Perkin Elmer Singapore Pte Ltd. vs. Dakila Trading Corporation

Extraterritorial service of summons is invalid in an action in personam against a non-resident defendant not found in the Philippines, and mere allegations of the defendant's property within the country or a denied prayer for attachment do not convert the action to one in rem or quasi in rem to justify such service; additionally, a compulsory counterclaim survives the dismissal of the complaint if the cause of action for the counterclaim is not eliminated by the dismissal.

Respondent Dakila Trading Corporation entered into a Distribution Agreement with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a Singapore corporation, appointing respondent as the sole distributor of PEIA products in the Philippines. PEIA unilaterally terminated the agreement, prompting respondent to file a complaint for collection of sum of money and damages against PEIA and its Philippine affiliate, Perkin-Elmer Instruments (Philippines) Corporation (PEIP). PEIA subsequently became a sole proprietorship owned by petitioner Perkin Elmer Singapore Pte Ltd., changing its name to Perkinelmer Asia. Respondent amended its complaint to substitute petitioner for PEIA, alleging that petitioner assumed PEIA's obligations. Summons was served extraterritorially on petitioner in Singapore after the trial court deputized respondent's general manager. Petitioner moved to dismiss on grounds of lack of jurisdiction over its person, failure to state a cause of action, and improper venue.

• The Distribution Agreement: On June 1, 1990, respondent Dakila Trading Corporation and PEIA, a Singapore corporation, executed a Distribution Agreement appointing respondent as the sole distributor of PEIA products in the Philippines. PEIA owned 99% of the shares of PEIP, a Philippine corporation from which respondent could also order products.
• Unilateral Termination: On August 2, 1997, PEIA unilaterally terminated the Distribution Agreement.
• Filing of the Complaint: Respondent filed a Complaint for Collection of Sum of Money and Damages with Prayer for Issuance of a Writ of Attachment against PEIA and PEIP in the RTC of Mandaluyong City. The RTC denied the prayer for a writ of attachment, emphasizing that PEIP has a personality separate and distinct from its shareholder.
• Substitution of Parties: PEIA allegedly became a sole proprietorship owned by petitioner Perkin Elmer Singapore Pte Ltd., operating under the name Perkinelmer Asia. Respondent filed an Ex-Parte Motion to Admit Amended Complaint to substitute petitioner for PEIA, claiming petitioner assumed all of PEIA's outstanding obligations. The RTC admitted the Amended Complaint.
• Extraterritorial Service of Summons: The RTC deputized respondent's General Manager to serve summons on petitioner in Singapore. Petitioner received the summons but filed a Special Appearance and Motion to Dismiss, challenging the court's jurisdiction over its person, the existence of a cause of action, and the propriety of the venue.

• Invalid Extraterritorial Service: Petitioner argued that the action for collection of sum of money and damages is in personam; thus, extraterritorial service of summons under Section 15, Rule 14 is improper, as it applies only to in rem or quasi in rem cases. Personal service within the Philippines is required to acquire jurisdiction over a non-resident defendant.
• No Conversion to Quasi in Rem: Petitioner maintained that mere allegations of personal property within the Philippines do not convert the action to one relating to property within the country, as the main subject matter must be the property itself. Furthermore, the denied prayer for attachment did not convert the action from in personam to quasi in rem.
• Failure to State a Cause of Action: Petitioner claimed it is not the real party-in-interest because it is an entirely different corporate entity from PEIA and never used PEIA's name. Even assuming they were the same entity, the Distribution Agreement expressly granted PEIA the right to terminate the contract at any time.
• Improper Venue: Petitioner asserted that the Distribution Agreement stipulated the exclusive jurisdiction of the courts of Singapore or the Philippines, as elected by PEIA. Absent any waiver by PEIA, filing in the Philippines was improper.

• Valid Extraterritorial Service: Respondent countered that the allegations in the Amended Complaint regarding petitioner's ownership of shares of stock in PEIP constitute personal property within the Philippines, bringing the case under the second instance of Section 15, Rule 14, where the action relates to property in which the defendant claims an interest.
• Conversion by Attachment: Respondent argued that the prayer for attachment in the Complaint converted the action in personam to an action quasi in rem, satisfying the fourth instance of Section 15, Rule 14.
• Cause of Action Exists: Respondent maintained that the Amended Complaint sufficiently alleges all the essential elements of a cause of action.
• Proper Venue: Respondent contended that the venue stipulation was merely alternative and did not preclude filing in the residence of the respondent under Section 2, Rule 4 of the Rules of Court.

• Validity of Extraterritorial Service: Whether extraterritorial service of summons was valid to acquire jurisdiction over the person of the non-resident petitioner in an action in personam.
• Conversion to Quasi in Rem: Whether mere allegations of property in the Philippines or a denied prayer for attachment convert an action in personam to one in rem or quasi in rem.
• Cause of Action: Whether the Amended Complaint fails to state a cause of action against the petitioner.
• Venue: Whether the venue was improperly laid given the stipulation in the Distribution Agreement.
• Survival of Counterclaim: Whether the dismissal of the complaint for lack of jurisdiction over the person of the defendant carries with it the dismissal of the compulsory counterclaim.

• Validity of Extraterritorial Service: Extraterritorial service of summons was invalid. The action for collection of sum of money and damages is purely in personam, being based on the personal liability of the petitioner. Extraterritorial service applies only to actions in rem or quasi in rem; for actions in personam against a non-resident not found in the Philippines, personal service within the country is essential to acquire jurisdiction.
• Conversion to Quasi in Rem: The action was not converted to quasi in rem. Mere allegations of personal property within the Philippines do not make the action relate to property within the meaning of Section 15, Rule 14; the main subject matter of the action must be the property itself. Moreover, actual attachment of the property is required under the fourth instance of Section 15, Rule 14. Since the prayer for a writ of attachment was denied by the RTC, the property was never attached, and the action remained in personam.
• Cause of Action: The Amended Complaint sufficiently states a cause of action. When a motion to dismiss is based on failure to state a cause of action, the facts alleged in the complaint are hypothetically admitted as true. The defense that petitioner is not the real party-in-interest is evidentiary in nature and must be proven at trial.
• Venue: Venue was properly laid. The stipulation in the Distribution Agreement, despite using the word "exclusive," provided alternative venues (Singapore or the Philippines). Thus, Philippine courts are not an improper venue.
• Survival of Counterclaim: The compulsory counterclaim survives the dismissal of the complaint. Under the 1997 Revised Rules of Civil Procedure, as clarified in Pinga v. Heirs of German Santiago, the dismissal of a complaint does not carry with it the dismissal of a counterclaim if the cause of action for the counterclaim is not eliminated by the dismissal. Petitioner's counterclaim for damages arising from the unfounded suit remains viable because the dismissal of the complaint does not obviate the violation of petitioner's rights caused by the filing of the unfounded suit.

• Extraterritorial Service of Summons — Applies only to actions in rem or quasi in rem, not to actions in personam. Its purpose in such actions is not to vest the court with jurisdiction over the person of the defendant, but to comply with due process so that the defendant is informed of the pendency of the action against property in the Philippines. In actions in personam against a non-resident defendant not found in the Philippines, extraterritorial service is invalid, and Philippine courts cannot acquire jurisdiction over the person unless the defendant voluntarily appears.
• Conversion of Actions In Personam to Quasi In Rem — An action in personam is not converted to quasi in rem by mere allegations that the defendant has personal property within the Philippines. For the action to relate to property within the meaning of Section 15, Rule 14, the main subject matter of the action must be the property itself. Additionally, actual attachment of the non-resident defendant's property is required to convert the action; a mere prayer for attachment, or an attachment that is void from the beginning, will not effect such conversion.
• Survival of Compulsory Counterclaim — Under the 1997 Revised Rules of Civil Procedure, the dismissal of a complaint does not carry with it the dismissal of a compulsory counterclaim if the cause of action for the counterclaim survives the dismissal. If the dismissal of the complaint eliminates the cause of the counterclaim, the counterclaim cannot survive; conversely, if the counterclaim states a sufficient cause of action independent of the complaint, it should stand independently. This doctrine abandons previous rulings holding that a compulsory counterclaim is necessarily dismissed along with the complaint.
• Voluntary Appearance — The inclusion in a motion to dismiss of grounds other than lack of jurisdiction over the person of the defendant, including a prayer for other reliefs, shall not be deemed a voluntary appearance under Section 20, Rule 14. Filing an answer ad cautelam with a compulsory counterclaim to avoid being declared in default does not constitute voluntary submission to the court's jurisdiction.

• "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."
• "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."
• "If the dismissal of the complaint somehow eliminates the cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that hardly is the case, especially as a general rule. More often than not, the allegations that form the counterclaim are rooted in an act or omission of the plaintiff other than the plaintiff’s very act of filing the complaint."

• Venturanza v. Court of Appeals, G.R. No. L-77760 — Followed. Held that a void attachment does not convert an action in personam to one in rem, reinforcing the requirement of actual attachment for extraterritorial service.
• Pinga v. Heirs of German Santiago, G.R. No. 170354 — Followed. Established that under the 1997 Rules, the dismissal of a complaint does not carry the dismissal of a counterclaim, abandoning the doctrine in BA Finance.
• Metal Engineering Resources Corp. v. Court of Appeals, International Container Terminal Services, Inc. v. Court of Appeals, BA Finance Corporation v. Co. — Abandoned/Overruled. These cases previously held that if the court dismisses the main action for lack of jurisdiction, the compulsory counterclaim must likewise be dismissed.
• De Midgely v. Ferandos, G.R. No. L-34314 — Superseded. Held that alleging grounds other than lack of jurisdiction in a motion to dismiss amounted to voluntary appearance; superseded by Section 20, Rule 14 and La Naval Drug.
• La Naval Drug Corporation v. Court of Appeals, G.R. No. 103200 — Followed. Held that estoppel by jurisdiction must be unequivocal and intentional, supporting the rule that seeking other reliefs in a motion to dismiss does not equate to voluntary appearance.

• Section 15, Rule 14, 1997 Revised Rules of Civil Procedure — Enumerates the four instances wherein a non-resident defendant not found in the country may be served with summons by extraterritorial service: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is property within the Philippines, in which the defendant claims a lien or interest; (3) when the relief demanded consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant non-resident’s property has been attached within the Philippines. Applied to demonstrate that the present case did not fall under any of these instances, rendering the extraterritorial service invalid.
• Section 20, Rule 14, 1997 Revised Rules of Civil Procedure — Provides that 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. Applied to reject the argument that petitioner voluntarily submitted to the trial court's jurisdiction.
• Section 3, Rule 17, 1997 Revised Rules of Civil Procedure — Provides that dismissal due to the fault of the plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims in the same or separate action. Applied by analogy to support the survival of the compulsory counterclaim despite the dismissal of the complaint.

Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Antonio Eduardo B. Nachura