Tradition Asia Pacific Pte. Ltd. v. Moya

THIRD DIVISION

[G.R. No. 232092. December 13, 2017.]

TRADITION ASIA PACIFIC PTE. LTD., petitioner,vs. HON. ENCARNACION JAJA G. MOYA, PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF MAKATI, BRANCH 146, AND TULLET PREBON [PHILIPPINES], INC., respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Third Division, issued a Resolution datedDecember 13, 2017, which reads as follows: HTcADC

"G.R. No. 232092 (Tradition Asia Pacific Pte. Ltd. vs. Hon. Encarnacion Jaja G. Moya, Presiding Judge of the Regional Trial Court of Makati, Branch 146, and Tullet Prebon [Philippines], Inc.). — The Court resolves to:

(1) NOTE the Notice of Change of Firm Name dated October 5, 2017, filed by counsel for petitioner, from Kapunan Garcia & Castillo Law Offices to Kapunan & Castillo Law Offices; and

(2) NOTE WITHOUT ACTION petitioner's Motion for Leave of Court to Withdraw Petition for Review on Certiorari dated October 2, 2017.

Before Us is a petition for review under Rule 45 of the Rules of Court, seeking to reverse and set aside the February 26, 2015 Decision 1 and May 31, 2017 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 119101. The challenged rulings affirmed the June 16, 2010 and January 24, 2011 Orders of the Makati City Regional Trial Court (RTC), Branch 146, in Civil Case No. 09-141 entitled "Tullet Prebon (Philippines), Inc. v. Tradition Financial Services Philippines, Inc."

Factual Antecedents

Petitioner Tradition Asia Pacific Pte. Ltd. is a corporation operating under the laws of Singapore. It is part of one of the largest Inter-dealer Brokers (IDB) in the world, the Compangie Financiere Tradition (Tradition Group), which serves as an intermediary that facilitates transactions between brokers/dealers and dealer banks in the market. The Tradition Group used to cater to the Philippine market only through petitioner. Pursuant, however, to its objective of expansion and diversification of its business in Asia, the Tradition Group established a subsidiary in the Philippines in 2008, known as Tradition Financial Services Philippines, Inc. (Tradition Philippines).

Private respondent Tullet Prebon (Philippines), Inc., on the other hand, is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines. Respondent belongs to the Tullet Prebon Plc Group, one of the competitors of the Tradition Group in the global market.

Sometime in February 2009, respondent filed a complaint 3 for damages, with prayer for the issuance of a writ of preliminary attachment, temporary restraining order, and/or writ of preliminary injunction against petitioner, Tradition Philippines, James Lent (Lent), petitioner's Chief Financial Officer; Maharlika Schulze (Schulze), an employee of Tradition Financial Services, Ltd., London (Tradition London); and respondent's former high-ranking employees and/or members of the board, namely: Jaime Villalon (Villalon), Mercedes Chuidian (Chuidian), and Leonard James Harvey (Harvey). Considering that petitioner does not reside and is not found in the Philippines, respondent prayed for the attachment of its properties within the Philippines.

On April 16, 2009, the Makati RTC issued an Order 4 granting respondent's application for the issuance of a writ of preliminary attachment and directed the attachment of 139,995 shares of stock of petitioner in Tradition Philippines. Despite these developments, no writ of attachment was issued by the Makati RTC; neither was there any attachment made of petitioner's properties in the Philippines.

Subsequently, respondent filed an Ex-Parte Motion for Leave of Court for Extraterritorial Service of Summons [Re: Defendant Tradition Asia Pacific (Pte.) Ltd.], 5 praying for the service of summons upon petitioner thru publication or registered mail. The trial court granted the said motion in an Order 6 dated May 15, 2009. Respondent thereafter manifested in its July 3, 2009 Ex-Parte Compliance 7 that it had already complied with the May 15, 2009 Order allowing the extraterritorial service of summons to petitioner, as shown by the 1) Affidavit of Publication dated July 3, 2009 of the Chief Editor of The Manila Times stating that copies of the May 15, 2009 Order, May 21, 2009 Summons, and Complaint were published in The Manila Times on July 2, 2009 (Affidavit of Publication), and 2) Affidavit of Service by Registered Mail dated July 1, 2009, alleging that copies of the said Order, Summons, and Complaint were deposited in the post office and directed to petitioner at its last known address at No. 63 Market Street #07-01048942, Singapore on July 1, 2009.

Respondent thereafter moved to declare petitioner in default 8 for failing to file its answer to the complaint despite the extraterritorial service of summons. In response, petitioner filed its Special Appearance and Opposition 9 dated March 12, 2010, alleging that the service of summons upon it is improper since no single property of petitioner located in the Philippines was attached at the time of the alleged service of summons.

Without acting on the parties' motions, the Makati RTC issued a writ of attachment on March 16, 2010, which was implemented on March 18, 2010. 10

Petitioner moved to dismiss the complaint on the ground that, as a non-resident defendant not found in the Philippines, the extraterritorial service of summons resorted to by the respondent did not vest the Makati RTC with jurisdiction over its person. Petitioner likewise contended that the complaint failed to state a cause of action against it since the same lacks ultimate facts upon which it may be held liable. Respondent opposed the motion, to which the petitioner responded with a Reply. Respondent then filed its Rejoinder. aScITE

Ruling of the Makati Regional Trial Court

On June 16, 2010, the Makati RTC issued an Order 11 resolving the motion to declare in default and the motion to dismiss that respondent and petitioner respectively filed. The dispositive portion of the Order states:

WHEREFORE, in view of the foregoing the Motions to Dismiss filed by defendant x x x Tradition Asia Pacific (PTE.) Ltd., are DENIED for lack of merit.

Likewise, plaintiff's Motion to Declare Defendants in default is DENIED. In view thereof, Defendants Maharlika Schulze and Tradition Asia Pacific (PTE.) Ltd., are directed to file their Answer within ten (10) days from receipt of this Order.

SO ORDERED.

Petitioner moved for reconsideration, but the trial court denied the same in an Order 12 dated January 24, 2011. Thus, petitioner sought to set aside the Makati RTC's rulings via a petition for certiorari under Rule 65 to the CA.

Ruling of the Court of Appeals

Finding that the Makati RTC did not gravely abuse its discretion in denying the motion to dismiss, the CA dismissed the petition.

Since the instant case for damages is an action in personam, the CA conceded that summons must be served by personal or substituted service to petitioner; otherwise, the court will not acquire jurisdiction over it. 13 Considering, however, that petitioner does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of respondent is to convert the action into a proceeding in rem or quasi in rem by attaching the former's properties in the Philippines. After which, the service of summons, either by publication coupled with the sending a copy of the court's orders to the last known address of petitioner by registered mail, will no longer be for the purpose of acquiring jurisdiction but for compliance with the requirements of due process. The CA ruled that since petitioner's properties in the Philippines had already been attached, the case was converted into an in rem proceeding and the trial court, in effect, acquired jurisdiction over the action.

Anent the propriety of the extraterritorial service of summons, the appellate court affirmed the trial court's determination that summons was properly served upon the petitioner based on evidence showing that the latter was able to receive the complaint, summons, and May 15, 2009 Order.

Petitioner moved for reconsideration of the adverted Decision, but the CA denied the same in its January 16, 2017 Resolution. Hence, this petition.

Petitioner, in the main, reiterates that the complaint for damages partakes of the nature of an action in personam; consequently, jurisdiction over its person can only be acquired through personal or substituted service, and resort to extraterritorial service of summons is improper. The failure of the respondent to actually attach its properties prior to the extraterritorial service of summons is fatal to the trial court's acquisition of jurisdiction over it.

Issue

Whether or not the CA erred in ruling that the trial court had acquired jurisdiction over the action by reason of the attachment of petitioner's shares of stock in Tradition Philippines.

Our Ruling

The petition is denied.

The Makati RTC has acquired

It is undisputed that the complaint for damages filed by the respondent is indeed in the nature of an action in personam, that is, one brought against a person on the basis of personal liability. As such, jurisdiction over the petitioner is necessary for the court to validly try and decide the case. 14 Jurisdiction over the person of the defendant in actions in personam is acquired through personal service or, if this is not possible and the defendant cannot be personally served, substituted service as provided in Sections 6 15 and 7, 16 Rule 14 of the Rules of Court. 17 HEITAD

It is equally undisputed, however, that petitioner is a non-resident defendant not found in the Philippines. As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not found in the Philippines because of the impossibility of acquiring jurisdiction over his or her person, unless he or she voluntarily appears in court. 18 In such cases, the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant, as elucidated in Philippine Commercial International Bank v. Alejandro, viz.: 19

Corollarily, in actions in personam, such as the instant case for collection of sum of money, summons must be served by personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant. Thus, in order to acquire jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendant's property. (Emphasis supplied)

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. 20 The seizure of property under legal process contemplated in the foregoing partakes of a writ of preliminary attachment, as provided for in Section 1, Rule 57 of the Rules of Court, which provides:

Section 1. Grounds upon which attachment may issue. — At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: x x x

(f) In an action against a party who does not reside and is not found in the Philippines, or on whom summons may be served by publication. (Emphasis supplied)

While the attachment of a defendant's property is sufficient to confer the trial court with jurisdiction over the action, summons, nevertheless, must still be served upon the defendant, not for the purpose of vesting the court with jurisdiction, but for the purpose of 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. 21

In the present case, the attachment of the shares of petitioner in Tradition Philippines was clearly resorted to in order to vest the trial court with jurisdiction over the res. Although the extraterritorial service and publication of the summons was resorted to prior to the actual attachment of petitioner's property, jurisdiction over the action had already been acquired by the trial court upon the actual implementation of the writ of preliminary attachment on March 18, 2010.

Consequently, petitioner's motion to dismiss based on the lack of jurisdiction of the trial court over its person was properly denied in view of the acquisition of jurisdiction of Makati RTC over the res.

This notwithstanding, We cannot sustain the validity of the extraterritorial service of summons upon the petitioner for having been improperly issued.

The extraterritorial service of summons

In Velayo-Fong v. Spouses Velayo, 22 We explained that, as stated in Section 15 of Rule 14, there are only four instances when extraterritorial service of summons is proper, namely: (a) when the action affects the personal status of the plaintiffs; (b) 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; (c) 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 (d) when the defendant'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. ATICcS

Clearly, the extant case does not fall into any of the instances where extraterritorial service of summons is proper. To reiterate, the case at bar is an action in personam, and jurisdiction over it can only be acquired through personal or substituted service of summons. The extraterritorial service of summons made prior to the actual attachment of petitioner's property did not serve to vest jurisdiction to the trial court over the petitioner nor the res, inasmuch as the operative act which converted the action into an action quasi in rem and, thus, conferred the trial court with jurisdiction over the action, is the actual attachment of the property on March 18, 2010. The CA, therefore, erred in affirming the trial court's pronouncement that service of summons was validly served pursuant to Section 15, Rule 14. Regardless of the nature of the action, proper service of summons is imperative, and a decision rendered without proper service of summons suffers a defect in jurisdiction. 23

Due process requires that those with interest in the thing in litigation be notified and given an opportunity to defend those interests. 24 Petitioner cannot be considered as having been properly and formally notified of the proceedings due to the improper service of summons against it. Accordingly, it is incumbent upon the trial court to serve summons upon the petitioner in the proper manner to properly take cognizance of and exercise its jurisdiction over the case.

WHEREFORE, the petition is DENIED. The February 26, 2015 Decision and May 31, 2017 Resolution of the Court of Appeals in CA-G.R. SP No. 119101 are hereby AFFIRMED.

The Makati City Regional Trial Court, Branch 146, is hereby directed to serve summons anew to petitioner Tradition Asia Pacific Pte. Ltd. (Bersamin, J., on leave)

SO ORDERED."

Very truly yours,

(SGD.) WILFREDO V. LAPITANDivision Clerk of Court

 

Footnotes

1. Penned by Associate Justice Myra V. Garcia-Fernandez, with the concurrence of Associate Justices Hakim S. Abdulwahid and Mario V. Lopez; rollo, pp. 57-72.

2.Id. at 74-75.

3.Id. at 97-126.

4.Id. at 130-133.

5.Id. at 134-137.

6.Id. at 142-143.

7.Id. at 144-146.

8.Id. at 154-159.

9.Id. at 160-169.

10.Id. at 176, 186-187, as alleged by the parties in their respective Reply and Rejoinder.

11.Id. at 265-270.

12.Id. at 431-432.

13.Id. at 66.

14.Alba v. Court of Appeals, G.R. No. 164041, July 29, 2005, 465 SCRA 495.

15. Section 6. Service in person on defendant. — Whenever practicable, the summons shall be served by handling a copy thereof to the defendant in person, or, if he refuses to receive and sign for it, by tendering it to him.

16. Section 7. Substituted service. — If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant's residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant's office or regular place of business with some competent person in charge thereof.

17.Spouses Belen v. Hon. Pablo R. Chavez, G.R. No. 175334, March 26, 2008, 549 SCRA 479, citing Valmonte v. Court of Appeals, 322 Phil. 97 (1996).

18.NM Rothschild & Sons (Australia) Limited v. Lepanto Consolidated Mining Company, G.R. No. 175799, November 28, 2011, 661 SCRA 328, citing Perkin Elmer Singapore Pte. Ltd. v. Dakila Trading Corporation, G.R. No. 172242, August 14, 2007, 530 SCRA 170.

19. Philippine Commercial International Bank v. Alejandro, G.R. No. 175587, September 21, 2007, 533 SCRA 738. (citations omitted)

20. Biaco v. Philippine Countryside Rural Bank, G.R. No. 161417, February 8, 2007, 515 SCRA 106, citing Alba v. Court of Appeals, G.R. No. 164041, July 29, 2005, 465 SCRA 495, 505.

21. Macasaet v. Co, Jr., G.R. No. 156759, June 5, 2013, 697 SCRA 187.

22. G.R. No. 155488, December 6, 2006, 510 SCRA 320.

23. De Pedro v. Romasan Development Corporation, G.R. No. 194751, November 26, 2014, 743 SCRA 52.

24. Id.