certiorari25 before the CA.cralawred
The CA Ruling SEC. 2. Venue of personal actions. � All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant or
In a Decision26 dated March 5, 2012, the CA annulled the RTC Orders, and any of the principal defendants resides, or in the case of a non-resident defendant
accordingly, dismissed Briones�s complaint without prejudice to the filing of the same where he may be found, at the election of the plaintiff.
before the proper court in Makati City.27 It held that the RTC gravely abused its
discretion in denying Cash Asia�s motion to dismiss, considering that the subject SEC. 3. Venue of actions against nonresidents. � If any of the defendants does not
contracts clearly provide that actions arising therefrom should be exclusively filed reside and is not found in the Philippines, and the action affects the personal status of
before the courts of Makati City only.28 As such, the CA concluded that Briones�s the plaintiff, or any property of said defendant located in the Philippines, the action
complaint should have been dismissed outright on the ground of improper may be commenced and tried in the court of the place where the plaintiff resides, or
venue,29 this, notwithstanding Briones�s claim of forgery. where the property or any portion thereof is situated or found.

Dissatisfied, Briones moved for reconsideration,30 which was, however, denied in a SEC. 4. When Rule not applicable. � This Rule shall not apply �
Resolution31 dated October 4, 2012, hence, this petition.
(a) In those cases where a specific rule or law provides otherwise; or
The Issue Before the Court
(b) Where the parties have validly agreed in writing before the filing of the action on the
The primordial issue for the Court�s resolution is whether or not the CA gravely exclusive venue thereof.
abused its discretion in ordering the outright dismissal of Briones�s complaint on the
Based therefrom, the general rule is that the venue of real actions is the court which
ground of improper venue.
has jurisdiction over the area wherein the real property involved, or a portion thereof,
is situated; while the venue of personal actions is the court which has jurisdiction
The Court�s Ruling where the plaintiff or the defendant resides, at the election of the plaintiff. As an
exception, jurisprudence in Legaspi v. Rep. of the Phils.33 instructs that the parties,
The petition is meritorious. thru a written instrument, may either introduce another venue where actions arising
from such instrument may be filed, or restrict the filing of said actions in a certain
At the outset, the Court stresses that �[t]o justify the grant of the extraordinary exclusive venue, viz.:chanroblesvirtuallawlibrary
remedy of certiorari, [the petitioner] must satisfactorily show that the court or quasi-
judicial authority gravely abused the discretion conferred upon it. Grave abuse of
The parties, however, are not precluded from agreeing in writing on an exclusive
discretion connotes judgment exercised in a capricious and whimsical manner that is
venue, as qualified by Section 4 of the same rule. Written stipulations as to venue
tantamount to lack of jurisdiction. To be considered �grave,� discretion must be may be restrictive in the sense that the suit may be filed only in the place agreed
exercised in a despotic manner by reason of passion or personal hostility, and must be
upon, or merely permissive in that� the parties may file their suit not only in
so patent and gross as to amount to an evasion of positive duty or to a virtual refusal
the place agreed upon but also in the places fixed by law. As in any other
to perform the duty enjoined by or to act at all in contemplation of
agreement, what is essential is the ascertainment of the intention of the parties
law.�32chanRoblesvirtualLawlibrary respecting the matter.
Guided by the foregoing considerations, the Court finds that the CA gravely abused its As regards restrictive stipulations on venue, jurisprudence instructs that it must
discretion in ordering the outright dismissal of Briones�s complaint against Cash be shown that such stipulation is exclusive. In the absence of qualifying or
Asia, without prejudice to its re-filing before the proper court in Makati City. restrictive words, such as �exclusively,� �waiving for this purpose any other
venue,� �shall only� preceding the designation of venue, �to the exclusion of the
Rule 4 of the Rules of Court governs the rules on venue of civil actions, to
other courts,� or words of similar import, the stipulation should be deemed as
wit:chanroblesvirtuallawlibrary
merely an agreement on an additional forum, not as limiting venue to the
specified place.34 (Emphases and underscoring supplied)
Rule 4
VENUE OF ACTIONS In this relation, case law likewise provides that in cases where the complaint assails
only the terms, conditions, and/or coverage of a written instrument and not its
SECTION 1. Venue of real actions. � Actions affecting title to or possession of real validity, the exclusive venue stipulation contained therein shall still be binding on the
property, or interest therein, shall be commenced and tried in the proper court which parties, and thus, the complaint may be properly dismissed on the ground of improper
has jurisdiction over the area wherein the real property involved, or a portion thereof, venue.35 Conversely, therefore, a complaint directly assailing the validity of the written
is situated. instrument itself should not be bound by the exclusive venue stipulation contained
therein and should be filed in accordance with the general rules on venue.To be sure,
Forcible entry and detainer actions shall be commenced and tried in the municipal it would be inherently consistent for a complaint of this nature to recognize the
trial court of the municipality or city wherein the real property involved, or a portion exclusive venue stipulation when it, in fact, precisely assails the validity of the
thereof, is situated. instrument in which such stipulation is contained.

14
 DECISION
In this case, the venue stipulation found in the subject contracts is indeed restrictive
in nature, considering that it effectively limits the venue of the actions arising
therefrom to the courts of Makati City. However, it must be emphasized that
Briones�s complaint directly assails the validity of the subject contracts, claiming
forgery in their execution. Given this circumstance, Briones cannot be expected to LEONARDO-DE CASTRO, J.:
comply with the aforesaid venue stipulation, as his compliance therewith would mean
an implicit recognition of their validity. Hence, pursuant to the general rules on venue,
Briones properly filed his complaint before a court in the City of Manila where the
subject property is located.

In conclusion, the CA patently erred and hence committed grave abuse of discretion in This is a Petition for Review on Certiorari assailing the Decision[1] of the Court
dismissing Briones�s complaint on the ground of improper venue.chanrobleslaw of Appeals dated September 8, 2006 in CA-G.R. SP No. 94382 and its
Resolution[2] dated December 12, 2006, denying the Motion for Reconsideration.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated March 5,
2012 and the Resolution dated October 4, 2012 of the Court of Appeals in CA-G.R. SP
No. 117474 are hereby ANNULLED and SET ASIDE. The Orders dated September 20,
2010 and October 22, 2010 of the Regional Trial Court of Manila, Branch 173 in Civil On August 30, 2005, respondent Lepanto Consolidated Mining Company filed
Case No. 10-124040 are REINSTATED. with the Regional Trial Court (RTC) of Makati City a Complaint[3] against petitioner NM
Rothschild & Sons (Australia) Limited praying for a judgment declaring the loan and
SO ORDERED.cralawlawlibrary hedging contracts between the parties void for being contrary to Article 2018[4] of the
NM ROTHSCHILD & SONS (AUSTRALIA) G.R. No. 175799 Civil Code of the Philippines and for damages. The Complaint was docketed as Civil
LIMITED, Case No. 05-782, and was raffled to Branch 150. Upon respondents (plaintiffs) motion,
Present: the trial court authorized respondents counsel to personally bring the summons and
Petitioner, Complaint to the Philippine Consulate General in Sydney, Australia for the latter office
to effect service of summons on petitioner (defendant).
CORONA, C.J.,

Chairperson,
On October 20, 2005, petitioner filed a Special Appearance With Motion to
LEONARDO-DE CASTRO, Dismiss[5] praying for the dismissal of the Complaint on the following grounds: (a) the
court has not acquired jurisdiction over the person of petitioner due to the defective
BERSAMIN, and improper service of summons; (b) the Complaint failed to state a cause of action
and respondent does not have any against petitioner; (c) the action is barred by
- versus - DEL CASTILLO, and estoppel; and (d) respondent did not come to court with clean hands.

VILLARAMA, JR., JJ.

On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to
take the deposition of Mr. Paul Murray (Director, Risk Management of petitioner) before
Promulgated: the Philippine Consul General; and (2) a Motion for Leave to Serve Interrogatories on
respondent.

LEPANTO CONSOLIDATED MINING

COMPANY, On December 9, 2005, the trial court issued an Order[6] denying the Motion to
November 28, 2011 Dismiss. According to the trial court, there was a proper service of summons through
Respondent. the Department of Foreign Affairs (DFA) on account of the fact that the defendant has
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x neither applied for a license to do business in the Philippines, nor filed with the
Securities and Exchange Commission (SEC) a Written Power of Attorney designating
some person on whom summons and other legal processes maybe served. The trial
court also held that the Complaint sufficiently stated a cause of action. The other

15
allegations in the Motion to Dismiss were brushed aside as matters of defense which
can best be ventilated during the trial.
On December 27, 2005, petitioner filed a Motion for Reconsideration.[7] On March 6,
2006, the trial court issued an Order denying the December 27, 2005 Motion for
Reconsideration and disallowed the twin Motions for Leave to take deposition and serve
written interrogatories.[8]
On April 3, 2006, petitioner sought redress via a Petition for Certiorari[9] with
the Court of Appeals, alleging that the trial court committed grave abuse of discretion
in denying its Motion to Dismiss. The Petition was docketed as CA-G.R. SP No. 94382.
On September 8, 2006, the Court of Appeals rendered the assailed Decision
dismissing the Petition for Certiorari. The Court of Appeals ruled that since the denial of
a Motion to Dismiss is an interlocutory order, it cannot be the subject of a Petition
for Certiorari, and may only be reviewed in the ordinary course of law by an appeal from
the judgment after trial. On December 12, 2006, the Court of Appeals rendered the
assailed Resolution denying the petitioners Motion for Reconsideration.
Meanwhile, on December 28, 2006, the trial court issued an Order directing
respondent to answer some of the questions in petitioners Interrogatories to Plaintiff
dated September 7, 2006.
Notwithstanding the foregoing, petitioner filed the present petition assailing
the September 8, 2006 Decision and the December 12, 2006 Resolution of the Court of
Appeals. Arguing against the ruling of the appellate court, petitioner insists that (a) an
order denying a motion to dismiss may be the proper subject of a petition for certiorari;
and (b) the trial court committed grave abuse of discretion in not finding that it had not
validly acquired jurisdiction over petitioner and that the plaintiff had no cause of
action.
Respondent, on the other hand, posits that: (a) the present Petition should be
dismissed for not being filed by a real party in interest and for lack of a proper
verification and certificate of non-forum shopping; (b) the Court of Appeals correctly
ruled that certiorari was not the proper remedy; and (c) the trial court correctly denied
petitioners motion to dismiss.
Our discussion of the issues raised by the parties follows:
16
Whether petitioner is a real
party in interest
Respondent argues that the present Petition should be dismissed on the
ground that petitioner no longer existed as a corporation at the time said Petition was
filed on February 1, 2007. Respondent points out that as of the date of the filing of the
Petition, there is no such corporation that goes by the name NM Rothschild and Sons
(Australia) Limited. Thus, according to respondent, the present Petition was not filed by
a real party in interest, citing our ruling in Philips Export B.V. v. Court of
Appeals,[10] wherein we held:
A name is peculiarly important as necessary to the very
existence of a corporation (American Steel Foundries vs. Robertson,
269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley
R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co.,
40 W Va 530, 23 SE 792). Its name is one of its attributes, an
element of its existence, and essential to its identity (6 Fletcher
[Perm Ed], pp. 3-4). The general rule as to corporations is that each
corporation must have a name by which it is to sue and be sued and
do all legal acts. The name of a corporation in this respect
designates the corporation in the same manner as the name of an
individual designates the person (Cincinnati Cooperage Co. vs. Bate,
96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10
NH 123); and the right to use its corporate name is as much a part
of the corporate franchise as any other privilege granted (Federal
Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66
ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165,
26 A 36).[11]
In its Memorandum[12] before this Court, petitioner started to refer to itself
as Investec Australia Limited (formerly NM Rothschild & Sons [Australia] Limited) and
captioned said Memorandum accordingly. Petitioner claims that NM Rothschild and
Sons (Australia) Limited still exists as a corporation under the laws of Australia under
said new name. It presented before us documents evidencing the process in the
Australian Securities & Investment Commission on the change of petitioners company
name from NM Rothschild and Sons (Australia) Limited to Investec Australia Limited.[13]
We find the submissions of petitioner on the change of its corporate name
satisfactory and resolve not to dismiss the present Petition for Review on the ground of
not being prosecuted under the name of the real party in interest.While we stand by
our pronouncement in Philips Export on the importance of the corporate name to the
very existence of corporations and the significance thereof in the corporations right to
sue, we shall not go so far as to dismiss a case filed by the proper party using its
former name when adequate identification is presented. A real party in interest is the
party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.[14] There is no doubt in our minds that the party who
filed the present Petition, having presented sufficient evidence of its identity and being
represented by the same counsel as that of the defendant in the case sought to be
dismissed, is the entity that will be benefited if this Court grants the dismissal prayed
for.
Since the main objection of respondent to the verification and certification
against forum shopping likewise depends on the supposed inexistence of the
corporation named therein, we give no credit to said objection in light of the foregoing
discussion.
Propriety of the Resort to a
Petition for Certiorari with
the Court of Appeals
We have held time and again that an order denying a Motion to Dismiss is an
interlocutory order which neither terminates nor finally disposes of a case as it leaves
something to be done by the court before the case is finally decided on the merits. The
general rule, therefore, is that the denial of a Motion to Dismiss cannot be questioned
in a special civil action for Certiorari which is a remedy designed to correct errors of
jurisdiction and not errors of judgment.[15] However, we have likewise held that when
the denial of the Motion to Dismiss is tainted with grave abuse of discretion, the grant
of the extraordinary remedy of Certiorari may be justified. By grave abuse of discretion
is meant:
[S]uch capricious and whimsical exercise of judgment that is
equivalent to lack of jurisdiction. The abuse of discretion must be
grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so
patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act all in
contemplation of law.[16]
The resolution of the present Petition therefore entails an inquiry into whether
the Court of Appeals correctly ruled that the trial court did not commit grave abuse of
17
discretion in its denial of petitioners Motion to Dismiss. A mere error in judgment on
the part of the trial court would undeniably be inadequate for us to reverse the
disposition by the Court of Appeals.
Issues more properly
ventilated during the trial of
the case
As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782
on the following grounds: (a) lack of jurisdiction over the person of petitioner due to the
defective and improper service of summons; (b) failure of the Complaint to state a cause
of action and absence of a cause of action; (c) the action is barred by estoppel; and (d)
respondent did not come to court with clean hands.
As correctly ruled by both the trial court and the Court of Appeals, the alleged
absence of a cause of action (as opposed to the failure to state a cause of action), the
alleged estoppel on the part of petitioner, and the argument that respondent is in pari
delicto in the execution of the challenged contracts, are not grounds in a Motion to
Dismiss as enumerated in Section 1, Rule 16[17] of the Rules of Court. Rather, such
defenses raise evidentiary issues closely related to the validity and/or existence of
respondents alleged cause of action and should therefore be threshed out during the
trial.
As regards the allegation of failure to state a cause of action, while the same is
usually available as a ground in a Motion to Dismiss, said ground cannot be ruled
upon in the present Petition without going into the very merits of the main case.
It is basic that [a] cause of action is the act or omission by which a party
violates a right of another.[18] Its elements are the following: (1) a right existing in favor
of the plaintiff, (2) a duty on the part of the defendant to respect the plaintiff's right,
and (3) an act or omission of the defendant in violation of such right.[19] We have held
that to sustain a Motion to Dismiss for lack of cause of action, the complaint must
show that the claim for relief does not exist and not only that the claim was defectively
stated or is ambiguous, indefinite or uncertain.[20]
The trial court held that the Complaint in the case at bar contains all the
three elements of a cause of action, i.e., it alleges that: (1) plaintiff has the right to ask
for the declaration of nullity of the Hedging Contracts for being null and void and
contrary to Article 2018 of the Civil Code of the Philippines; (2) defendant has the
corresponding obligation not to enforce the Hedging Contracts because they are in the
nature of wagering or gambling agreements and therefore the transactions
implementing those contracts are null and void under Philippine laws; and (3)
defendant ignored the advice and intends to enforce the Hedging Contracts by
demanding financial payments due therefrom.[21]
The rule is that in a Motion to Dismiss, a defendant hypothetically admits the
truth of the material allegations of the ultimate facts contained in the plaintiff's
complaint.[22] However, this principle of hypothetical admission admits of
exceptions. Thus, in Tan v. Court of Appeals, [23] we held:
The flaw in this conclusion is that, while conveniently
echoing the general rule that averments in the complaint are
deemed hypothetically admitted upon the filing of a motion to
dismiss grounded on the failure to state a cause of action, it did not
take into account the equally established limitations to such
rule, i.e., that a motion to dismiss does not admit the truth of
mere epithets of fraud; nor allegations of legal conclusions; nor an
erroneous statement of law; nor mere inferences or conclusions from
facts not stated; nor mere conclusions of law; nor allegations of
fact the falsity of which is subject to judicial notice; nor matters of
evidence; nor surplusage and irrelevant matter; nor scandalous
matter inserted merely to insult the opposing party; nor to legally
impossible facts; nor to facts which appear unfounded by a record
incorporated in the pleading, or by a document referred to; and, nor
to general averments contradicted by more specific averments. A
more judicious resolution of a motion to dismiss, therefore,
necessitates that the court be not restricted to the consideration of
the facts alleged in the complaint and inferences fairly deducible
therefrom. Courts may consider other facts within the range of
judicial notice as well as relevant laws and jurisprudence which the
courts are bound to take into account, and they are also fairly
entitled to examine records/documents duly incorporated into
the complaint by the pleader himself in ruling on the demurrer
to the complaint.[24] (Emphases supplied.)
In the case at bar, respondent asserts in the Complaint that the Hedging
Contracts are void for being contrary to Article 2018[25] of the Civil Code. Respondent
claims that under the Hedging Contracts, despite the express stipulation for deliveries
of gold, the intention of the parties was allegedly merely to compel each other to pay the
difference between the value of the gold at the forward price stated in the contract and
its market price at the supposed time of delivery.
18
Whether such an agreement is void is a mere allegation of a conclusion of law,
which therefore cannot be hypothetically admitted. Quite properly, the relevant
portions of the contracts sought to be nullified, as well as a copy of the contract itself,
are incorporated in the Complaint. The determination of whether or not the Complaint
stated a cause of action would therefore involve an inquiry into whether or not the
assailed contracts are void under Philippine laws. This is, precisely, the very issue to be
determined in Civil Case No. 05-782. Indeed, petitioners defense against the charge of
nullity of the Hedging Contracts is the purported intent of the parties that actual
deliveries of gold be made pursuant thereto. Such a defense requires the presentation
of evidence on the merits of the case. An issue that requires the contravention of the
allegations of the complaint, as well as the full ventilation, in effect, of the main merits
of the case, should not be within the province of a mere Motion to Dismiss.[26] The trial
court, therefore, correctly denied the Motion to Dismiss on this ground.
It is also settled in jurisprudence that allegations of estoppel and bad faith
require proof. Thus, in Paraaque Kings Enterprises, Inc. v. Court of Appeals,[27] we ruled:
Having come to the conclusion that the complaint states a
valid cause of action for breach of the right of first refusal and that
the trial court should thus not have dismissed the complaint, we
find no more need to pass upon the question of whether the
complaint states a cause of action for damages or whether the
complaint is barred by estoppel or laches. As these
matters require presentation and/or determination of facts,
they can be best resolved after trial on the merits.[28] (Emphases
supplied.)
On the proposition in the Motion to Dismiss that respondent has come to
court with unclean hands, suffice it to state that the determination of whether one
acted in bad faith and whether damages may be awarded is evidentiary in
nature. Thus, we have previously held that [a]s a matter of defense, it can be best
passed upon after a full-blown trial on the merits.[29]
Jurisdiction over the person
of petitioner
Petitioner alleges that the RTC has not acquired jurisdiction over its person on
account of the improper service of summons. Summons was served on petitioner
through the DFA, with respondents counsel personally bringing the summons and
Complaint to the Philippine Consulate General in Sydney, Australia.

In the pleadings filed by the parties before this Court, the parties entered into
a lengthy debate as to whether or not petitioner is doing business in the
Philippines. However, such discussion is completely irrelevant in the case at bar, for
two reasons. Firstly, since the Complaint was filed on August 30, 2005, the provisions
of the 1997 Rules of Civil Procedure govern the service of summons. Section 12, Rule
14 of said rules provides:
Sec. 12. Service upon foreign private juridical entity. When
the defendant is a foreign private juridical entity which has
transacted business in the Philippines, service may be made on
its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents
within the Philippines. (Emphasis supplied.)
This is a significant amendment of the former Section 14 of said rule which previously
provided:
Sec. 14. Service upon private foreign corporations. If the
defendant is a foreign corporation, or a nonresident joint stock
company or association, doing business in the Philippines, service
may be made on its resident agent designated in accordance with
law for that purpose, or if there be no such agent, on the
government official designated by law to that effect, or on any of its
officers or agents within the Philippines. (Emphasis supplied.)
The coverage of the present rule is thus broader.[30] Secondly, the service of summons
to petitioner through the DFA by the conveyance of the summons to the Philippine
Consulate General in Sydney, Australia was clearly made not through the above-quoted
Section 12, but pursuant to Section 15 of the same rule which provides:
Sec. 15. 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
19
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 6; 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.
Respondent argues[31] that extraterritorial service of summons upon foreign
private juridical entities is not proscribed under the Rules of Court, and is in fact
within the authority of the trial court to adopt, in accordance with Section 6, Rule 135:
Sec. 6. Means to carry jurisdiction into effect. When by law
jurisdiction is conferred on a court or judicial officer, all auxiliary
writs, processes and other means necessary to carry it into effect
may be employed by such court or officer; and if the procedure to be
followed in the exercise of such jurisdiction is not specifically
pointed out by law or by these rules, any suitable process or mode of
proceeding may be adopted which appears comformable to the spirit
of said law or rules.
Section 15, Rule 14, however, is the specific provision dealing precisely with
the service of summons on a defendant which does not reside and is not found in the
Philippines, while Rule 135 (which is in Part V of the Rules of Court entitled Legal
Ethics) concerns the general powers and duties of courts and judicial officers.
Breaking down Section 15, Rule 14, it is apparent that there are only four
instances wherein a defendant who is a non-resident and is not found in the country
may be served with summons by extraterritorial service, to wit: (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 claims a lien or an
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; and (4) when the defendant non-resident's property has been attached
within the Philippines. In these instances, 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.[32]

Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd.
v. Dakila Trading Corporation[33] that:
Undoubtedly, extraterritorial service of summons
applies only where the action is in rem or quasi in rem, but not
if an action is in personam.
When the case instituted is an action in rem or quasi in
rem, Philippine courts already have jurisdiction to hear and decide
the case because, in actions in rem and 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. Thus, in such instance, extraterritorial
service of summons can be made upon the defendant. The said
extraterritorial service of summons is not for the purpose of vesting
the court with jurisdiction, but for complying with the requirements
of fair play or due process, so that the defendant 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. On the other hand, when the defendant or respondent
does not reside and is not found in the Philippines, and the
action involved is in personam, Philippine courts cannot try
any case against him because of the impossibility of acquiring
jurisdiction over his person unless he voluntarily appears in
court.[34](Emphases supplied.)
In Domagas v. Jensen,[35] we held that:
[T]he aim and object of an action determine its character. Whether a
proceeding is in rem, or in personam, or quasi in rem for that matter,
is determined by its nature and purpose, and by these only. A
proceeding in personam is a proceeding to enforce personal rights
and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the
exercise of ownership of, specific property, or seek to compel him to
control or dispose of it in accordance with the mandate of the
court. The purpose of a proceeding in personam is to impose,
through the judgment of a court, some responsibility or liability
directly upon the person of the defendant. Of this character are suits
20
to compel a defendant to specifically perform some act or actions to
fasten a pecuniary liability on him.[36]
It is likewise settled that [a]n action in personam is lodged against a person based on
personal liability; an action in rem is directed against the thing itself instead of the
person; while an action quasi in rem names a person as defendant, but its object is to
subject that persons interest in a property to a corresponding lien or obligation.[37]
The Complaint in the case at bar is an action to declare the loan and
Hedging Contracts between the parties void with a prayer for damages. It is a suit
in which the plaintiff seeks to be freed from its obligations to the defendant under a
contract and to hold said defendant pecuniarily liable to the plaintiff for entering into
such contract. It is therefore an action in personam, unless and until the plaintiff
attaches a property within the Philippines belonging to the defendant, in which case
the action will be converted to one quasi in rem.
Since the action involved in the case at bar is in personam and since the
defendant, petitioner Rothschild/Investec, does not reside and is not found in the
Philippines, the Philippine courts cannot try any case against it because of the
impossibility of acquiring jurisdiction over its person unless it voluntarily appears in
court.[38]
In this regard, respondent vigorously argues that petitioner should be held to
have voluntarily appeared before the trial court when it prayed for, and was actually
afforded, specific reliefs from the trial court.[39] Respondent points out that while
petitioners Motion to Dismiss was still pending, petitioner prayed for and was able to
avail of modes of discovery against respondent, such as written interrogatories,
requests for admission, deposition, and motions for production of documents.[40]
Petitioner counters that under this Courts ruling in the leading case of La
Naval Drug Corporation v. Court of Appeals,[41] a party may file a Motion to Dismiss on
the ground of lack of jurisdiction over its person, and at the same time raise affirmative
defenses and pray for affirmative relief, without waiving its objection to the acquisition
of jurisdiction over its person.[42]
It appears, however, that petitioner misunderstood our ruling in La Naval. A
close reading of La Naval reveals that the Court intended a distinction between the
raising of affirmative defenses in an Answer (which would not amount to acceptance of
the jurisdiction of the court) and the prayer for affirmative reliefs (which would be
considered acquiescence to the jurisdiction of the court):
In the same manner that a plaintiff may assert two or
more causes of action in a court suit, a defendant is likewise
expressly allowed, under Section 2, Rule 8, of the Rules of
Court, to put up his own defenses alternatively or even
hypothetically. Indeed, under Section 2, Rule 9, of the Rules of
Court, defenses and objections not pleaded either in a motion to
dismiss or in an answer, except for the failure to state a cause of
action, are deemed waived. We take this to mean that a defendant
may, in fact, feel enjoined to set up, along with his objection to the
court's jurisdiction over his person, all other possible defenses. It
thus appears that it is not the invocation of any of such defenses,
but the failure to so raise them, that can result in waiver or
estoppel. By defenses, of course, we refer to the grounds
provided for in Rule 16 of the Rules of Court that must be
asserted in a motion to dismiss or by way of affirmative
defenses in an answer.
Mindful of the foregoing, in Signetics Corporation vs.
Court of Appeals and Freuhauf Electronics Phils., Inc. (225
SCRA 737, 738), we lately ruled:
This is not to say, however, that the
petitioner's right to question the jurisdiction
of the court over its person is now to be
deemed a foreclosed matter. If it is true, as
Signetics claims, that its only involvement in the
Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that
TEAM Pacific is not its agent, then it cannot really
be said to be doing business in the Philippines. It
is a defense, however, that requires the
contravention of the allegations of the complaint,
as well as a full ventilation, in effect, of the main
merits of the case, which should not thus be
within the province of a mere motion to dismiss.
So, also, the issue posed by the petitioner as to
whether a foreign corporation which has done
business in the country, but which has ceased to
do business at the time of the filing of a
complaint, can still be made to answer for a cause
of action which accrued while it was doing
business, is another matter that would yet have to
await the reception and admission of
evidence. Since these points have seasonably
been raised by the petitioner, there should be
21
no real cause for what may understandably be
its apprehension, i.e., that by its participation
during the trial on the merits, it may, absent
an invocation of separate or independent
reliefs of its own, be considered to have
voluntarily submitted itself to the court's
jurisdiction.[43] (Emphases supplied.)
In order to conform to the ruling in La Naval, which was decided by this
Court in 1994, the former Section 23, Rule 14 [44] concerning voluntary appearance was
amended to include a second sentence in its equivalent provision in the 1997 Rules of
Civil Procedure:
SEC. 20. Voluntary appearance. The defendant's voluntary
appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant
shall not be deemed a voluntary appearance. (Emphasis
supplied.)
The new second sentence, it can be observed, merely mentions other grounds
in a Motion to Dismiss aside from lack of jurisdiction over the person of the
defendant. This clearly refers to affirmative defenses, rather than affirmative reliefs.
Thus, while mindful of our ruling in La Naval and the new Section 20, Rule
20, this Court, in several cases, ruled that seeking affirmative relief in a court is
tantamount to voluntary appearance therein.[45] Thus, in Philippine Commercial
International Bank v. Dy Hong Pi,[46] wherein defendants filed a Motion for Inhibition
without submitting themselves to the jurisdiction of this Honorable Court subsequent
to their filing of a Motion to Dismiss (for Lack of Jurisdiction), we held:
Besides, any lingering doubts on the issue of voluntary
appearance dissipate when the respondents' motion for inhibition is
considered. This motion seeks a sole relief: inhibition of Judge
Napoleon Inoturan from further hearing the case. Evidently, by
seeking affirmative relief other than dismissal of the case,
respondents manifested their voluntary submission to the
court's jurisdiction. It is well-settled that the active participation of
a party in the proceedings is tantamount to an invocation of the
 court's jurisdiction and a willingness to abide by the resolution of
the case, and will bar said party from later on impugning the court's
jurisdiction.[47] (Emphasis supplied.)
In view of the above, we therefore rule that petitioner, by seeking affirmative
reliefs from the trial court, is deemed to have voluntarily submitted to the jurisdiction
of said court. A party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and after obtaining or failing to obtain such relief, repudiate
or question that same jurisdiction.[48]Consequently, the trial court cannot be
considered to have committed grave abuse of discretion amounting to lack or excess of
jurisdiction in the denial of the Motion to Dismiss on account of failure to acquire
jurisdiction over the person of the defendant.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision
of the Court of Appeals dated September 8, 2006 and its Resolution dated December
12, 2006 in CA-G.R. SP No. 94382 are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
[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.
22
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 Valmontes 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 respondents counsel
in which, in regard to the partition of the property in question, she referred
private respondents counsel to her husband as the party to whom all communications
intended for her should be sent. The letter reads:
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: 21-2095
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 respondents
motion.
In its Order dated July 3, 1992, the trial court, denied private respondents
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 courts
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
wifes attorney (at least with regard to the dispute vis-a-vis [sic] the Paco property)
would appear to be feeble or trifling, if not incredible.
This view is bolstered by Atty. Valmontes 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
23
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 datedJuly 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 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 extraterritorially 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 the res, 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 respondents 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 defendants 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.
24
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
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 defendants
husband was binding on her. But the ruling in that case is justified because summons
were served upon defendants 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 defendants 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
husbands representative and attorney-in-fact in a civil case, which he had earlier filed
against William Gemperle. In fact Gemperles 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 respondent s attorney
that all communications intended for her should be addressed to her husband who is
also her lawyer at the latters 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 petitioners 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.
AUCTION IN MALINTA, INC., G.R. No. 173979
Petitioner,
Present:
- versus - Ynares-Santiago, J. (Chairperson),
Austria-Martinez,
Callejo, Sr.,
Assailed in this petition for review under Rule 45 of the Rules of Court is the
May 31, 2005 Decision[1] of the Court of Appeals in CA-G.R. CV No. 78456, which held
that venue was properly laid before the Regional Trial Court of Bulanao, Tabuk,
Kalinga (Kalinga RTC), and reversed the trial courts September 3, 2002
Resolution[2] dismissing the complaint of respondent Warren Embes Lubayen in Civil
Case No. 511, on the ground of improper venue.
The facts show that on October 24, 2001, respondent, a resident of Magsaysay, Tabuk,
Kalinga, filed with the Kalinga RTC a complaint[3] for damages against petitioner
Auction in Malinta, Inc., a corporation with business address at Malinta, Valenzuela
City, and engaged in public auction of heavy equipments, trucks, and assorted
machineries. Respondent alleged that in an auction conducted by petitioner on May
29, 2001, he was declared the highest bidder for a wheel loader T.C.M. 75B, series no.
3309. On June 7, 2001, respondent tendered the payment for the said item but
petitioner could no longer produce the loader. It offered a replacement but failed to
deliver the same up to the filing of the complaint. Hence, respondent instituted this
case to recover actual, moral, and exemplary damages plus attorneys fees.
Petitioner filed a motion to dismiss on the ground of improper venue. It argued that the
correct venue is the RTC of Valenzuela City pursuant to the stipulation in the Bidders
Application and Registration Bidding Agreement which states that:
ALL COURT LITIGATION PROCEDURES SHALL BE CONDUCTED IN
THE APPROPRIATE COURTS OF VALENZUELA CITY,
METRO MANILA.[4]

Chico-Nazario, and
In a Resolution dated September 3, 2002, the Kalinga RTC held that the clear
Nachura, JJ.
intention of the parties was to limit the venue to the proper court
of Valenzuela City and thus dismissed respondents complaint on the ground of
WARREN EMBES LUYABEN, improper venue.[5]
Respondent. Promulgated:

February 12, 2007 Aggrieved, respondent appealed to the Court of Appeals which reversed the
Resolution of the Kalinga RTC and reinstated the complaint. The dispositive portion
x ---------------------------------------------------------------------------------------- x thereof, reads:

DECISION WHEREFORE, the Resolution appealed from is hereby

REVERSED and SET ASIDE. The case is remanded to the RTC
which is ordered to reinstate plaintiffs complaint for damages.
YNARES-SANTIAGO, J.:

25
 SO ORDERED.[6]
Petitioners motion for reconsideration was denied; hence, the instant petition.
The sole issue is whether the stipulation in the parties Bidders Application
and Registration Bidding Agreement effectively limited the venue of the instant case
exclusively to the proper court of Valenzuela City.
The Court rules in the negative.
The general rule on the venue of personal actions, as in the instant case for
damages[7] filed by respondent, is embodied in Section 2, Rule 4 of the Rules of
Court. It provides:
Sec. 2. Venue of personal actions. All other actions may be
commenced and tried where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a nonresident defendant, where
he may be found, at the election of the plaintiff.
The aforequoted rule, however, finds no application where the parties, before
the filing of the action, have validly agreed in writing on an exclusive venue.[8] But
the mere stipulation on the venue of an action is not enough to preclude parties from
bringing a case in other venues. It must be shown that such stipulation is exclusive. In
the absence of qualifying or restrictive words, such as exclusively and waiving for this
purpose any other venue,[9] shall only preceding the designation of venue,[10] to the
exclusion of the other courts,[11] or words of similar import, the stipulation should be
deemed as merely an agreement on an additional forum, not as limiting venue to the
specified place.[12]
This has been the rule since the 1969 case of Polytrade Corporation v.
Blanco.[13] It was held therein that the clause [t]he parties agree to sue and be sued in
the Courts of Manila, does not preclude the filing of suits in the court which has
jurisdiction over the place of residence of the plaintiff or the defendant. The plain
meaning of the said provision is that the parties merely consented to be sued
in Manila considering that there are no qualifying or restrictive words which would
indicate that Manila, and Manila alone, is the agreed venue. It simply is permissive
and the parties did not waive their right to pursue remedy in the courts specifically
mentioned in Section 2 of Rule 4 of the Rules of Court.[14]
26
The Polytrade doctrine was further applied in the case of Unimasters
Conglomeration, Inc. v. Court of Appeals,[15] which analyzed the various jurisprudence
rendered after the Polytrade case. In Unimasters, we held that a stipulation stating that
[a]ll suits arising out of this Agreement shall be filed with/in the proper Courts of
Quezon City,[16] is only permissive and does not limit the venue to the Quezon
City courts. As explained in the said case:
In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue
of actions between them to be laid only and exclusively at a definite
place, and to disregard the prescriptions of Rule 4, agreements on
venue are not to be regarded as mandatory or restrictive, but merely
permissive, or complementary of said rule. The fact that in their
agreement the parties specify only one of the venues mentioned in
Rule 4, or fix a place for their actions different from those specified
by said rule, does not, without more, suffice to characterize the
agreement as a restrictive one. There must, to repeat, be
accompanying language clearly and categorically expressing their
purpose and design that actions between them be litigated only at
the place named by them, regardless of the general precepts of Rule
4; and any doubt or uncertainty as to the parties intentions must be
resolved against giving their agreement a restrictive or mandatory
aspect. Any other rule would permit of individual, subjective judicial
interpretations without stable standards, which could well result in
precedents in hopeless inconsistency.[17]
The rule enunciated in Unimasters and Polytrade was reiterated in
subsequent cases where the following agreements on venue were likewise declared to
be merely permissive and do not limit the venue to the place specified therein, to wit:
1. If court litigation becomes necessary to enforce collection, an
additional equivalent (sic) to 25% of the principal amount will be
charged. The agreed venue for such action is Makati, Metro Manila,
Philippines.[18]
2. In case of litigation hereunder, venue shall be in the City Court or
Court of First Instance of Manila as the case may be for
determination of any and all questions arising thereunder.[19]
Then too, the doctrine that absent qualifying or restrictive words, the venue
shall either be that stated in the law or rule governing the action or the one agreed in
the contract, was applied to an extra-judicial foreclosure sale under Act No.
3135.[20] In Langkaan Realty Development, Inc. v. United Coconut Planters
Bank,[21] where the provision on the venue employed the word shall to refer to the place Costs against petitioner.
where the foreclosure will be held, the Court ruled that said provision lack(s) qualifying
or restrictive words to indicate the exclusivity of the agreed forum, and therefore the
stipulated place is considered only as an additional, not a limiting venue.[22] The said
stipulation reads: SO ORDERED.

MA. TERESA CHAVES BIACO, G.R. No. 161417

Petitioner,
It is hereby agreed that in case of foreclosure of this Present:
mortgage under Act 3135, as amended, and Presidential Decree No.
385, the auction sale shall be held at the capital of the province, if QUISUMBING, J.,
the property is within the territorial jurisdiction of the province Chairperson,
concerned, or shall be held in the city, if the property is within the - versus - CARPIO,
territorial jurisdiction of the city concerned.[23] CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
PHILIPPINE COUNTRYSIDE RURAL
In the instant case, the stipulation in the parties agreement, i.e., all Court BANK,
litigation procedures shall be conducted in the appropriate Courts of Valenzuela City, Respondent. Promulgated:
Metro Manila, evidently lacks the restrictive and qualifying words that will limit venue February 8, 2007
exclusively to the RTC of Valenzuela City. Hence, the Valenzuela courts should only be
considered as an additional choice of venue to those mentioned under Section 2, Rule x----------------------------------------------------------------------------x
4 of the Rules of Court.Accordingly, the present case for damages may be filed with the
(a) RTC ofValenzuela City as stipulated in the bidding agreement; (b) RTC of Bulanao,
Tabuk, Kalinga which has jurisdiction over the residence of respondent (plaintiff); or DECISION
with the (c) RTC of Valenzuela City which has jurisdiction over the business address of
petitioner (defendant). The filing of the complaint in the RTC of Bulanao, Tabuk, TINGA, J.:
Kalinga, is therefore proper, respondent being a resident of Tabuk, Kalinga.
Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision[1] of the Court of
Appeals in CA-G.R. No. 67489 dated August 27, 2003, which denied her petition for
annulment of judgment, and the Resolution[2] dated December 15, 2003 which denied
The case of Hoechst Philippines, Inc. v. Torres,[24] promulgated in 1978, and her motion for reconsideration.
invoked by petitioner in its motion to dismiss, had already been superseded by current
decisions on venue. In the said case, the Court construed the proviso: [i]n case of any The facts as succinctly stated by the Court of Appeals are as follows:
litigation arising out of this agreement, the venue of action shall be in the competent
courts of the Province of Rizal,[25] as sufficient to limit the venue to the proper court of Ernesto Biaco is the husband of petitioner Ma. Teresa
Rizal. However, in Supena v. De la Rosa,[26] we ruled that Hoechst had been rendered Chaves Biaco. While employed in the Philippine Countryside Rural
obsolete by recent jurisprudence applying the doctrine enunciated in Polytrade. Bank (PCRB) as branch manager, Ernesto obtained several loans
from the respondent bank as evidenced by the following promissory
notes:

In sum, we find that the Court of Appeals correctly declared that venue in the Feb. 17, 1998 P 65,000.00
instant case was properly laid with the RTC of Bulanao, Tabuk, Kalinga. Mar. 18, 1998 30,000.00
May 6, 1998 60,000.00
May 20, 1998 350,000.00
July 30, 1998 155,000.00
WHEREFORE, the petition is DENIED. The May 31, 2005 Decision of the Sept. 8, 1998 40,000.00
Court of Appeals in CA-G.R. CV No. 78456 which reversed the September 3, 2002 Sept. 8, 1998 120,000.00
Resolution of the Regional Trial Court of Bulanao, Tabuk, Kalinga; reinstated the
complaint in Civil Case No. 511; and remanded the case to the said court, As security for the payment of the said loans, Ernesto
is AFFIRMED. executed a real estate mortgage in favor of the bank covering the
parcel of land described in Original Certificate of Title (OCT) No. P-
27
14423. The real estate mortgages bore the signatures of the spouses
Biaco.
When Ernesto failed to settle the above-mentioned loans on
its due date, respondent bank through counsel sent him a written
demand on September 28, 1999. The amount due as of September
30, 1999 had already reached ONE MILLION EIGHTY THOUSAND
SIX HUNDRED SEVENTY SIX AND FIFTY CENTAVOS
(P1,080,676.50).
The written demand, however, proved futile.
On February 22, 2000, respondent bank filed a complaint
for foreclosure of mortgage against the spouses Ernesto and Teresa
Biaco before the RTC of Misamis Oriental. Summons was served to
the spouses Biaco through Ernesto at his office (Export and Industry
Bank) located at Jofelmor Bldg., Mortola Street, Cagayan de Oro
City.
Ernesto received the summons but for unknown reasons,
he failed to file an answer. Hence, the spouses Biaco were declared
in default upon motion of the respondent bank. The respondent
bank was allowed to present its evidence ex parte before the Branch
Clerk of Court who was then appointed by the court as
Commissioner.
Arturo Toring, the branch manager of the respondent bank,
testified that the spouses Biaco had been obtaining loans from the
bank since 1996 to 1998. The loans for the years 1996-1997 had
already been paid by the spouses Biaco, leaving behind a balance
of P1,260,304.33 representing the 1998 loans. The amount being
claimed is inclusive of interests, penalties and service charges as
agreed upon by the parties. The appraisal value of the land subject
of the mortgage is only P150,000.00 as reported by the Assessors
Office.
Based on the report of the Commissioner, the respondent
judge ordered as follows:
WHEREFORE, judgment is hereby rendered
ordering defendants spouses ERNESTO R. BIACO and MA.
THERESA [CHAVES] BIACO to pay plaintiff bank within a
period of not less than ninety (90) days nor more than one
hundred (100) days from receipt of this decision the loan of
ONE MILLION TWO HUNDRED SIXTY THOUSAND THREE
HUNDRED FOUR PESOS and THIRTY THREE CENTAVOS
(P1,260,304.33) plus litigation expenses in the amount of
SEVEN THOUSAND SIX HUNDRED FORTY PESOS
(P7,640.00) and attorneys fees in the amount of TWO
HUNDRED FIFTY TWO THOUSAND THIRTY PESOS and
28
FORTY THREE CENTAVOS (P252,030.43) and cost of this
suit.
In case of non-payment within the period, the
Sheriff of this Court is ordered to sell at public auction the
mortgaged Lot, a parcel of registered land (Lot 35802, Cad.
237 {Lot No. 12388-B, Csd-10-002342-D}), located at Gasi,
Laguindingan, Misamis Oriental and covered by TCT No. P-
14423 to satisfy the mortgage debt, and the surplus if there
be any should be delivered to the defendants spouses
ERNESTO and MA. THERESA [CHAVES] BIACO. In the
event however[,] that the proceeds of the auction sale of the
mortgage[d] property is not enough to pay the outstanding
obligation, the defendants are ordered to pay any deficiency
of the judgment as their personal liability.
SO ORDERED.
On July 12, 2000, the sheriff personally served the above-
mentioned judgment to Ernesto Biaco at his office at Export and
Industry Bank. The spouses Biaco did not appeal from the adverse
decision of the trial court. On October 13, 2000, the respondent
bank filed an ex parte motion for execution to direct the sheriff to
sell the mortgaged lot at public auction. The respondent bank
alleged that the order of the court requiring the spouses Biaco to pay
within a period of 90 days had passed, thus making it necessary to
sell the mortgaged lot at public auction, as previously mentioned in
the order of the court. The motion for execution was granted by the
trial court per Order dated October 20, 2000.
On October 31, 2000, the sheriff served a copy of the writ
of execution to the spouses Biaco at their residence in #92
9th Street, Nazareth, Cagayan de Oro City. The writ of execution was
personally received by Ernesto. By virtue of the writ of execution
issued by the trial court, the mortgaged property was sold at public
auction in favor of the respondent bank in the amount of ONE
HUNDRED FIFTY THOUSAND PESOS (P150,000.00).
The amount of the property sold at public auction being
insufficient to cover the full amount of the obligation, the
respondent bank filed an ex parte motion for judgment praying for
the issuance of a writ of execution against the other properties of the
spouses Biaco for the full settlement of the remaining obligation.
Granting the motion, the court ordered that a writ of execution be
issued against the spouses Biaco to enforce and satisfy the
judgment of the court for the balance of ONE MILLION THREE
HUNDRED SIXTY NINE THOUSAND NINE HUNDRED SEVENTY
FOUR PESOS AND SEVENTY CENTAVOS (P1,369,974.70).
The sheriff executed two (2) notices of levy against
properties registered under the name of petitioner Ma. Teresa
Chaves Biaco. However, the notices of levy were denied registration
because Ma. Teresa had already sold the two (2) properties to her
daughters on April 11, 2001.[3]

Petitioner sought the annulment of the Regional Trial Court decision
contending that extrinsic fraud prevented her from participating in the judicial
foreclosure proceedings. According to her, she came to know about the judgment in
the case only after the lapse of more than six (6) months after its finality. She claimed
that extrinsic fraud was perpetrated against her because the bank failed to verify the
authenticity of her signature on the real estate mortgage and did not inquire into the
reason for the absence of her signature on the promissory notes. She moreover
asserted that the trial court failed to acquire jurisdiction because summons were
served on her through her husband without any explanation as to why personal
service could not be made.
The Court of Appeals considered the two circumstances that kept petitioner
in the dark about the judicial foreclosure proceedings: (1) the failure of the sheriff to
personally serve summons on petitioner; and (2) petitioners husbands concealment of
his knowledge of the foreclosure proceedings. On the validity of the service of
summons, the appellate court ruled that judicial foreclosure proceedings are
actions quasi in rem. As such, jurisdiction over the person of the defendant is not
essential as long as the court acquires jurisdiction over the res. Noting that the
spouses Biaco were not opposing parties in the case, the Court of Appeals further
ruled that the fraud committed by one against the other cannot be considered extrinsic
fraud.
Her motion for reconsideration having been denied, petitioner filed the instant
Petition for Review,[4] asserting that even if the action is quasi in rem, personal service
of summons is essential in order to afford her due process.The substituted service
made by the sheriff at her husbands office cannot be deemed proper service absent
any explanation that efforts had been made to personally serve summons upon her but
that such efforts failed. Petitioner contends that extrinsic fraud was perpetrated not so
much by her husband, who did not inform her of the judicial foreclosure proceedings,
but by the sheriff who allegedly connived with her husband to just leave a copy of the
summons intended for her at the latters office.
Petitioner further argues that the deficiency judgment is a personal judgment
which should be deemed void for lack of jurisdiction over her person.
Respondent PCRB filed its Comment,[5] essentially reiterating the appellate
courts ruling. Respondent avers that service of summons upon the defendant is not
necessary in actions quasi in rem it being sufficient that the court acquire jurisdiction
over the res. As regards the alleged conspiracy between petitioners husband and the
sheriff, respondent counters that this is a new argument which cannot be raised for
the first time in the instant petition.
We required the parties to file their respective memoranda in the
Resolution[6] dated August 18, 2004. Accordingly, petitioner filed her
Memorandum[7] dated October 10, 2004, while respondent filed its Memorandum for
Respondent[8] dated September 9, 2004.
Annulment of judgment is a recourse equitable in character, allowed only in
exceptional cases as where there is no available or other adequate
remedy. Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure (Rules
of Court) provide that judgments may be annulled only on grounds of extrinsic fraud
and lack of jurisdiction or denial of due process.[9]
29
Petitioner asserts that extrinsic fraud consisted in her husbands concealment
of the loans which he obtained from respondent PCRB; the filing of the complaint for
judicial foreclosure of mortgage; service of summons; rendition of judgment by default;
and all other proceedings which took place until the writ of garnishment was served.[10]
Extrinsic fraud exists when there is a fraudulent act committed by
the prevailing party outside of the trial of the case, whereby the defeated party was
prevented from presenting fully his side of the case by fraud or deception practiced on
him by the prevailing party.[11] Extrinsic fraud is present where the unsuccessful
party had been prevented from exhibiting fully his case, by fraud or deception
practiced on him by his opponent, as by keeping him away from court, a false promise
of a compromise; or where the defendant never had knowledge of the suit, being kept
in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without
authority assumes to represent a party and connives at his defeat; or where the
attorney regularly employed corruptly sells out his clients interest to the other
side. The overriding consideration is that the fraudulent scheme of the prevailing
litigant prevented a party from having his day in court.[12]
With these considerations, the appellate court acted well in ruling that there
was no fraud perpetrated by respondent bank upon petitioner, noting that the spouses
Biaco were co-defendants in the case and shared the same interest.Whatever fact or
circumstance concealed by the husband from the wife cannot be attributed to
respondent bank.
Moreover, petitioners allegation that her signature on the promissory notes
was forged does not evince extrinsic fraud. It is well-settled that the use of forged
instruments during trial is not extrinsic fraud because such evidence does not
preclude the participation of any party in the proceedings.[13]
The question of whether the trial court has jurisdiction depends on the
nature of the action, i.e., whether the action is in personam, in rem, or quasi in
rem. The rules on service of summons under Rule 14 of the Rules of Court likewise
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. 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.[14]
In an action in personam, jurisdiction over the person of the defendant is
necessary for the court to validly try and decide the case. 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. Jurisdiction over the res is acquired either (1) by the seizure of the property
under legal process, whereby it is brought into actual custody of the law; or (2) as a
result of the institution of legal proceedings, in which the power of the court is
recognized and made effective.[15]
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.[16]
 A resident defendant who does not voluntarily appear in court, such as
petitioner in this case, must be personally served with summons as provided under
Sec. 6, Rule 14 of the Rules of Court. If she cannot be personally served with summons
within a reasonable time, substituted service may be effected (1) by leaving copies of
the summons at the defendants residence with some person of suitable age and
discretion then residing therein, or (2) by leaving the copies at defendants office or
regular place of business with some competent person in charge thereof in accordance
with Sec. 7, Rule 14 of the Rules of Court.
In this case, the judicial foreclosure proceeding instituted by respondent
PCRB undoubtedly vested the trial court with jurisdiction over the res. A judicial
foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the person
of petitioner is not required, it being sufficient that the trial court is vested with
jurisdiction over the subject matter.
There is a dimension to this case though that needs to be delved
into.Petitioner avers that she was not personally served summons. Instead, summons
was served to her through her husband at his office without any explanation as to why
the particular surrogate service was resorted to. The Sheriffs Return of Service
dated March 21, 2000 states:
xxxx
That on March 16, 2000, the undersigned served the copies
of Summons, complaint and its annexes to the defendants Sps.
Ernesto R. & Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,]
defendant of the above-entitled case at his office EXPORT &
INDUSTRY
BANK, Jofelmore Bldg.[,] Mortola St., Cagayan de Oro City and he
acknowledged receipt thereof as evidenced with his signature
appearing on the original copy of the Summons.[17] [Emphasis
supplied]
Without ruling on petitioners allegation that her husband and the sheriff
connived to prevent summons from being served upon her personally, we can see that
petitioner was denied due process and was not able to participate in the judicial
foreclosure proceedings as a consequence. The violation of petitioners constitutional
right to due process arising from want of valid service of summons on her warrants the
annulment of the judgment of the trial court.
There is more, the trial court granted respondent PCRBs ex-parte motion for
deficiency judgment and ordered the issuance of a writ of execution against the
spouses Biaco to satisfy the remaining balance of the award. In short, the trial court
went beyond its jurisdiction over the res and rendered a personal judgment against the
spouses Biaco. This cannot be countenanced.
In Sahagun v. Court of Appeals,[18] suit was brought against a non-resident
defendant, Abelardo Sahagun, and a writ of attachment was issued and subsequently
levied on a house and lot registered in his name. Claiming ownership of the house, his
wife, Carmelita Sahagun, filed a motion to intervene. For failure of plaintiff to serve
summons extraterritorially upon Abelardo, the complaint was dismissed without
prejudice.
Subsequently, plaintiff filed a motion for leave to serve summons by
publication upon Abelardo. The trial court granted the motion. Plaintiff later filed an
30
amended complaint against Abelardo, this time impleading Carmelita and Rallye as
additional defendants. Summons was served on Abelardothrough publication in
the Manila Evening Post. Abelardo failed to file an answer and was declared in
default. Carmelita went on certiorari to the Court of Appeals assailing as grave abuse
of discretion the declaration of default of Abelardo. The Court of Appeals dismissed the
petition and denied reconsideration.
In her petition with this Court, Carmelita raised the issue of whether the trial
court acquired jurisdiction over her husband, a non-resident defendant, by the
publication of summons in a newspaper of general circulation in the Philippines. The
Court sustained the correctness of extrajudicial service of summons by publication in
such newspaper.
The Court explained, citing El Banco Espaol-Filipino v. Palanca,[19]that
foreclosure and attachment proceedings are both actions quasi in rem. As such,
jurisdiction over the person of the (non-resident) defendant is not essential. Service of
summons on a non-resident defendant who is not found in the country is required, not
for purposes of physically acquiring jurisdiction over his person but simply in
pursuance of the requirements of fair play, so that he may be informed of the
pendency of the action against him and the possibility that property belonging to him
or in which he has an interest may be subjected to a judgment in favor of a resident,
and that he may thereby be accorded an opportunity to defend in the action, should he
be so minded.
Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et.
al.[20] and Perkins v. Dizon, et al.[21] that in a proceeding in rem or quasi in rem, the only
relief that may be granted by the court against a defendant over whose person it has
not acquired jurisdiction either by valid service of summons or by voluntary
submission to its jurisdiction, is limited to the res.
Similarly, in this case, while the trial court acquired jurisdiction over the res,
its jurisdiction is limited to a rendition of judgment on the res. It cannot extend its
jurisdiction beyond the res and issue a judgment enforcing petitioners personal
liability. In doing so without first having acquired jurisdiction over the person of
petitioner, as it did, the trial court violated her constitutional right to due process,
warranting the annulment of the judgment rendered in the case.
WHEREFORE, the instant petition is GRANTED. The Decision dated August
27, 2003 and the Resolution dated December 15, 2003 of the Court of Appeals in CA-
G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11, 2000 and Order
dated February 9, 2001 of the Regional Trial Court ofCagayan de Oro City, Branch 20,
are likewise SET ASIDE.
SO ORDERED.
PERKIN ELMER SINGAPORE PTE G.R. No. 172242
LTD.,
Present:
Petitioner,
YNARES-
SANTIAGO, J.,Chairperson,
AUSTRIA-MARTINEZ,
 CHICO-NAZARIO, and
- versus - NACHURA, JJ.
Promulgated:
DAKILA TRADING CORPORATION, August 14, 2007
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
The case before this Court is a Petition for Review[1] on Certiorariunder Rule
45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the
Decision,[2] dated 4 April 2006, of the Court of Appeals in CA-G.R. SP No. 78981, which
affirmed the Orders, dated 4 November 2002[3] and 20 June 2003,[4] of the
Mandaluyong City Regional Trial Court (RTC), Branch 212, in Civil Case No. MC99-
605, which, in turn, denied the Motion to Dismiss and subsequent Motion for
Reconsideration of herein petitioner Perkin Elmer Singapore Pte Ltd.
Petitioner is a corporation duly organized and existing under the laws
of Singapore. It is not considered as a foreign corporation doing business in
the Philippines. Herein respondent Dakila Trading Corporation is a corporation
organized and existing under Philippine laws, and engaged in the business of selling
and leasing out laboratory instrumentation and process control instrumentation, and
trading of laboratory chemicals and supplies.
The antecedents of the present case are as follows:
31
Respondent entered into a Distribution Agreement[5] on 1 June
1990with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a corporation duly
organized and existing under the laws of Singapore and engaged in the business of
manufacturing, producing, selling or distributing various laboratory/analytical
instruments. By virtue of the said agreement, PEIA appointed the respondent as the
sole distributor of its products in the Philippines. The respondent was likewise granted
the right to purchase and sell the products of PEIA subject to the terms and conditions
set forth in the Distribution Agreement. PEIA, on the other hand, shall give respondent
a commission for the sale of its products in the Philippines.
Under the same Distribution Agreement, respondent shall order the products
of PEIA, which it shall sell in the Philippines, either from PEIA itself or from Perkin-
Elmer Instruments (Philippines) Corporation (PEIP), an affiliate of PEIA. PEIP is a
corporation duly organized and existing under Philippine laws, and involved in the
business of wholesale trading of all kinds of scientific, biotechnological, and analytical
instruments and appliances.PEIA allegedly owned 99% of the shares of PEIP.
On 2 August 1997, however, PEIA unilaterally terminated the Distribution
Agreement, prompting respondent to file before the RTC of Mandaluyong City, Branch
212, a Complaint[6] for Collection of Sum of Money and Damages with Prayer for
Issuance of a Writ of Attachment against PEIA and PEIP, docketed as Civil Case No.
MC99-605.
The RTC issued an Order,[7] dated 26 March 1999, denying respondents
prayer for the issuance of a writ of attachment. The respondent moved for the
reconsideration of the said Order but it was denied in another Order, dated 11
January 2000.[8]
Respondent then filed Ex-Parte Motions for Issuance of Summons and for
Leave of Court to Deputize Respondents General Manager, Richard A. Tee, to Serve
Summons Outside of the Philippines,[9] which the RTC granted in its Order, dated 27
April 2000.[10] Thus, an Alias Summons, dated 4 September 2000, was issued by the
RTC to PEIA. But the said Alias Summons was served on 28 September 2000 and
received by Perkinelmer Asia, a Singaporean based sole proprietorship, owned by the
petitioner and, allegedly, a separate and distinct entity from PEIA.
PEIP moved to dismiss[11] the Complaint filed by respondent on the ground
that it states no cause of action. Perkinelmer Asia, on the other hand, through its
counsel, sent letters, dated 12 October 2000[12] and 15 November 2000,[13] to the
respondent and to the RTC, respectively, to inform them of the wrongful service of
summons upon Perkinelmer Asia.
 Accordingly, respondent filed an Ex-Parte Motion to Admit Amended
Complaint, together with the Amended Complaint claiming that PEIA had become a
sole proprietorship[14] owned by the petitioner, and subsequently changed its name to
Perkinelmer Asia. Being a sole proprietorship of the petitioner, a change in PEIAs name
and juridical status did not detract from the fact that all its due and outstanding
obligations to third parties were assumed by the petitioner. Hence, in its Amended
Complaint[15] respondent sought to change the name of PEIA to that of the
petitioner. In an Order, dated 24 July 2001,[16] the RTC admitted the Amended
Complaint filed by the respondent.Respondent then filed another Motion [17] for the
Issuance of Summons and for Leave of Court to Deputize Respondents General
Manager, Richard A. Tee, to Serve Summons Outside the Philippines. In another
Order, dated 4 March 2002,[18] the RTC deputized respondents General Manager to
serve summons on petitioner in Singapore. The RTC thus issued summons[19] to the
petitioner. Acting on the said Order, respondents General Manager went
to Singapore and served summons on the petitioner.
The [petitioner] hinges its dismissal on the failure of the [respondent]
to state a cause of action. The [RTC] would like to emphasize that in
a Motion to Dismiss, it hypothetically admits the truth of the facts
alleged in a complaint.
When the ground for dismissal is that the complaint states no cause
of action, such fact can be determined only from the facts alleged in
the complaint x x x and from no other x x x and the Court cannot
consider other matters aliunde x x x. This implies that the issue
must be passed upon on the basis of the allegations and declare
them to be false, otherwise it would be a procedural error and a
denial of due process to the [respondent] x x x.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion
to Dismiss filed by PEIP, compelling the latter to file its Answer to the Amended The three (3) essential elements of a cause of action are the
Complaint. following:

Petitioner subsequently filed with the RTC a Special Appearance and Motion a) The plaintiffs legal rights;
to Dismiss[20] respondents Amended Complaint on 30 May 2002 based on the following
grounds: (1) the RTC did not acquire jurisdiction over the person of the petitioner; (2) b) A correlative obligation of the defendant;
the respondent failed to state a cause of action against the petitioner because it is not
the real party-in-interest; (3) even assuming arguendo that the respondent correctly c) The omission of the defendant in violation of the
filed the case against the petitioner, the Distribution Agreement which was the basis of legal rights.
its claim grants PEIA the right to terminate the contract at any time; and (4) the venue
was improperly laid. The RTC in its Order, dated 4 November 2002, denied petitioners
Motion to Dismiss, ratiocinating as follows:
A cursory reading of the Amended Complaint would reveal
that all of the essential elements of a cause of action are attendant
in the Amended Complaint.
Prescinding from the above arguments of both parties, the [RTC] is
inclined to DENY the Motion to Dismiss.

As for the contention that venue was improperly laid, x x x, the

[RTC] in its ultimate desire that the ends of justice could be served
A careful scrutiny on (sic) the allegation in the (Amended) Complaint in its fullest, cannot rule that venue was improperly laid.
would show that [herein respondent] alleges ownership by the
[herein petitioner] of shares of stocks in the [PEIP]. Such allegation
of ownership of shares of stocks by the [petitioner] would reveal that
there is an allegation of personal property in the Philippines. Shares
xxxx
of stocks represent personal property of the shareholder. Thus, it
follows that even though the Amended Complaint is primarily for
damages, it does relate to a property of the [petitioner], to which the
latter has a claim interest (sic), or an actual or contingent lien,
which will make it fall under one of the requisite (sic) for The stipulation as to the venue of a prospective action does not
extraterritorial service under Section 15, Rule 14, of the Rules of preclude the filing of the suit in the residence of the [respondent]
Court. Thus, it could be gainfully said that the summons had been under Section 2, Rule 4, Rules of Court, especially where the venue
validly served for [RTC] to acquire jurisdiction over the [petitioner]. stipulation was imposed by the [petitioner] for its own benefits.

32
 WHETHER OR NOT THE COURT OF APPEALS
SHOULD HAVE GRANTED THE PETITION
xxxx FOR CERTIORARI AND REVERSED THE RTC
ORDERS ON THE GROUND THAT THE
AMENDED COMPLAINT FAILED TO STATE A
CAUSE OF ACTION AGAINST PETITIONER.
The [RTC] further believes that it is imperative that in order to ferret
out the truth, a full-blown trial is necessary for parties to be able to
prove or disprove their allegations.[21]
1. BASED ON THE ALLEGATIONS IN
Petitioner moved for the reconsideration of the aforesaid Order but, it was THE EX-PARTE MOTION TO ADMIT AMENDED
denied by the RTC in its Order, dated 20 June 2003. COMPLAINT, AMENDED COMPLAINT, AND ALL
DOCUMENTS ATTACHED AND/OR RELATED
THERETO, PETITIONER IS NOT THE REAL
PARTY-IN-INTEREST DEFENDANT IN THE CASE
Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the BELOW.
1997 Revised Rules of Civil Procedure with application for temporary restraining order
and/or preliminary injunction before the Court of Appeals alleging that the RTC
committed grave abuse of discretion amounting to lack or excess of jurisdiction in
refusing to dismiss the Amended Complaint. The Court of Appeals never issued any 2. ASSUMING ARGUENDO THAT
temporary restraining order or writ of injunction. On 4 April 2006, the Court of RESPONDENT DAKILA FILED THIS CASE
Appeals rendered a Decision affirming the RTC Orders of 4 November 2002 and 20 AGAINST THE CORRECT [PARTY], INASMUCH AS
June 2003. THE DISTRIBUTION AGREEMENT DATED 1
JUNE 1990 GRANTS [PEIA] THE RIGHT TO
TERMINATE THE CONTRACT AT ANY TIME,
RESPONDENT DAKILA FAILS TO STATE A
This brings us to the present Petition before this Court wherein petitioner CAUSE OF ACTION IN THE CASE BELOW.
raised the following issues.

B.
I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED

REVERSIBLE ERROR IN NOT RULING THAT THE SERVICE OF WHETHER OR NOT THE COURT OF APPEALS
SUMMONS ON PETITIONER WAS DEFECTIVE AND THAT THE SHOULD HAVE GRANTED THE PETITION
TRIAL COURT THUS FAILED TO ACQUIRE JURISDICTION OVER FOR CERTIORARI AND REVERSED THE RTC
THE PERSON OF THE PETITIONER. ORDERS ON THE GROUND OF IMPROPER
VENUE.

II.
III.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR IN RULING THAT THE SOLE ISSUE IN THE
PETITION FOR CERTIORARI FILED BEFORE IT IS THE QUESTION
OF WHETHER THE TRIAL COURT ACQUIRED JURISDICTION WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY
OVER THE PERSON OF THE PETITIONER THROUGH THE RESTRAINING ORDER AND/OR WRIT OF INJUNCTION.
EXTRATERRITORIAL SERVICE OF SUMMONS.

A.

33
 The foregoing issues raised by petitioner essentially requires this Court to
make a determination of the (1) proper service of summons and acquisition of
jurisdiction by the RTC over the person of the petitioner; (2) existence of a cause of
action against petitioner in respondents Amended Complaint; and (3) proper venue for
respondents civil case against petitioner.
Petitioner contends that Civil Case No. MC99-605 involves an action for
collection of sum of money and damages arising from the alleged breach of the
Distribution Agreement. The action is one in personam, or an action against a person
based on his personal liability; and for the court a quo to acquire jurisdiction over the
person of the petitioner, personal service of summons, and not extraterritorial service
of summons, must be made within the state even if the petitioner is a non-
resident. Petitioner avers that extraterritorial service of summons stated under Section
15, Rule 14 of the 1997 Revised Rules of Civil Procedure, is only proper in in
rem and quasi in rem cases; thus, resort to an extraterritorial service of summons in
the case at bar was erroneous. Petitioner asseverates that the allegations in the
respondents Amended Complaint that the petitioner has personal properties within the
Philippines does not make the present case one that relates to, or the subject of which
is, property within the Philippines warranting the extraterritorial service of summons
under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner
states that for an action to be considered as one that relates to, or the subject of which
is, property within the Philippines, the main subject matter of the action must be the
property within the Philippines itself, and such was not the situation in this
case. Likewise, the prayer in respondents Amended Complaint for the issuance of a
writ of attachment over the personal property of PEIP, which is 99% owned by
petitioner (as the supposed successor of PEIA), did not convert the action from one in
personam to one that is quasi in rem. Also, the petitioner points out that since the
respondents prayer for the issuance of a writ of attachment was denied by the RTC in
its Order, dated 26 March 1999, then the nature of Civil Case No. MC99-605
remains in personam, contrary to the ruling of the Court of Appeals that by the
attachment of the petitioners interest in PEIP the action in personam was converted to
an action quasi in rem. Resultantly, the extraterritorial service of summons on the
petitioner was not validly effected, and did not give the RTC jurisdiction over the
petitioner.
Petitioner further argues that the appellate court should have granted its
Petition for Certiorari on the ground that the RTC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in refusing to dismiss respondents
Amended Complaint for failure to state a cause of action against petitioner which was
not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that it had
never used the name PEIA as its corporate name, and neither did it change its name
from that of PEIA. Petitioner stresses that PEIA is an entirely different corporate entity
that is not connected in whatever manner to the petitioner. Even
assuming arguendo that petitioner is the real party-in-interest in Civil Case No. MC99-
605 or that petitioner and PEIA are one and the same entity, petitioner still avows that
the respondent failed to state a cause of action against it because the Distribution
Agreement expressly grants PEIA the right to terminate the said contract at any time.
34
Lastly, it is the contention of the petitioner that the appellate court should
have granted its Petition for Certiorari because the RTC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in refusing to dismiss Civil Case
No. MC99-605 for having been filed in an improper venue. Petitioner asserts that in
the Distribution Agreement entered into between the respondent and PEIA, both had
mutually agreed to the exclusive jurisdiction of the courts of Singapore or of
the Philippines as elected by PEIA. Absent any waiver by PEIA of its right to choose the
venue of the dispute, the Complaint filed by the respondent before the RTC in
the Philippines should have been dismissed on the ground of improper venue.
The Petition is meritorious.
Jurisdiction is the power with which courts are invested for administering
justice; that is, for hearing and deciding cases. In order for the court to have authority
to dispose of the case on the merits, it must acquire jurisdiction over the subject
matter and the parties.[22]
Jurisdiction of the court over the subject matter is conferred only by the
Constitution or by law. It is determinable on the basis of allegations in the
complaint.[23]
Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint,
while jurisdiction over the defendants in a civil case 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. If the defendants
have not been summoned, unless they voluntarily appear in court, the court acquires
no jurisdiction over their persons and a judgment rendered against them is null and
void. To be bound by a decision, a party should first be subjected to the courts
jurisdiction.[24]
Thus, one of the modes of acquiring jurisdiction over the person of the
defendant or respondent in a civil case is through service of summons. It is intended to
give notice to the defendant or respondent that a civil action has been commenced
against him. The defendant or respondent is thus put on guard as to the demands of
the plaintiff or the petitioner.[25]
The proper service of summons differs depending on the nature of the civil
case instituted by the plaintiff or petitioner: whether it is in personam, in rem, or quasi
in rem. Actions in personam, are those actions brought against a person on the basis of
his personal liability; actions in rem are actions against the thing itself instead of
against the person; and actions are quasi in rem, where an individual is named as
defendant and the purpose of the proceeding is to subject his or her interest in a
property to the obligation or loan burdening the property.[26]
Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there
are only four instances wherein a defendant who is a non-resident and is not found in
the country may be served with summons by extraterritorial service, to wit: (1) when
the action affects the personal status of the plaintiff; (2) when the action relates to, or
the subject of which is property, within the Philippines, in which the defendant claims
a lien or an 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; and (4) when the defendant non-residents property has been
attached within the Philippines. In these instances, 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.[27]
Undoubtedly, extraterritorial service of summons applies only where the
action is in rem or quasi in rem, but not if an action is in personam.
When the case instituted is an action in rem or quasi in rem, Philippine courts
already have jurisdiction to hear and decide the case because, in actions in
rem and 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.[28] Thus, in such instance, extraterritorial service of summons can be made
upon the defendant. The said extraterritorial service of summons is not for the purpose
of vesting the court with jurisdiction, but for complying with the requirements of fair
play or due process, so that the defendant 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.[29] On the other
hand, when the defendant or respondent does not reside and is not found in
the Philippines,[30] and the action involved is in personam, Philippine courts cannot try
any case against him because of the impossibility of acquiring jurisdiction over his
person unless he voluntarily appears in court.[31]
In the case at bar, this Court sustains the contention of the petitioner that
there can never be a valid extraterritorial service of summons upon it, because the
case before the court a quo involving collection of a sum of money and damages is,
indeed, an action in personam, as it deals with the personal liability of the petitioner to
the respondent by reason of the alleged unilateral termination by the former of the
Distribution Agreement. Even the Court of Appeals, in its Decision dated 4 April 2004,
upheld the nature of the instant case as an action in personam. In the said Decision
the appellate court ruled that:
35
In the instant petition, [respondents] cause of action in
Civil Case No. MC99-605 is anchored on the claim that petitioner
unilaterally terminated the Distribution Agreement. Thus,
[respondent] prays in its [C]omplaint that Upon the filing of the
Complaint, issue an Order fixing the amount of the bond and issue a
writ of attachment requiring the sheriff to attach the properties of
[Perkin-Elmer Philippines], which are not exempt from execution, and
as much as may be sufficient to satisfy [respondents] demands.
The action instituted by [respondent] affects the parties
alone, not the whole world. Hence, it is an action in personam, i.e.,
any judgment therein is binding only upon the parties properly
impleaded.
xxxx
The objective sought in [respondents] [C]omplaint was to
establish a claim against petitioner for its alleged unilateral
termination of [D]istribution [A]greement. Hence, to repeat, Civil
Case No. MC99-605 is an action in personam because it is an
action against persons, namely, herein petitioner, on the basis
of its personal liability. As such, personal service of summons
upon the [petitioner] is essential in order for the court to
acquire of (sic) jurisdiction over [its person].[32] (Emphasis
supplied.)
Thus, being an action in personam, personal service of summons within
the Philippines is necessary in order for the RTC to validly acquire jurisdiction over the
person of the petitioner, and this is not possible in the present case because the
petitioner is a non-resident and is not found within the Philippines.Respondents
allegation in its Amended Complaint that petitioner had personal property within
the Philippines in the form of shares of stock in PEIP did not make Civil Case No.
MC99-605 fall under any of the four instances mentioned in Section 15, Rule 14 of the
Rules of Court, as to convert the action in personam to an action in rem or quasi in
rem and, subsequently, make the extraterritorial service of summons upon the
petitioner valid.
It is incorrect for the RTC to have ruled that the allegations made by the
respondent in its Amended Complaint, which is primarily for collection of a sum of
money and damages, that the petitioner owns shares of stock within the Philippines to
which the petitioner claims interest, or an actual or contingent lien, would make the
case fall under one of the aforesaid instances wherein extraterritorial service of
summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure,
would be valid. The RTC in arriving at such conclusions relied on the second instance,
mentioned under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e.,
when the action relates to, or the subject of which is property, within the Philippines,
in which the defendant claims a lien or interest, actual or contingent), where
extraterritorial service of summons can be properly made. However, the aforesaid
second instance has no application in the case before this Court. Primarily, the
Amended Complaint filed by the respondent against the petitioner was for the
collection of sum of money and damages. The said case was neither related nor
connected to any property of the petitioner to which it claims a lien or interest.The
action for collection of a sum of money and damages was purely based on the personal
liability of the petitioner towards the respondent. The petitioner is correct in saying
that mere allegations of personal property within the Philippines does not necessarily
make the action as one that relates to or the subject of which is, property within the
Philippines as to warrant the extraterritorial service of summons. For the action to be
considered one that relates to, or the subject of which, is the property within
the Philippines, the main subject matter of the action must be the property itself of the
petitioner in the Philippines. By analogy, an action involving title to or possession of
real or personal property -- such as the foreclosure of real estate or chattel mortgage
where the mortgagor does not reside or is not found in the Philippines -- can be
considered as an action which relates to, or the subject of which is, property within the
Philippines, in which the defendant claims a lien or interest, actual or contingent; and
in such instance, judgment will be limited to the res.[33]
Moreover, the allegations made by the respondent that the petitioner has
property within the Philippines were in support of its application for the issuance of a
writ of attachment, which was denied by the RTC. Hence, it is clear from the foregoing
that the Complaint filed by the respondent against the petitioner does not really relate
to, or the subject of which is, property within the Philippines of the petitioner.
This Court also finds error in the Decision of the Court of Appeals. It is
provided for in the said Decision, thus:
However, let it be emphasized that in the [C]omplaint filed
before the trial court, [respondent] prayed that Upon the filing of the
Complaint, issue an Order fixing the amount of the bond and issue a
writ of attachment requiring the sheriff to attach the properties of
[Perkin-Elmer Philippines], which are not exempt from execution, and
as much as may be sufficient to satisfy [respondents] demands.
In other words, although the [C]omplaint before the trial
court does not involve the personal status of the [respondent],
nevertheless, the case involves property within the Philippines in
which the [petitioner] has or claim an interest, or which the
[respondent] has attached, which is one of the instances where
extraterritorial service of summons is proper.
36
xxxx
Hence, it is submitted that one of the instances when
exterritorial service of summons under Section 15, Rule 14 of the
Rules of Court is proper may be considered to have been met. This is
because the [C]omplaint for collection of sum of money which is an
action in personam was converted into an action quasi in rem by the
attachment of [petitioners] interest in [Perkin-
Elmer Philippines].[34] (Emphasis supplied.)
Respondents allegation in its Amended Complaint that petitioner had
personal property within the Philippines in the form of shares of stock in PEIP does not
convert Civil Case No. MC99-605 from an action in personam to one quasi in rem, so as
to qualify said case under the fourth instance mentioned in Section 15, Rule 14 of the
1997 Revised Rules of Civil Procedure (i.e., when the non-resident defendants property
has been attached within the Philippines), wherein extraterritorial service of summons
upon the petitioner would have been valid. It is worthy to note that what is required
under the aforesaid provision of the Revised Rules of Civil Procedure is not a mere
allegation of the existence of personal property belonging to the non-resident defendant
within the Philippines but, more precisely, that the non-resident defendants personal
property located within the Philippines must have been actually attached. This Court in
the case of Venturanza v. Court of Appeals[35] ruled that when the attachment was void
from the beginning, the action in personamwhich required personal service of
summons was never converted into an action in rem where service by publication
would have been valid. Hence, the appellate court erred in declaring that the present
case, which is an action in personam, was converted to an action quasi in rem because
of respondents allegations in its Amended Complaint that petitioner had personal
property within the Philippines.
Glaringly, respondents prayer in its Amended Complaint for the issuance of a
writ of attachment over petitioners purported shares of stock in PEIP located within
the Philippines was denied by the court a quo in its Order dated 26 March
1999. Respondents Motion for Reconsideration of the said Order was likewise denied
by the RTC in its subsequent Order, dated 11 January 2000. Evidently, petitioners
alleged personal property within the Philippines, in the form of shares of stock in PEIP,
had not been attached; hence, Civil Case No. MC99-605, for collection of sum of money
and damages, remains an action in personam. As a result, the extraterritorial service of
summons was not validly effected by the RTC against the petitioner, and the RTC thus
failed to acquire jurisdiction over the person of the petitioner. The RTC is therefore
bereft of any authority to act upon the Complaint filed before it by the respondent
insofar as the petitioner is concerned.
If there was no valid summons served upon petitioner, could RTC have
acquired jurisdiction over the person of the petitioner by the latters voluntary
appearance? As a rule, even if the service of summons upon the defendant or
respondent in a civil case is defective, the court can still acquire jurisdiction over his
person when he voluntary appears in court or submits himself to its
authority. Nonetheless, voluntary appearance, as a mode of acquiring jurisdiction over
the person of the defendant, is likewise inapplicable in this case.
It is settled that a party who makes a special appearance in court for the
purpose of challenging the jurisdiction of said court, based on the invalidity of the
service of summons, cannot be considered to have voluntarily submitted himself to the
jurisdiction of the court.[36] In the present case, petitioner has been consistent in all its
pleadings in assailing the service of summons upon it and the jurisdiction of the RTC
over its person. Thus, the petitioner cannot be declared in estoppel when it filed an
Answer ad cautelam with compulsory counterclaim before the RTC while the instant
Petition was still pending before this Court. The petitioner was in a situation wherein it
had no other choice but to file an Answer; otherwise, the RTC would have already
declared that petitioner had waived its right to file responsive pleadings. [37] Neither can
the compulsory counterclaim contained in petitioners Answer ad cautelam be
considered as voluntary appearance of petitioner before the RTC. Petitioner seeks to
recover damages and attorneys fees as a consequence of the unfounded suit filed by
respondent against it. Thus, petitioners compulsory counterclaim is only consistent
with its position that the respondent wrongfully filed a case against it and the RTC
erroneously exercised jurisdiction over its person.
Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of
the RTC over respondents complaint and over petitioners counterclaim -- while it may
have no jurisdiction over the former, it may exercise jurisdiction over the latter. The
compulsory counterclaim attached to petitioners Answer ad cautelam can be treated as
a separate action, wherein petitioner is the plaintiff while respondent is the
defendant.[38] Petitioner could have instituted a separate action for the very same
claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to
demand the same in Civil Case No. MC99-605.[39] Jurisdiction of the RTC over the
subject matter and the parties in the counterclaim must thus be determined separately
and independently from the jurisdiction of the same court in the same case over the
subject matter and the parties in respondents complaint.
Moreover, even though the petitioner raised other grounds in its Motion to
Dismiss aside from lack of jurisdiction over its person, the same is not tantamount to
its voluntary appearance or submission to the authority of the court a quo. While in De
Midgely v. Ferandos,[40] it was held that, in a Motion to Dismiss, the allegation of
grounds other than lack of jurisdiction over the person of the defendant, including a
prayer "for such other reliefs as" may be deemed "appropriate and proper" amounted to
voluntary appearance, such ruling must be deemed superseded by the declaration of
this Court in La Naval Drug Corporation v. Court of Appeals[41] that estoppel by
jurisdiction must be unequivocal and intentional. It would be absurd to hold that
petitioner unequivocally and intentionally submitted itself to the jurisdiction of the
court by seeking other reliefs to which it might be entitled when the only relief that it
could properly ask from the trial court is the dismissal of the complaint against
it.[42] Thus, the allegation of grounds other than lack of jurisdiction with a prayer for
such other reliefs as may be deemed appropriate and proper cannot be considered as
37
unequivocal and intentional estoppel. Most telling is Section 20, Rule 14 of the Rules
of Court, which expressly provides:
SEC. 20. Voluntary appearance. - The defendants voluntary
appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds aside
from lack of jurisdiction over the person of the defendant shall not be
deemed a voluntary appearance.[43] (Emphasis supplied.)
In sum, this Court finds that the petitioner did not submit itself voluntarily to
the authority of the court a quo; and in the absence of valid service of summons, the
RTC utterly failed to acquire jurisdiction over the person of the petitioner.
Anent the existence of a cause of action against petitioner and the proper
venue of the case, this Court upholds the findings of the RTC on these issues.
Dismissal of a Complaint for failure to state a cause of action is provided for
by the Rules of Court.[44] When a Motion to Dismiss is grounded on the failure to state
a cause of action, a ruling thereon should be based only on the facts alleged in the
complaint. The court must pass upon this issue based solely on such allegations,
assuming them to be true. For it to do otherwise would be a procedural error and a
denial of plaintiffs right to due process.[45] While, truly, there are well-recognized
exceptions[46] to the rule that the allegations are hypothetically admitted as true and
inquiry is confined to the face of the complaint,[47] none of the exceptions apply in this
case.Hence, the general rule applies. The defense of the petitioner that it is not the real
party-in-interest is evidentiary in nature which must be proven in trial.The appellate
court, then, cannot be faulted for not granting petitioners Motion to Dismiss on the
ground of failure to state a cause of action.
In the same way, the appellate court did not err in denying petitioners Motion
to Dismiss Civil Case No. MC99-605 on the ground of improper venue. In arriving at
such conclusion, this Court quotes with approval the following ratiocination of the
RTC:
As for the contention that venue was improperly laid, x x x,
the [trial court] in its ultimate desire that the ends of justice could
be served in its fullest, cannot rule that venue was improperly laid.
xxxx
The stipulation as to the venue of a prospective action does not
preclude the filing of the suit in the residence of the
[respondent] under Section 2, Rule 4, Rules of Court, especially
 where the venue stipulation was imposed by the [petitioner] for
its own benefits.[48] (Emphasis supplied.)
Despite the venue stipulation found in the Distribution Agreement stipulating that
the exclusive jurisdiction over disputes arising from the same shall lie in the courts of
Singapore or of the Territory (referring to the Philippines), whichever is elected by PEIA
(or petitioner, as PEIAs alleged successor), the RTC of the Philippines cannot be
considered as an improper venue. Truly, the venue stipulation used the word
exclusive, however, a closer look on the Distribution Agreement would reveal that the
venue stipulation was really in the alternative i.e., courts of Singapore or of the
Territory, meaning, the Philippines; thus, the court a quo is not an improper venue for
the present case.
Nonetheless, it bears to emphasize that despite our findings that based on the
allegations in respondents Complaint in Civil Case No. MC99-605, respondent appears
to have a cause of action against the petitioner and that the RTC is the proper venue
for the said case, Civil Case No. MC99-605 is still dismissible, for the RTC never
acquired jurisdiction over the person of the petitioner. The extraterritorial service of
summons upon the petitioner produces no effect because it can only be done if the
action is in rem or quasi in rem. The case for collection of sum of money and damages
filed by the respondent against the petitioner being an action in personam, then
personal service of summons upon the petitioner within the Philippines is essential for
the RTC to validly acquire jurisdiction over the person of the petitioner. Having failed
to do so, the RTC can never subject petitioner to its jurisdiction. The mere allegation
made by the respondent that the petitioner had shares of stock within the Philippines
was not enough to convert the action from one in personam to one that was quasi in
rem, for petitioners purported personal property was never attached; thus, the
extraterritorial service of summons upon the petitioner remains invalid. In light of the
foregoing findings, this Court concludes that the RTC has no power to hear and decide
the case against the petitioner, because the extraterritorial service of summons was
not validly effected upon the petitioner and the RTC never acquired jurisdiction over its
person.
Finally, as regards the petitioners counterclaim, which is purely for damages and
attorneys fees by reason of the unfounded suit filed by the respondent against it, it has
long been settled that the same truly falls under the classification of compulsory
counterclaim and it must be pleaded in the same action, otherwise, it is barred.[49] In
the case at bar, this Court orders the dismissal of the Complaint filed by the
respondent against the petitioner because the court a quo failed to acquire
jurisdiction over the person of the latter. Since the Complaint of the respondent
was dismissed, what will happen then to the counterclaim of the petitioner? Does the
dismissal of the complaint carry with it the dismissal of the counterclaim?
In the cases of Metal Engineering Resources Corp. v. Court of
Appeals,[50] International Container Terminal Services, Inc. v. Court of Appeals,[51]and BA
Finance Corporation v. Co.,[52] the Court ruled that if the court does not have
38
jurisdiction to entertain the main action of the case and dismisses the same, then the
compulsory counterclaim, being ancillary to the principal controversy, must likewise
be dismissed since no jurisdiction remained for any grant of relief under the
counterclaim.[53] If we follow the aforesaid pronouncement of the Court in the cases
mentioned above, the counterclaim of the herein petitioner being compulsory in nature
must also be dismissed together with the Complaint. However, in the case of Pinga vs.
Heirs of German Santiago,[54] the Court explicitly expressed that:
Similarly, Justice Feria notes that the present rule
reaffirms the right of the defendant to move for the dismissal of the
complaint and to prosecute his counterclaim, as stated in the
separate opinion [of Justice Regalado in BA Finance]. Retired Court
of Appeals Justice Hererra pronounces that the amendment to
Section 3, Rule 17 [of the 1997 Revised Rules of Civil
Procedure] settles that nagging question whether the dismissal
of the complaint carries with it the dismissal of the
counterclaim, and opines that by reason of the amendments, the
rulings in Metals Engineering, International Container, and BA
Finance may be deemed abandoned. x x x.
x x x, when the Court promulgated the 1997 Rules of Civil
Procedure, including the amended Rule 17, those previous jural
doctrines that were inconsistent with the new rules incorporated in
the 1997 Rules of Civil Procedure were implicitly
abandoned insofar as incidents arising after the effectivity of the
new procedural rules on 1 July 1997. BA Finance, or even the
doctrine that a counterclaim may be necessarily dismissed along
with the complaint, clearly conflicts with the 1997 Rules of Civil
Procedure.The abandonment of BA Finance as doctrine extends as
far back as 1997, when the Court adopted the new Rules of Civil
Procedure. If, since then, abandonment has not been affirmed in
jurisprudence, it is only because no proper case has arisen that
would warrant express confirmation of the new rule. That
opportunity is here and now, and we thus rule that the dismissal
of a complaint due to fault of the plaintiff is without prejudice
to the right of the defendant to prosecute any pending
counterclaims of whatever nature in the same or separate
action. We confirm that BA Finance and all previous rulings of
the Court that are inconsistent with this present holding
are now abandoned.[55] [Emphasis supplied].
It is true that the aforesaid declaration of the Court refers to instances
covered by Section 3, Rule 17 of the 1997 Revised Rules of Civil Procedure [56] on
dismissal of the complaint due to the fault of the plaintiff.Nonetheless, it does not also
preclude the application of the same to the instant case just because the dismissal of
respondents Complaint was upon the instance of the petitioner who correctly argued
lack of jurisdiction over its person.

Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the
situation wherein the very filing of the complaint by the plaintiff against the defendant
caused the violation of the latters rights. As to whether the dismissal of such a
complaint should also include the dismissal of the counterclaim, the Court
acknowledged that said matter is still debatable, viz:
Whatever the nature of the counterclaim, it bears the same
integral characteristics as a complaint; namely a cause (or causes) of
action constituting an act or omission by which a party violates the
right of another.The main difference lies in that the cause of action
in the counterclaim is maintained by the defendant against the
plaintiff, while the converse holds true with the complaint. Yet, as
with a complaint, a counterclaim without a cause of action cannot
survive.
x x x if the dismissal of the complaint somehow eliminates
the cause(s) of the counterclaim, then the counterclaim cannot
survive. Yet that hardly is the case, especially as a general
rule. More often than not, the allegations that form the counterclaim
are rooted in an act or omission of the plaintiff other than the
plaintiffs very act of filing the complaint. Moreover, such acts or
omissions imputed to the plaintiff are often claimed to have occurred
prior to the filing of the complaint itself. The only apparent
exception to this circumstance is if it is alleged in the
counterclaim that the very act of the plaintiff in filing the
complaint precisely causes the violation of the defendants
rights. Yet even in such an instance, it remains debatable
whether the dismissal or withdrawal of the complaint is
sufficient to obviate the pending cause of action maintained by
the defendant against the plaintiff.[57]
Based on the aforequoted ruling of the Court, if the dismissal of the complaint
somehow eliminates the cause of the counterclaim, then the counterclaim cannot
survive. Conversely, if the counterclaim itself states sufficient cause of action then
it should stand independently of and survive the dismissal of the complaint. Now,
having been directly confronted with the problem of whether the compulsory
counterclaim by reason of the unfounded suit may prosper even if the main complaint
had been dismissed, we rule in the affirmative.
It bears to emphasize that petitioners counterclaim against respondent is for
damages and attorneys fees arising from the unfounded suit. While respondents
Complaint against petitioner is already dismissed, petitioner may have very well
already incurred damages and litigation expenses such as attorneys fees since it was
forced to engage legal representation in the Philippines to protect its rights and to
assert lack of jurisdiction of the courts over its person by virtue of the improper service
of summons upon it. Hence, the cause of action of petitioners counterclaim is not
eliminated by the mere dismissal of respondents complaint.
It may also do well to remember that it is this Court which mandated that
claims for damages and attorneys fees based on unfounded suit constitute compulsory
39
counterclaim which must be pleaded in the same action or, otherwise, it shall be
barred. It will then be iniquitous and the height of injustice to require the petitioner to
make the counterclaim in the present action, under threat of losing his right to claim
the same ever again in any other court, yet make his right totally dependent on the
fate of the respondents complaint.
If indeed the Court dismisses petitioners counterclaim solely on the basis of
the dismissal of respondents Complaint, then what remedy is left for the petitioner? It
can be said that he can still file a separate action to recover the damages and attorneys
fees based on the unfounded suit for he cannot be barred from doing so since he did
file the compulsory counterclaim in the present action, only that it was dismissed
when respondents Complaint was dismissed. However, this reasoning is highly flawed
and irrational considering that petitioner, already burdened by the damages and
attorneys fees it may have incurred in the present case, must again incur more
damages and attorneys fees in pursuing a separate action, when, in the first place, it
should not have been involved in any case at all.
Since petitioners counterclaim is compulsory in nature and its cause of
action survives that of the dismissal of respondents complaint, then it should be
resolved based on its own merits and evidentiary support.
WHEREFORE, premises considered, the instant Petition is
hereby GRANTED. The Decision of the Court of Appeals, dated 4 April 2006, in CA-
G.R. SP No. 78981, affirming the Orders, dated 4 November 2002 and 20 June 2003,
of the Regional Trial Court of Mandaluyong City, Branch 212, in Civil Case No. MC99-
605, is hereby REVERSED AND SET ASIDE.Respondents Amended Complaint in Civil
Case No. MC99-605 as against the petitioner is hereby ordered DISMISSED, and all
the proceedings against petitioner in the court a quo by virtue thereof are
hereby DECLARED NULL AND VOID. The Regional Trial Court of Mandaluyong City,
Branch 212, is DIRECTED to proceed without further delay with the resolution of
respondents Complaint in Civil Case No. MC99-605 as to defendant PEIP, as well as
petitioners counterclaim. No costs.
SO ORDERED.