Northwest Orient Airlines, Inc. vs. Court of Appeals and C.F. Sharp & Company Inc.

A foreign court's judgment against a Philippine corporation is enforceable in the Philippines, provided the foreign court acquired jurisdiction through valid service of process. Where the Philippine corporation is doing business in the foreign country and is thus deemed a resident thereof, service of summons at its head office in the Philippines via diplomatic channels, after reasonable attempts to serve it within the foreign forum have failed, is valid and sufficient to confer jurisdiction upon the foreign court.

Northwest Orient Airlines, Inc. (NORTHWEST), a U.S. corporation, and C.F. Sharp & Company, Inc. (SHARP), a Philippine corporation, entered into an International Passenger Sales Agency Agreement in 1974, authorizing SHARP's Japan branch to sell NORTHWEST's air transportation tickets. SHARP failed to remit the proceeds from these sales. On March 25, 1980, NORTHWEST filed a collection suit against SHARP in the Tokyo District Court of Japan.

• Nature of the Action: This is a suit for enforcement of a foreign money judgment filed by NORTHWEST against SHARP in the Philippines.
• The Underlying Agreement and Dispute: In 1974, NORTHWEST authorized SHARP's Japan branch to sell its airline tickets. SHARP failed to remit the proceeds.
• The Japanese Lawsuit and Service of Summons: NORTHWEST sued SHARP in Tokyo in 1980. After two unsuccessful attempts to serve summons at SHARP's Yokohama branch (the authorized person was absent on the first attempt and refused service on the second, claiming he was no longer an employee), the Tokyo District Court ordered service through diplomatic channels. The summons was served on SHARP at its principal office in Manila on August 28, 1980.
• The Foreign Judgment: SHARP did not appear in the Japanese proceedings. The Tokyo Court entered a default judgment against SHARP on January 29, 1981, for ¥83,158,195 plus 6% annual interest.
• The Philippine Enforcement Proceedings: NORTHWEST filed a complaint to enforce the judgment in the Manila RTC. The RTC dismissed the complaint on a demurrer to evidence, finding the Japanese court lacked jurisdiction because service of summons outside Japan was invalid. The Court of Appeals affirmed.

• Validity of Service and Jurisdiction: NORTHWEST argued that SHARP, by maintaining four registered branches in Japan, was a resident corporation there and thus amenable to the jurisdiction of Japanese courts. Service at its head office in Manila, after failed attempts in Japan, was valid under the procedural law of the forum (Japan).
• Presumption of Regularity and Processual Presumption: NORTHWEST contended that the foreign judgment and the proceedings leading to it are presumed valid and regular. In the absence of proof of Japanese law, the "processual presumption" applies, deeming Japanese law to be the same as Philippine law. Under Philippine rules, service on a foreign corporation doing business in the country can be made on a government official, who then transmits the process to the corporation's home office—a procedure analogous to the diplomatic channel service used here.
• Distinguishing Precedent: NORTHWEST argued that the lower courts erred in relying on Boudard v. Tait, which involved a defendant with no presence in the foreign jurisdiction, unlike SHARP which had substantial operations in Japan.

• Lack of Jurisdiction Due to Extraterritorial Service: SHARP maintained that the Japanese court never acquired jurisdiction over its person because the summons was served in the Philippines, outside the territorial boundaries of Japan. It argued that for an action in personam, personal service within the forum is required, regardless of the defendant's residence.
• Corporation's Domicile: SHARP asserted that a corporation's residence is solely the place of its incorporation (the Philippines). Having branches in Japan does not make it a resident of Japan; therefore, it was a non-resident defendant in the Japanese case, and extraterritorial service was void.
• Invalidity Under Philippine Law: SHARP contended that the diplomatic channel service did not comply with Philippine rules for service on foreign corporations, which require service on specific officers or agents within the country, not at the head office abroad.

• Jurisdiction Over the Defendant: Whether the Tokyo District Court acquired jurisdiction over C.F. Sharp & Company, Inc., a Philippine corporation, through service of summons effected at its principal office in Manila via diplomatic channels.
• Validity of the Foreign Judgment: Whether the Japanese judgment is null and void for want of jurisdiction and thus unenforceable in the Philippines.

• Jurisdiction Was Properly Acquired: The service of summons on SHARP in Manila was valid and conferred jurisdiction upon the Japanese court. SHARP, by maintaining four branches and doing business in Japan, was deemed a resident corporation of Japan for jurisdictional purposes. Under the "processual presumption," Japanese procedural law is presumed identical to Philippine law. Philippine law (Sec. 14, Rule 14 of the Rules of Court and Sec. 128 of the Corporation Code) authorizes service on a government official when a foreign corporation has no resident agent, and that official then transmits the process to the corporation's home office. The diplomatic channel service used in this case was the functional equivalent of this procedure. The prior attempts to serve SHARP in Japan demonstrated the reasonableness of this alternative method.
• The Foreign Judgment is Enforceable: The presumption of validity and regularity of the foreign judgment was not overcome by SHARP. The burden to prove want of jurisdiction, want of notice, collusion, fraud, or clear mistake lay with SHARP, and it failed to discharge this burden by not presenting evidence of Japanese law to invalidate the service. Accordingly, the judgment is entitled to recognition and enforcement.

• Processual Presumption — In the absence of proof of a foreign law, it is presumed to be the same as the domestic law (lex fori). This presumption applies to matters of procedure, such as service of summons. The Court invoked this doctrine to presume that Japanese rules on service of process were similar to Philippine rules, thereby validating the extraterritorial service.
• Residence of a Corporation for Jurisdictional Purposes — While a corporation's domicile is the state of its incorporation, a corporation doing business in a foreign country through branches may be considered a resident of that country for the purpose of being subject to its courts' jurisdiction. This "residence" is based on the locality of its existence and business operations, not its legal domicile.
• Presumption of Validity and Regularity of Foreign Judgments — A foreign judgment is presumed valid and binding. The party attacking it bears the burden of proving a ground for its invalidity, such as want of jurisdiction, want of notice, collusion, fraud, or clear mistake of law or fact.

• "The domicile of a corporation belongs to the state where it was incorporated... Nonetheless, a corporation formed in one state may, for certain purposes, be regarded a resident in another state in which it has offices and transacts business." — This passage clarifies the distinction between a corporation's legal domicile and its operational residence for jurisdictional purposes.
• "In as much as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving process." — This is the core application of the doctrines to the facts, establishing the link between business presence, residence, and amenability to jurisdiction.

• Boudard v. Tait, 67 Phil. 170 (1939) — Distinguished. This case held that a foreign court lacked jurisdiction over a defendant who had no presence or agent in the foreign country. The Court found it inapplicable because SHARP had four branches in Japan.
• Milliken v. Meyer, 311 U.S. 457 (1940) — Followed. This U.S. Supreme Court case established that domicile within a state is sufficient to subject an absent defendant to the state's jurisdiction through reasonable substituted service. The Court cited its rationale that the responsibilities of citizenship/domicile are not dissolved by mere absence.
• State Investment House, Inc. v. Citibank, N.A., 203 SCRA 9 (1991) — Cited for the principle that foreign corporations licensed to do business in the Philippines are assimilated to the status of domestic corporations and may be considered residents for certain legal purposes.

• Section 50, Rule 39 of the Rules of Court — Provides that a foreign judgment is presumptive evidence of a right between the parties but may be assailed by evidence of want of jurisdiction, want of notice, collusion, fraud, or clear mistake of law or fact.
• Section 14, Rule 14 of the Rules of Court — Governs service of summons on a foreign corporation doing business in the Philippines. It allows service on its resident agent, or if none, on the appropriate government official (e.g., the Securities and Exchange Commission), who must then transmit the process to the corporation's home office.
• Section 128 of the Corporation Code (Batas Pambansa Blg. 68) — Requires foreign corporations to stipulate that if they cease to do business or have no resident agent, service of summons may be made on the Securities and Exchange Commission with the same effect as service at the home office.

• Justice Teodoro R. Padilla, Jr. (Ponente)
• Justice Arturo B. Bellosillo
• Justice Jose A. R. Quaison
• Justice Santiago M. Kapunan