The Supreme Court in Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation, clarified that in actions in personam (actions against a person based on personal liability), Philippine courts cannot acquire jurisdiction over non-resident defendants through extraterritorial service of summons. For the court to validly exercise its authority, personal service within the Philippines is necessary, unless the defendant voluntarily appears in court. This ruling protects the rights of foreign entities by ensuring they are only subjected to Philippine court jurisdiction when proper service is executed or when they willingly participate in the legal proceedings.

Breach of Contract Across Borders: Can a Philippine Court Hear the Case?

The case revolves around a dispute between Perkin Elmer Singapore Pte Ltd (Perkin Elmer), a Singaporean corporation, and Dakila Trading Corporation (Dakila), a Philippine corporation. Dakila filed a complaint against Perkin Elmer for alleged breach of a Distribution Agreement. The core legal question is whether the Regional Trial Court (RTC) of Mandaluyong City properly acquired jurisdiction over Perkin Elmer, considering that Perkin Elmer is a non-resident corporation.

Dakila initially entered into a Distribution Agreement with Perkin-Elmer Instruments Asia Pte Ltd (PEIA), another Singaporean corporation. The agreement appointed Dakila as the sole distributor of PEIA’s products in the Philippines. Subsequently, PEIA allegedly terminated the agreement, leading Dakila to file a complaint for collection of sum of money and damages against PEIA and Perkin-Elmer Instruments (Philippines) Corporation (PEIP), a Philippine affiliate of PEIA. Dakila attempted to serve summons extraterritorially on PEIA, which it claimed had become a sole proprietorship owned by Perkin Elmer, later renamed Perkinelmer Asia.

However, Perkin Elmer argued that the RTC did not acquire jurisdiction over its person because the service of summons was defective. According to Perkin Elmer, the action was in personam, requiring personal service within the Philippines, not extraterritorial service. The company also contended that Dakila failed to state a cause of action against it, as it was not the real party-in-interest, and that the Distribution Agreement allowed PEIA to terminate the contract at any time. Furthermore, Perkin Elmer asserted that venue was improperly laid.

The Supreme Court emphasized the fundamental principles of jurisdiction. Jurisdiction is the power of a court to hear and decide a case. The court must acquire jurisdiction over the subject matter and the parties involved to have the authority to dispose of the case on its merits. Jurisdiction over the subject matter is conferred by the Constitution or by law, and it is determined by the allegations in the complaint.

The Court reiterated that jurisdiction over the defendant in a civil case is acquired through service of summons or voluntary appearance. Without proper service of summons or voluntary submission, the court lacks jurisdiction over the defendant, rendering any judgment null and void. Thus, the proper service of summons is vital to ensuring that the defendant receives notice of the action and is given an opportunity to respond.

The Supreme Court clarified the distinctions between actions in personam, in rem, and quasi in rem. Actions in personam are brought against a person based on their personal liability. Actions in rem are directed against the thing itself, rather than the person. Actions quasi in rem involve naming an individual as defendant to subject their interest in a property to the obligation burdening the property. This distinction is critical because the method of acquiring jurisdiction over a defendant differs based on the nature of the action.

Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure outlines the instances where extraterritorial service of summons is permissible. These include actions affecting the personal status of the plaintiff, actions relating to property within the Philippines in which the defendant claims an interest, actions seeking to exclude the defendant from any interest in property located in the Philippines, and cases where the defendant’s property has been attached within the Philippines. However, the Court stressed that extraterritorial service of summons applies only to actions in rem or quasi in rem, not to actions in personam.

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.

In actions in rem and quasi in rem, jurisdiction over the person of the defendant is not required, provided the court acquires jurisdiction over the res (the thing). Extraterritorial service of summons in such cases serves to comply with due process, informing the defendant of the action and the potential impact on their property. However, in actions in personam, Philippine courts cannot exercise jurisdiction over non-resident defendants who are not found in the Philippines, unless they voluntarily appear in court. This is because personal service within the country is essential for acquiring jurisdiction over the person.

The Court determined that Dakila’s case against Perkin Elmer was indeed an action in personam, dealing with Perkin Elmer’s personal liability due to the alleged breach of the Distribution Agreement. Since Perkin Elmer is a non-resident corporation not found within the Philippines, personal service of summons within the country was impossible. The court rejected Dakila’s argument that Perkin Elmer’s alleged ownership of shares of stock in PEIP within the Philippines transformed the action into one in rem or quasi in rem.

The Court emphasized that for an action to be considered as relating to property within the Philippines, the main subject matter of the action must be the property itself. In this case, Dakila’s complaint was primarily for the collection of a sum of money and damages, not directly related to any specific property of Perkin Elmer within the Philippines. Furthermore, Dakila’s prayer for a writ of attachment over Perkin Elmer’s shares in PEIP was denied by the RTC, further solidifying the action’s in personam nature.

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.

The Supreme Court also addressed the issue of voluntary appearance. While a defendant’s voluntary appearance generally confers jurisdiction, a special appearance made solely to challenge the court’s jurisdiction due to improper service of summons does not constitute voluntary submission. Perkin Elmer consistently contested the service of summons and the RTC’s jurisdiction, thus, its filing of an Answer ad cautelam (as a precaution) with a compulsory counterclaim did not amount to a voluntary appearance.

Finally, the Court addressed the dismissal of compulsory counterclaims. Although earlier jurisprudence suggested that the dismissal of a complaint also necessitates the dismissal of compulsory counterclaims, the Court, citing Pinga v. Heirs of German Santiago, clarified that a compulsory counterclaim may survive the dismissal of the complaint if it states a sufficient cause of action independent of the complaint. In this case, Perkin Elmer’s counterclaim for damages and attorney’s fees arising from the unfounded suit was deemed to survive the dismissal of Dakila’s complaint.

Despite finding that Dakila appeared to have a cause of action against Perkin Elmer and that the RTC was the proper venue, the Supreme Court ultimately ruled that the RTC never acquired jurisdiction over Perkin Elmer due to the invalid extraterritorial service of summons. As a result, the Supreme Court granted Perkin Elmer’s petition, reversed the Court of Appeals’ decision, and ordered the dismissal of Dakila’s amended complaint against Perkin Elmer.

FAQs

What was the key issue in this case?	The key issue was whether the Philippine court acquired jurisdiction over a non-resident foreign corporation (Perkin Elmer) through extraterritorial service of summons in an action in personam.
What is an action in personam?	An action in personam is a legal proceeding instituted against a person based on their personal liability, where the judgment binds only the parties involved. In contrast, an action in rem is against the thing itself, and a quasi in rem action involves subjecting a defendant’s interest in property to an obligation.
When is extraterritorial service of summons allowed?	Extraterritorial service of summons is allowed in specific instances, such as actions affecting personal status, actions involving property within the Philippines in which the defendant claims an interest, and actions where the defendant’s property has been attached within the Philippines. However, it is not permitted in actions in personam unless the defendant voluntarily appears.
What is needed for the court to have jurisdiction over the defendant?	For the court to acquire jurisdiction over the defendant, proper service of summons must be executed as required by the rules, or they must voluntarily appear in court, thereby submitting themselves to the court’s authority.
Why was the service of summons on Perkin Elmer deemed invalid?	The service of summons was deemed invalid because the case was an action in personam and Perkin Elmer, a non-resident foreign corporation, was served extraterritorially, which is not allowed under the rules for such actions.
Did Perkin Elmer voluntarily submit to the court’s jurisdiction?	No, Perkin Elmer did not voluntarily submit to the court’s jurisdiction because it consistently challenged the validity of the service of summons and the court’s authority over it, and its subsequent actions were merely precautionary.
What happened to Perkin Elmer’s counterclaim?	The Supreme Court clarified that even though the main complaint was dismissed, Perkin Elmer’s compulsory counterclaim for damages and attorney’s fees could still be resolved based on its own merits.
What is the significance of this ruling?	This ruling clarifies the limitations on Philippine courts’ jurisdiction over non-resident foreign entities in actions in personam, emphasizing the need for proper service of summons within the Philippines to ensure due process and fairness.

This case serves as a crucial reminder of the importance of adhering to the rules of civil procedure, particularly regarding service of summons, when dealing with foreign entities. It highlights the limitations on Philippine courts’ jurisdiction in actions in personam and underscores the need for personal service within the Philippines to validly acquire jurisdiction over non-resident defendants. Philippine businesses must understand the proper procedures to take when filing a case against foreign entities and should be aware of the jurisdictional requirements for each case.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Perkin Elmer Singapore PTE LTD. vs Dakila Trading Corporation, G.R. No. 172242, August 14, 2007