Asiatic Petroleum (P.I.), Ltd. vs. Co Quico

A court acquires jurisdiction over a non-resident defendant when the defendant's property located within the Philippines is attached or garnished at the commencement of the action and summons is served by publication, regardless of whether the proceeding is characterized as in rem, quasi in rem, or in personam.

Asiatic Petroleum (P.I.), Ltd. was a corporation engaged in the sale of gasoline, kerosene, and other petroleum products. On October 13, 1927, Co Quico entered into a contract of agency with Asiatic Petroleum, becoming its sales agent on commission, obligated to sell petroleum products in cash and to render proper accounting. The contractual relationship between the parties gave rise to the monetary obligation that became the subject of the collection suit.

On October 13, 1927, Co Quico entered into a contract of agency with Asiatic Petroleum (P.I.), Ltd., by which he became the corporation's sales agent on commission, obligated to sell gasoline, kerosene, and other petroleum products in cash and to render proper accounting. By the time the complaint was filed on May 24, 1933, Co Quico was in default in the sum of ₱2,123.80, after deducting the cash bond he had filed, and had rendered no account to Asiatic Petroleum. He had left for China.

Asiatic Petroleum filed its complaint seeking to recover ₱2,123.80 and ₱109.67, and prayed for preliminary attachment of Co Quico's properties, alleging under oath that the defendant had disposed of part of his property and was disposing of the rest with intent to defraud his creditors. On May 26, 1933, the trial court issued a writ of preliminary attachment upon Co Quico's deposits with the Mercantile Bank of China. The Bank Commissioner, as receiver of the bank, reported that the defendant had deposits amounting to ₱3,421.61 in current account and Amoy ₱3,403.16 in foreign currency savings account. On August 21, 1933, the Bank Commissioner revised his reply, stating that the defendant had transferred said deposits to his son, Co Chio.

Because Co Quico's whereabouts were unknown, the trial court on June 6, 1933 ordered that he be summoned by publication, and directed the clerk of court to mail copies of the order and complaint to his last known address in Tarlac, Tarlac. The defendant defaulted, and on November 17, 1933, the court rendered judgment sentencing him to pay the total amounts prayed for. A writ of execution was issued and levy was made on the defendant's bank deposits, but execution was returned unsatisfied because of the transfer to Co Chio. An alias writ of execution was issued to the Provincial Sheriff of Tarlac, who reported that the defendant had no property subject to execution. Another alias writ was issued and again levied on the bank deposits. The Mercantile Bank of China acknowledged the levy and stated that payment would be made in due course. Co Chio, the transferee, executed a written statement acknowledging that his father, Co Quico, was the real owner of said deposits.

On August 20, 1938, counsel for Co Quico entered a special appearance solely to have all proceedings declared null and void, alleging that the court had not acquired jurisdiction over the person of the defendant and that the defendant had been deprived of his property without due process of law. After both parties submitted memoranda, the lower court issued the order now appealed from, setting aside and declaring null and void all proceedings except the filing of the complaint, and reopening the case. The trial court reasoned that the action was strictly one in personam against a non-resident who was summoned by publication and did not appear.

• Lack of Jurisdiction over the Person: Respondent argued that the court had not acquired jurisdiction over the person of the defendant, who was a non-resident summoned by publication and who did not appear.
• Deprivation of Property Without Due Process: Respondent maintained that the defendant had been deprived of his property without due process of law.

• Jurisdiction over Non-Resident Defendant: Whether the court acquired jurisdiction over a non-resident defendant who was summoned by publication, where the defendant's property located within the Philippines had been garnished at the commencement of the action.

• Jurisdiction over Non-Resident Defendant: Yes. Jurisdiction was properly acquired, the defendant's property being within the Philippines and having been garnished at the commencement of the action, with summons served by publication pursuant to section 398 of the Code of Civil Procedure.

• Jurisdiction over Non-Resident Defendant: The defendant, although outside the Philippines when the action was instituted, possessed property found and located within the jurisdiction. The writ of attachment was duly served on the Mercantile Bank of China, which acknowledged the defendant's deposits and noted the garnishment. The general proposition applies that all property within a State is subject to the jurisdiction of its courts, and courts have the right to adjudicate title thereto, enforce liens thereupon, and subject it to the payment of the debts of its owners, whether resident or not. The sovereign power may lay hands on any and all persons and property within its borders, and what is within the reach of executive and legislative action must also be within the reach of the judiciary. The Court found it neither necessary nor fruitful to characterize the proceedings as in rem or quasi in rem, as such characterization is of no legal significance in this connection. The situs of the res was clear, the garnishment of the res was effected at the commencement of the action, and reasonable notice and opportunity to be heard were presumptively had by virtue of the publication of summons in accordance with section 398 of the Code of Civil Procedure. The lower court therefore erred in setting aside all proceedings on the ground that the action was strictly in personam against a non-resident who did not appear.

• Jurisdiction over Property within the State — All property within a State is subject to the jurisdiction of its courts, which have the right to adjudicate title thereto, enforce liens thereupon, and subject it to the payment of the debts of its owners, whether resident or not. The sovereign power may lay hands on any and all persons and property within its borders, and what is within the reach of executive and legislative action must also be within the reach of the judiciary. Applied in this case: the defendant's bank deposits in the Philippines were garnished at the commencement of the action, bringing them within the court's jurisdiction notwithstanding the defendant's non-residence.

• Irrelevance of In Rem / Quasi In Rem Characterization — It is neither necessary nor fruitful to characterize proceedings as in rem or quasi in rem when determining whether a court has jurisdiction over a non-resident defendant whose property has been garnished within the jurisdiction. Such characterization is of no legal significance; what matters is the situs of the res, the garnishment of the res at the commencement of the action, and reasonable notice and opportunity to be heard through publication of summons.

• "It is evident, then, that the defendant-appellee in this case although he was outside of the Philippines at the time this action was instituted against him, possessed property found and located here and that such property was within the reach of our courts." — This passage articulates the ratio decidendi: that the presence of the defendant's property within the Philippines, subject to garnishment, suffices to bring the defendant within the jurisdiction of Philippine courts.

• "all property within a State is subject to the jurisdiction of its courts, and they have the right to adjudicate title thereto, to enforce liens thereupon, and to subject it to the payment of the debts of its owners, whether resident or not." — This is the canonical formulation of the doctrine of jurisdiction over property within the territorial reach of the courts, frequently cited in subsequent Philippine jurisprudence on attachment and jurisdiction over non-residents.

• "We find it neither necessary nor fruitful to indulge in any characterization as to whether the present proceedings should be described as those in rem or quasi in rem. Such characterization is of no legal significance in this connection." — This passage establishes the principle that the formal characterization of proceedings as in rem or quasi in rem is irrelevant where the res is clearly within the jurisdiction and has been garnished.

• Section 398, Code of Civil Procedure — Governed service of summons by publication. The Court held that publication of summons in accordance with this provision presumptively afforded the defendant reasonable notice and opportunity to be heard, satisfying jurisdictional requirements over a non-resident whose property had been garnished.

Avanceña, C.J., Villa-Real, Imperial, and Diaz, JJ., concurred.