NM Rothschild & Sons (Australia) Limited vs. Lepanto Consolidated Mining Company

A foreign defendant who seeks affirmative relief from the trial court — such as leave to take depositions or serve interrogatories — while its motion to dismiss for lack of jurisdiction over its person is still pending is deemed to have voluntarily appeared and submitted to the court's jurisdiction, regardless of whether the original service of summons was proper.

Lepanto Consolidated Mining Company and NM Rothschild & Sons (Australia) Limited were parties to loan and hedging contracts involving the delivery of gold. Lepanto sought to have these contracts declared void under Article 2018 of the Civil Code, which nullifies contracts for the delivery of goods, securities, or shares of stock entered into with the intention that only the price difference be paid by the loser to the winner. Rothschild is a foreign private juridical entity organized under Australian law, with no resident agent or designated officer in the Philippines. During the pendency of the proceedings, Rothschild changed its corporate name to Investec Australia Limited.

Lepanto Consolidated Mining Company and NM Rothschild & Sons (Australia) Limited, a foreign private juridical entity organized under Australian law, were parties to loan and hedging contracts involving the delivery of gold. On August 30, 2005, Lepanto filed a complaint with the Regional Trial Court of Makati City, Branch 150, docketed as Civil Case No. 05-782, praying for a judgment declaring the loan and hedging contracts void for being contrary to Article 2018 of the Civil Code of the Philippines, and for damages. Lepanto alleged that despite the express stipulation for deliveries of gold, the intention of the parties was merely to compel each other to pay the difference between the forward price and the market price at the time of supposed delivery, characterizing the contracts as wagering or gambling agreements. Upon Lepanto's motion, the trial court authorized Lepanto's counsel to personally bring the summons and complaint to the Philippine Consulate General in Sydney, Australia for service on Rothschild.

On October 20, 2005, Rothschild filed a Special Appearance with Motion to Dismiss, praying for dismissal on the grounds that the court had not acquired jurisdiction over its person due to defective and improper service of summons, that the complaint failed to state a cause of action, that the action was barred by estoppel, and that Lepanto did not come to court with clean hands. On November 29, 2005, while the Motion to Dismiss was still pending, Rothschild filed two additional motions: a Motion for Leave to take the deposition of Mr. Paul Murray, its Director for Risk Management, before the Philippine Consul General, and a Motion for Leave to Serve Interrogatories on Lepanto.

The trial court denied the Motion to Dismiss on December 9, 2005, holding that service of summons through the DFA was proper because Rothschild had neither applied for a license to do business in the Philippines nor filed a written power of attorney with the SEC designating a person to receive legal processes. The trial court also found that the complaint sufficiently stated a cause of action and dismissed the remaining grounds as matters of defense better ventilated during trial. Rothschild's Motion for Reconsideration was denied on March 6, 2006, and the twin motions for deposition and interrogatories were likewise disallowed. On December 28, 2006, however, the trial court issued an Order directing Lepanto to answer some of the questions in Rothschild's Interrogatories to Plaintiff dated September 7, 2006.

Rothschild elevated the denial to the Court of Appeals via a Petition for Certiorari, which was dismissed on September 8, 2006 on the ground that the denial of a motion to dismiss is an interlocutory order not subject to certiorari. The Motion for Reconsideration was denied on December 12, 2006. Rothschild then filed the present Petition for Review on Certiorari. During the pendency of the proceedings before the Supreme Court, Rothschild presented evidence that it had changed its corporate name from NM Rothschild and Sons (Australia) Limited to Investec Australia Limited, and began captioning its pleadings accordingly.

• Certiorari as Proper Remedy: Petitioner insisted that an order denying a motion to dismiss may be the proper subject of a petition for certiorari, particularly where the denial is tainted with grave abuse of discretion.
• Jurisdiction Over the Person: Petitioner argued that the trial court had not validly acquired jurisdiction over its person because the extraterritorial service of summons through the DFA was improper, the action being in personam against a non-resident defendant not found in the Philippines.
• Failure to State a Cause of Action: Petitioner maintained that the complaint failed to state a cause of action because the allegation that the hedging contracts were void under Article 2018 was a mere conclusion of law that could not be hypothetically admitted.
• Voluntary Appearance Not Waived: Petitioner relied on La Naval Drug Corporation vs. Court of Appeals, arguing that a party may file a motion to dismiss on the ground of lack of jurisdiction over its person and simultaneously raise affirmative defenses and pray for affirmative relief without waiving its objection to jurisdiction.

• Real Party in Interest: Respondent argued that the petition should be dismissed because petitioner no longer existed as a corporation under the name NM Rothschild and Sons (Australia) Limited at the time the petition was filed, and therefore the petition was not filed by a real party in interest.
• Verification and Certification Against Forum Shopping: Respondent contended that the verification and certification against non-forum shopping were defective for the same reason — the supposed non-existence of the corporation named therein.
• Certiorari Not the Proper Remedy: Respondent posited that the Court of Appeals correctly ruled that certiorari was not the proper remedy since the denial of a motion to dismiss is an interlocutory order.
• Voluntary Appearance: Respondent argued that petitioner should be deemed to have voluntarily appeared before the trial court when it prayed for and was afforded specific affirmative reliefs — written interrogatories, requests for admission, deposition, and motions for production of documents — while its motion to dismiss was still pending.
• Correct Denial of Motion to Dismiss: Respondent maintained that the trial court correctly denied the motion to dismiss on all grounds.

• Real Party in Interest: Whether the petition was filed by a real party in interest despite the petitioner's change of corporate name from NM Rothschild and Sons (Australia) Limited to Investec Australia Limited.
• Propriety of Certiorari: Whether the denial of a motion to dismiss, as an interlocutory order, may be the subject of a petition for certiorari.
• Grounds for Motion to Dismiss: Whether the grounds of absence of cause of action, estoppel, and unclean hands are proper grounds for a motion to dismiss under Section 1, Rule 16 of the Rules of Court.
• Failure to State a Cause of Action: Whether the complaint's allegation that the hedging contracts are void under Article 2018 of the Civil Code is a conclusion of law that cannot be hypothetically admitted in a motion to dismiss.
• Jurisdiction Over the Person: Whether the trial court acquired jurisdiction over the person of the foreign defendant through extraterritorial service of summons under Section 15, Rule 14 of the Rules of Court in an action in personam.
• Voluntary Appearance: Whether petitioner's seeking of affirmative reliefs from the trial court — specifically, leave to take deposition and serve interrogatories — while its motion to dismiss was pending constituted voluntary appearance and submission to the court's jurisdiction.

• Real Party in Interest: Yes. The petition was not dismissed for being filed under the petitioner's former name, adequate identification having been presented showing that the entity continued to exist under a new name.
• Propriety of Certiorari: Generally no, but certiorari may lie when the denial of the motion to dismiss is tainted with grave abuse of discretion amounting to lack or excess of jurisdiction.
• Grounds for Motion to Dismiss: No. Absence of cause of action, estoppel, and in pari delicto are not among the enumerated grounds in Section 1, Rule 16 of the Rules of Court and are evidentiary matters to be threshed out during trial.
• Failure to State a Cause of Action: No. The determination of whether the hedging contracts are void under Article 2018 requires inquiry into the very merits of the case, as the allegation of nullity is a conclusion of law not subject to hypothetical admission.
• Jurisdiction Over the Person: No. The action is in personam and the defendant is a non-resident not found in the Philippines; extraterritorial service under Section 15, Rule 14 applies only to actions in rem or quasi in rem.
• Voluntary Appearance: Yes. By seeking affirmative reliefs from the trial court — leave to take deposition and serve interrogatories — petitioner is deemed to have voluntarily submitted to the court's jurisdiction, foreclosing its objection to the propriety of service of summons.

• Real Party in Interest: While the corporate name is essential to a corporation's existence and identity, as held in Philips Export B.V. vs. Court of Appeals, the Court declined to dismiss the petition merely because it was filed under the petitioner's former name. Petitioner presented sufficient evidence from the Australian Securities & Investment Commission showing the change of name from NM Rothschild and Sons (Australia) Limited to Investec Australia Limited, and was represented by the same counsel throughout. A real party in interest is the party who stands to be benefited or injured by the judgment, and there was no doubt that the entity filing the petition was the same entity that would be affected by the outcome. The objection to the verification and certification against forum shopping, which depended on the supposed non-existence of the corporation, likewise failed.

• Propriety of Certiorari: An order denying a motion to dismiss is interlocutory and does not terminate the case; the general rule is that it cannot be questioned in a special civil action for certiorari, which is designed to correct errors of jurisdiction, not errors of judgment. However, when the denial is tainted with grave abuse of discretion — defined as capricious and whimsical exercise of judgment equivalent to lack of jurisdiction — certiorari may be justified. The resolution of the petition thus required an inquiry into whether the Court of Appeals correctly ruled that the trial court did not commit grave abuse of discretion. A mere error in judgment would be inadequate to reverse the appellate court's disposition.

• Grounds for Motion to Dismiss: The alleged absence of a cause of action (as opposed to failure to state one), estoppel, and in pari delicto are not among the grounds enumerated in Section 1, Rule 16 of the Rules of Court. These defenses raise evidentiary issues closely related to the validity or existence of the plaintiff's cause of action and should be threshed out during trial. Allegations of estoppel and bad faith require proof, and the determination of whether one acted in bad faith is evidentiary in nature, best resolved after a full-blown trial on the merits.

• Failure to State a Cause of Action: While failure to state a cause of action is a proper ground for a motion to dismiss, the rule on hypothetical admission of the truth of material allegations admits of exceptions. Under Tan vs. Court of Appeals, a motion to dismiss does not admit the truth of allegations of legal conclusions, erroneous statements of law, or mere inferences from facts not stated. The complaint's assertion that the hedging contracts are void under Article 2018 — because the parties' intention was merely to pay the difference between the forward price and the market price — is a conclusion of law that cannot be hypothetically admitted. The relevant portions of the contracts were incorporated into the complaint, and determining whether they are void requires examining the contracts themselves, which is precisely the issue to be decided in Civil Case No. 05-782. Petitioner's defense — that the parties intended actual delivery of gold — requires presentation of evidence on the merits, an inquiry beyond the province of a motion to dismiss.

• Jurisdiction Over the Person: The action to declare the loan and hedging contracts void with a prayer for damages is an action in personam: it seeks to impose personal liability on the defendant and to free the plaintiff from its obligations under the contract. Under Perkin Elmer Singapore Pte Ltd. vs. Dakila Trading Corporation, extraterritorial service of summons under Section 15, Rule 14 applies only to actions in rem or quasi in rem, not to actions in personam. Where the defendant does not reside and is not found in the Philippines and the action is in personam, Philippine courts cannot try the case because of the impossibility of acquiring jurisdiction over the defendant's person unless the defendant voluntarily appears. Section 15 enumerates only four instances where extraterritorial service is available — actions affecting personal status, actions involving property in the Philippines in which the defendant claims an interest, actions seeking to exclude the defendant from an interest in property, and actions where the defendant's property has been attached — none of which applies here. The broader coverage of Section 12, Rule 14 (which applies to foreign private juridical entities that have transacted business in the Philippines) was irrelevant because the service was not made under that provision.

• Voluntary Appearance: Although the original service of summons was improper, petitioner nonetheless voluntarily submitted to the trial court's jurisdiction by seeking affirmative reliefs. Petitioner relied on La Naval Drug Corporation vs. Court of Appeals, but a close reading of that case reveals a distinction between raising affirmative defenses in an answer (which does not amount to acceptance of jurisdiction) and praying for affirmative reliefs (which does constitute acquiescence to jurisdiction). The 1997 amendment to Section 20, Rule 14, adding the sentence that inclusion of other grounds in a motion to dismiss aside from lack of jurisdiction shall not be deemed voluntary appearance, refers only to affirmative defenses, not affirmative reliefs. In Philippine Commercial International Bank vs. Dy Hong Pi, the Court held that seeking affirmative relief other than dismissal of the case manifests voluntary submission to the court's jurisdiction. Petitioner's filing of motions for leave to take deposition and serve interrogatories while its motion to dismiss was pending constituted affirmative relief, and a party cannot invoke a court's jurisdiction to secure affirmative relief and later repudiate that same jurisdiction. Consequently, the trial court did not commit grave abuse of discretion in denying the motion to dismiss.

• Voluntary Appearance Through Affirmative Relief — A party who seeks affirmative relief from the court — such as leave to take depositions, serve interrogatories, or obtain any remedy other than dismissal — is deemed to have voluntarily appeared and submitted to the court's jurisdiction, even if that party has a pending motion to dismiss on the ground of lack of jurisdiction over its person. The inclusion of other grounds in a motion to dismiss under Section 20, Rule 14 refers to affirmative defenses, not affirmative reliefs. A party cannot invoke jurisdiction to secure affirmative relief and later repudiate that jurisdiction.

• Hypothetical Admission in Motion to Dismiss — Exceptions — In a motion to dismiss based on failure to state a cause of action, the defendant hypothetically admits the truth of the material allegations of ultimate facts in the complaint. However, this admission does not extend to: mere epithets of fraud; allegations of legal conclusions; erroneous statements of law; mere inferences or conclusions from facts not stated; allegations of fact the falsity of which is subject to judicial notice; matters of evidence; surplusage and irrelevant matter; scandalous matter; legally impossible facts; facts contradicted by records or documents incorporated in the complaint; and general averments contradicted by more specific averments. Courts may examine records and documents duly incorporated into the complaint by the pleader.

• Extraterritorial Service of Summons — Limited to Actions In Rem or Quasi In Rem — Under Section 15, Rule 14 of the Rules of Court, extraterritorial service of summons on a non-resident defendant is available only in four instances: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to property within the Philippines in which the defendant claims a lien or interest, actual or contingent; (3) when the relief demanded consists wholly or in part in excluding the defendant from any interest in property within the Philippines; and (4) when the defendant's property has been attached within the Philippines. In actions in personam against a non-resident defendant not found in the Philippines, Philippine courts cannot acquire jurisdiction over the defendant's person unless the defendant voluntarily appears.

• Interlocutory Orders and Certiorari — The denial of a motion to dismiss is an interlocutory order that neither terminates nor finally disposes of a case. As a general rule, it cannot be the subject of a petition for certiorari, which is designed to correct errors of jurisdiction, not errors of judgment. The exception is when the denial is tainted with grave abuse of discretion — defined as capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform the duty enjoined by law.

• "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." — This is the ratio decidendi on the voluntary appearance issue, establishing that seeking affirmative reliefs such as discovery motions constitutes submission to jurisdiction, foreclosing a later objection to the court's jurisdiction over the person.

• "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." — Quoted from Perkin Elmer Singapore Pte Ltd. vs. Dakila Trading Corporation, this passage defines the scope of Section 15, Rule 14 and explains why Philippine courts cannot acquire jurisdiction over a non-resident defendant in an action in personam absent voluntary appearance.

• "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." — Quoted from Tan vs. Court of Appeals, this enumerates the established exceptions to the doctrine of hypothetical admission in a motion to dismiss, critical for determining when a complaint's allegations of legal conclusions may be examined rather than assumed true.

• "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." — This is the text of the second sentence of Section 20, Rule 14 of the 1997 Rules of Civil Procedure, which the Court clarified refers to affirmative defenses, not affirmative reliefs, thus preserving the distinction between defensive pleadings and affirmative prayers.

• La Naval Drug Corporation vs. Court of Appeals, G.R. No. 103200, August 31, 1994, 236 SCRA 78 — Distinguished. The Court clarified that La Naval drew a distinction between raising affirmative defenses in an answer (which does not waive the objection to jurisdiction) and praying for affirmative reliefs (which does constitute voluntary appearance). Petitioner had misunderstood this distinction.

• Philippine Commercial International Bank vs. Dy Hong Pi, G.R. No. 171137, June 5, 2009, 588 SCRA 612 — Followed. The Court relied on this case to hold that seeking affirmative relief other than dismissal of the case manifests voluntary submission to the court's jurisdiction, and that active participation in proceedings bars a party from later impugning the court's jurisdiction.

• Perkin Elmer Singapore Pte Ltd. vs. Dakila Trading Corporation, G.R. No. 172242, August 14, 2007, 530 SCRA 170 — Followed. The Court quoted this case for the proposition that extraterritorial service of summons applies only to actions in rem or quasi in rem, and that Philippine courts cannot try cases in personam against non-resident defendants absent voluntary appearance.

• Tan vs. Court of Appeals, 356 Phil. 555 (1998) — Followed. The Court relied on this case to enumerate the exceptions to the doctrine of hypothetical admission in a motion to dismiss, particularly the rule that allegations of legal conclusions are not hypothetically admitted.

• Philips Export B.V. vs. Court of Appeals, G.R. No. 96161, February 21, 1992, 206 SCRA 457 — Followed but limited. The Court acknowledged the importance of the corporate name to a corporation's existence and identity, but declined to dismiss the petition filed under the petitioner's former name where adequate identification was presented.

• Domagas vs. Jensen, G.R. No. 158407, January 17, 2005, 448 SCRA 663 — Followed. The Court cited this case for the principle that the aim and object of an action determine whether it is in rem, in personam, or quasi in rem.

• Signetics Corporation vs. Court of Appeals, G.R. No. 105141, August 31, 1993, 225 SCRA 737 — Followed. Cited for the proposition that a defense requiring contravention of the complaint's allegations and full ventilation of the merits should not be within the province of a motion to dismiss.

• Section 15, Rule 14, Rules of Court — Governs extraterritorial service of summons on a defendant who does not reside and is not found in the Philippines. The Court held that this provision applies only to actions in rem or quasi in rem — specifically, actions affecting personal status, actions involving property in the Philippines in which the defendant claims an interest, actions seeking to exclude the defendant from property, and actions where the defendant's property has been attached. The provision does not authorize extraterritorial service in an action in personam against a non-resident defendant.

• Section 12, Rule 14, 1997 Rules of Civil Procedure — Governs service upon foreign private juridical entities which have transacted business in the Philippines. The Court noted this provision's broader coverage compared to the former Section 14, but found it irrelevant because the service was made under Section 15, not Section 12.

• Section 20, Rule 14, 1997 Rules of Civil Procedure — Provides that the defendant's voluntary appearance is equivalent to service of summons, and that the inclusion of other grounds in a motion to dismiss aside from lack of jurisdiction over the person shall not be deemed voluntary appearance. The Court clarified that the second sentence refers to affirmative defenses, not affirmative reliefs.

• Section 1, Rule 16, Rules of Court — Enumerates the grounds for a motion to dismiss. The Court held that absence of cause of action, estoppel, and in pari delicto are not among the enumerated grounds and are evidentiary matters properly ventilated during trial.

• Article 2018, Civil Code of the Philippines — Declares null and void any contract purporting to be for the delivery of goods, securities, or shares of stock entered into with the intention that the difference between the stipulated price and the market price at the time of pretended delivery be paid by the loser to the winner. Lepanto invoked this article to seek nullification of the hedging contracts. The Court held that whether the contracts fall under this article is a question of law requiring examination of the contracts themselves — an inquiry into the merits not resolvable on a motion to dismiss.

• Section 6, Rule 135, Rules of Court — Authorizes courts to employ auxiliary writs, processes, and means necessary to carry jurisdiction into effect. Respondent cited this provision to justify extraterritorial service, but the Court held that Section 15, Rule 14 is the specific provision governing extraterritorial service and prevails over the general provision in Rule 135.

Chief Justice Renato C. Corona (Chairperson), Associate Justice Lucas P. Bersamin, Associate Justice Mariano C. Del Castillo, and Associate Justice Martin S. Villarama, Jr. concurred with the decision. No separate concurring opinions were noted.