SECOND DIVISION
[G.R. Nos. 121576-78. June 16, 2000]
BANCO DO
BRASIL, petitioner, vs. THE COURT OF APPEALS, HON. ARSENIO M. GONONG,
and CESAR S. URBINO, SR., respondents.
D E C I S I O N
DE LEON, JR., J.:
Before us is a petition for review on certiorari
of the Decision[1] and the Resolution[2] of the Court of Appeals[3] dated July 19, 1993 and August 15, 1995,
respectively, which reinstated the entire Decision[4] dated February 18, 1991 of the Regional Trial Court
of Manila, Branch 8, holding, among others, petitioner Banco do Brasil liable
to private respondent Cesar Urbino, Sr. for damages amounting to $300,000.00.[5]
At the outset, let us state that this case
should have been consolidated with the recently decided case of Vlason
Enterprises Corporation v. Court of Appeals and Duraproof Services, represented
by its General Manager, Cesar Urbino Sr.[6], for these two (2) cases involved the same material
antecedents, though the main issue proffered in the present petition vary with
the Vlason case.
The material antecedents, as quoted from the
Vlason[7] case, are:
Poro Point
Shipping Services, then acting as the local agent of Omega Sea Transport
Company of Honduras & Panama, a Panamanian Company (hereafter referred to
as Omega), requested permission for its vessel M/V Star Ace, which had engine
trouble, to unload its cargo and to store it at the Philippine Ports Authority
(PPA) compound in San Fernando, La Union while awaiting transhipment to
Hongkong. The request was approved by the Bureau of Customs.[8] Despite the approval, the customs personnel boarded
the vessel when it docked on January 7, 1989, on suspicion that it was the
hijacked M/V Silver Med owned by Med Line Philippines Co., and that its cargo
would be smuggled into the country.[9] The district customs collector seized said vessel and
its cargo pursuant to Section 2301, Tariff and Customs Code. A notice of
hearing of SFLU Seizure Identification No. 3-89 was served on its consignee,
Singkong Trading Co. of Hongkong, and its shipper, Dusit International Co.,
Ltd. of Thailand.
While seizure
proceedings were ongoing, La Union was hit by three typhoons, and the vessel
ran aground and was abandoned. On June 8, 1989, its authorized representative,
Frank Cadacio, entered into salvage agreement with private respondent to secure
and repair the vessel at the agreed consideration of $1 million and "fifty
percent (50%) [of] the cargo after all expenses, cost and taxes."[10]
Finding that no
fraud was committed, the District Collector of Customs, Aurelio M. Quiray,
lifted the warrant of seizure on July 1989.[11] However, in a Second Indorsement dated November 11,
1989, then Customs Commissioner Salvador M. Mison declined to issue a clearance
for Quiray’s Decision; instead, he forfeited the vessel and its cargo in
accordance with Section 2530 of the Tariff and Customs Code.[12] Accordingly, acting District Collector of Customs
John S. Sy issued a Decision decreeing the forfeiture and the sale of the cargo
in favor of the government.[13]
To enforce its
preferred salvor’s lien, herein Private Respondent Duraproof Services filed
with the Regional Trial Court of Manila a Petition for Certiorari,
Prohibition and Mandamus[14] assailing the actions of Commissioner Mison and
District Collector Sy. Also impleaded as respondents were PPA Representative
Silverio Mangaoang and Med Line Philippines, Inc.
On January 10,
1989, private respondent amended its Petition[15] to include former District Collector Quiray; PPA Port
Manager Adolfo Ll. Amor, Jr.; x Vlason Enterprises as represented by its
president, Vicente Angliongto; Singkong Trading Company as represented by Atty.
Eddie Tamondong; Banco Du Brasil; Dusit International Co.; Thai-Nan Enterprises
Ltd., and Thai-United Trading Co., Ltd.[16] x x x
Summonses for the
amended Petition were served on Atty. Joseph Capuyan for Med Line Philippines:
Anglionto (through his secretary, Betty Bebero), Atty. Tamondong and
Commissioner Mison.[17] Upon motion of the private respondent, the trial
court allowed summons by publication to be served upon defendants who were not
residents and had no direct representative in the country.[18]
On January 29,
1990, private respondent moved to declare respondents in default, but the trial
court denied the motion in its February 23, 1990 Order[19], because Mangaoang and Amor had jointly filed a
Motion to Dismiss, while Mison and Med Line had moved separately for an
extension to file a similar motion.[20] Later it rendered an Order dated July 2, 1990, giving
due course to the motions to dismiss filed by Mangaoang and Amor on the ground
of litis pendentia, and by the commissioner and district collector of customs
on the ground of lack of jurisdiction.[21] In another Order, the trial court dismissed the
action against Med Line Philippines on the ground of litis pendentia.[22]
On two other
occasions, private respondent again moved to declare the following in default:
[Vlason], Quiray, Sy and Mison on March 26, 1990;[23] and Banco [do] Bra[s]il, Dusit International Co.,
Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd. on August 24,
1990.[24] There is no record, however, that the trial court
acted upon the motions. On September 18, 1990, [private respondent] filed
another Motion for leave to amend the petition,[25] alleging that its counsel failed to include
"necessary and/or indispensable parties": Omega represented by
Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, relief captain.
Aside from impleading these additional respondents, private respondent also
alleged in the Second (actually, third) Amended Petition[26] that the owners of the vessel intended to transfer
and alienate their rights and interest over the vessel and its cargo, to the
detriment of the private respondent.
The trial court
granted leave to private respondent to amend its Petition, but only to exclude
the customs commissioner and the district collector.[27] Instead, private respondent filed the "Second
Amended Petition with Supplemental Petition" against Singkong Trading
Company; and Omega and M/V Star Ace,[28] to which Cadacio and Rada filed a Joint Answer.[29]
Declared in
default in an Order issued by the trial court on January 23, 1991, were the
following: Singkong Trading Co., Commissioner Mison, M/V Star Ace and Omega.[30] Private respondent filed, and the trial court
granted, an ex parte Motion to present evidence against the defaulting
respondents.[31] Only private respondent, Atty. Tamondong,
Commissioner Mison, Omega and M/V Star Ace appeared in the next pretrial
hearing; thus, the trial court declared the other respondents in default and
allowed private respondent to present evidence against them.[32] Cesar Urbino, general manager of private respondent,
testified and adduced evidence against the other respondents, x x x.[33]
On December 29,
1990, private respondent and Rada, representing Omega, entered into a Memorandum
of Agreement stipulating that Rada would write and notify Omega regarding the
demand for salvage fees of private respondent; and that if Rada did not receive
any instruction from his principal, he would assign the vessel in favor of the
salvor.[34]
On February 18,
1991, the trial court disposed as follows:
"WHEREFORE,
IN VIEW OF THE FOREGOING, based on the allegations, prayer and evidence
adduced, both testimonial and documentary, the Court is convinced, that,
indeed, defendants/respondents are liable to [private respondent] in the amount
as prayed for in the petition for which it renders judgment as follows:
1. Respondent M/V
Star Ace, represented by Capt. Nahum Rada, [r]elief [c]aptain of the vessel and
Omega Sea Transport Company, Inc., represented by Frank Cadacio[,] is ordered
to refrain from alienating or [transferring] the vessel M/V Star Ace to any
third parties;
2. Singkong
Trading Company to pay the following:
a. Taxes due the
government;
b. Salvage fees on
the vessel in the amount of $1,000,000.00 based on xxx Lloyd’s Standard Form of
Salvage Agreement;
c. Preservation,
securing and guarding fees on the vessel in the amount of $225,000.00;
d. Maintenance
fees in the amount of P2,685,000.00;
e. Salaries of the
crew from August 16, 1989 to December 1989 in the amount of $43,000.00 and
unpaid salaries from January 1990 up to the present;
f. Attorney’s fees
in the amount of P656,000.00;
3. [Vlason]
Enterprises to pay [private respondent] in the amount of P3,000,000.00 for
damages;
4. Banco [Du]
Brasil to pay [private respondent] in the amount of $300,000.00 in damages;[35] and finally,
5. Costs of
[s]uit."
Subsequently, upon
the motion of Omega, Singkong Trading Co., and private respondent, the trial
court approved a Compromise Agreement[36] among the movants, reducing by 20 percent the amounts
adjudged. For their part, respondents-movants agreed not to appeal the
Decision.[37] On March 8, 1991, private respondent moved for the
execution of judgment, claiming that the trial court Decision had already become
final and executory. The Motion was granted and a Writ of Execution was issued.
To satisfy the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio
Camañgon were deputized on March 13, 1991 to levy and to sell on execution the
defendants vessel and personal property.
x x x
On March 18, 1991,
the Bureau of Customs also filed an ex parte Motion to recall the execution,
and to quash the notice of levy and the sale on execution. Despite this Motion,
the auction sale was conducted on March 21, 1991 by Sheriff Camañgon, with
private respondent submitting the winning bid. The trial court ordered the
deputy sheriffs to cease and desist from implementing the Writ of Execution and
from levying on the personal property of the defendants. Nevertheless, Sheriff
Camañgon issued the corresponding Certificate of Sale on March 27, 1991.
On April 10, 1991, petitioner Banco do
Brasil filed, by special appearance, an Urgent Motion to Vacate Judgement and
to Dismiss Case[38] on the ground that the February 18, 1991 Decision of
the trial court is void with respect to it for having been rendered without
validly acquiring jurisdiction over the person of Banco do Brasil. Petitioner
subsequently amended its petition[39] to specifically aver that its special appearance is
solely for the purpose of questioning the Court’s exercise of personal
jurisdiction.
On May 20, 1991, the trial court issued an
Order[40] acting favorably on petitioner’s motion and set aside
as against petitioner the decision dated February 18, 1991 for having been
rendered without jurisdiction over Banco do Brasil’s person. Private respondent
sought reconsideration[41] of the Order dated May 20, 1991. However, the trial
court in an Order[42] dated June 21, 1991 denied said motion.
Meanwhile, a certiorari petition[43] was filed by private respondent before public
respondent Court of Appeals seeking to nullify the cease and desist Order dated
April 5, 1991 issued by Judge Arsenio M. Gonong. Two (2) more separate
petitions for certiorari were subsequently filed by private respondent.
The second petition[44] sought to nullify the Order[45] dated June 26, 1992 setting aside the Deputy
Sheriff’s return dated April 1, 1991 as well as the certificate of sale issued
by Deputy Sheriff Camañgon. The third petition[46] sought to nullify the Order dated October 5, 1992 of
the Court of Tax Appeals directing the Commissioner of Customs to place Bureau
of Customs and PNP officers and guards to secure the M/V Star Ace and its
cargoes, make inventory of the goods stored in the premises as indicated to
belong to the private respondent. Likewise challenged was the Order dated
August 17, 1992 authorizing the sale of M/V Star Ace and its cargoes.
These three (3) petitions were consolidated
and on July 19, 1993, the appellate court rendered its Decision[47] granting private respondent’s petitions, thereby
nullifying and setting aside the disputed orders and effectively "giving
way to the entire [decision dated February 18, 1991 of the x x x
Regional Trial Court of Manila, Branch 8, in Civil Case No. 89-51451 which remains
valid, final and executory, if not yet wholly
executed."[48]
Private respondent Urbino, Vlason
Enterprises and petitioner Banco do Brasil filed separate motions for
reconsideration. For its part, petitioner Banco do Brasil sought reconsideration,
insofar as its liability for damages, on the ground that there was no valid
service of summons as service was on the wrong party – the ambassador of
Brazil. Hence, it argued, the trial court did not acquire jurisdiction over
petitioner Banco do Brasil.[49] Nonetheless, the appellate court denied the motions
for reconsideration in its Resolution[50] dated August 15, 1995.
Hence, the instant petition.
Petitioner Banco do Brasil takes exception
to the appellate court’s declaration that the suit below is in rem, not in
personam,[51] thus, service of summons by publication was
sufficient for the court to acquire jurisdiction over the person of petitioner
Banco do Brasil, and thereby liable to private respondent Cesar Urbino for
damages claimed, amounting to $300,000.00. Petitioner further challenges the
finding that the February 18, 1991 decision of the trial court was already
final and thus, cannot be modified or assailed.[52]
Petitioner avers that the action filed
against it is an action for damages, as such it is an action in personam
which requires personal service of summons be made upon it for the court to
acquire jurisdiction over it. However, inasmuch as petitioner Banco do Brasil
is a non-resident foreign corporation, not engaged in business in the
Philippines, unless it has property located in the Philippines which may be
attached to convert the action into an action in rem, the court cannot
acquire jurisdiction over it in respect of an action in personam.
The petition bears merit, thus the same
should be as it is hereby granted.
First. When the defendant is a nonresident
and he is not found in the country, summons may be served extraterritorially in
accordance with Rule 14, Section 17[53] of the Rules of Court. Under this provision, there are only four (4) instances
when extraterritorial service of summons is proper, namely: "(1) when the
action affects the personal status of the plaintiffs; (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, actual or contingent; (3) 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 (4)
when the defendant non-resident’s property has been attached within the
Philippines."[54] 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.[55]
Clear from the foregoing, extrajudicial
service of summons apply only where the action is in rem, an action
against the thing itself instead of against the person, or in an action quasi
in rem, where an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or loan
burdening the property. This is so inasmuch as, in in rem and quasi
in rem actions, 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.[56]
However, where the action is in personam,
one brought against a person on the basis of his personal liability,
jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case. When the defendant is a non-resident,
personal service of summons within the state is essential to the acquisition of
jurisdiction over the person.[57] This cannot be done, however, if the defendant is not
physically present in the country, and thus, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and decide the
case against him.[58]
In the instant case, private respondent’s
suit against petitioner is premised on petitioner’s being one of the claimants
of the subject vessel M/V Star Ace.[59] Thus, it can be said that private respondent
initially sought only to exclude petitioner from claiming interest over the
subject vessel M/V Star Ace. However, private respondent testified during the
presentation of evidence that, for being a nuisance defendant, petitioner
caused irreparable damage to private respondent in the amount of $300,000.00.[60] Therefore, while the action is in rem, by
claiming damages, the relief demanded went beyond the res and sought a
relief totally alien to the action.
It must be stressed that any relief granted in
rem or quasi in rem actions must be confined to the res, and
the court cannot lawfully render a personal judgment against the defendant.[61] Clearly, the publication of summons effected by
private respondent is invalid and ineffective for the trial court to acquire
jurisdiction over the person of petitioner, since by seeking to recover damages
from petitioner for the alleged commission of an injury to his person or
property[62] caused by petitioner’s being a nuisance defendant,
private respondent’s action became in personam. Bearing in mind the in
personam nature of the action, personal or, if not possible, substituted
service of summons on petitioner, and not extraterritorial service, is
necessary to confer jurisdiction over the person of petitioner and validly hold
it liable to private respondent for damages. Thus, the trial court had no
jurisdiction to award damages amounting to $300,000.00 in favor of private
respondent and as against herein petitioner.
Second. We settled the issue of finality of
the trial court’s decision dated February 18, 1991 in the Vlason case,
wherein we stated that, considering the admiralty case involved multiple
defendants, "each defendant had a different period within which to appeal,
depending on the date of receipt of decision."[63] Only upon the lapse of the reglementary period to
appeal, with no appeal perfected within such period, does the decision become
final and executory.[64]
In the case of petitioner, its Motion to
Vacate Judgment and to Dismiss Case was filed on April 10, 1991, only six (6)
days after it learned of the existence of the case upon being informed by the
Embassy of the Federative Republic of Brazil in the Philippines, on April 4,
1991, of the February 18, 1991 decision.[65] Thus, in the absence of any evidence on the date of
receipt of decision, other than the alleged April 4, 1991 date when petitioner
learned of the decision, the February 18, 1991 decision of the trial court
cannot be said to have attained finality as regards the petitioner.
WHEREFORE, the subject petition is hereby GRANTED. The
Decision and the Resolution of the Court of Appeals dated July 19, 1993 and
August 15, 1995, respectively, in CA-G.R. SP Nos. 24669, 28387 and 29317 are
hereby REVERSED and SET ASIDE insofar as they
affect petitioner Banco do Brasil. The Order dated May 20, 1991 of the Regional
Trial Court of Manila, Branch 8 in Civil Case No. 89-51451 is REINSTATED.
SO ORDERED.
Bellosillo, (Chairman), Mendoza,
Quisumbing, and Buena, JJ., concur.
[1] Penned by Associate Justice Jainal D. Rasul and
concurred in by Associate Justices Segundino G. Chua and Consuelo
Ynares-Santiago, now Associate Justice of the Supreme Court, in CA-G.R. S.P.
Nos. 24669, 28387 & 29317, Rollo, pp. 33-47.
[2] Id., pp. 49-53.
[3] Former Special Eighth Division.
[4] Penned by Judge Arsenio M. Gonong, Civil Case No.
89-51451, Records, Vol. 2, pp. 517-528.
[5] The Appellate Court erroneously declared in its decision
that the amount of P300,000.00 was awarded by the trial court, Rollo, p.
36.
[6] G.R. Nos. 121662-64, July 6, 1999, Third Division,
penned by Associate Justice Artemio V. Panganiban and concurred in by Associate
Justices Jose C. Vitug, Fidel P. Purisima, and Minerva P. Gonzaga-Reyes.
[7] Decision in G.R. Nos. 121662-64, pp. 3-13.
[8] Records, Vol. 1, pp. 27-31.
[9] Records, Vol. 1, p. 32.
[10] Records, Vol. 1, pp. 36-39.
[11] Decision dated July 17, 1989, in SFLU Seizure Identification
No. 3-89; Records, Vol. 1, pp. 54-68.
[12] 2nd Indorsement dated November 1989; Records, Vol. 1,
pp. 70-71.
[13] Decision dated November 17, 1989, Records, Vol. 1,
pp. 74-86.
[14] Docketed as Civil Case No. 89-51451 and raffled to
Branch 8; Records, Vol. 1, pp. 1-26.
[15] Ibid., pp. 122-145.
[16] Amended Petition, id., pp. 122 & 128-129.
[17] Sheriff’s Return, id., pp. 160-164 & 171.
[18] Id., pp. 153-156.
[19] Id., pp. 214-215.
[20] Eventually, both separately filed their motions to
dismiss.
[21] Records, Vol. 1, pp. 325-326.
[22] Order dated September 10, 1990; Records, Vol. 2, p.
359.
[23] Records, Vol. 1, pp. 237-238.
[24] Ibid., pp. 351-352.
[25] Records, Vol. 2, pp. 370-371.
[26] Motion for Leave to Admit Second Amended Petition and
Supplemental Petition, ibid., p. 370; Second Amended Petition with
Supplemental Petition, ibid., pp. 372-398.
[27] Order dated September 28, 1990, Records, Vol. 2, p.
407.
[28] Records, Vol. 2, pp. 414-415.
[29] Ibid., pp. 425-288.
[30] Id., p. 506.
[31] Order dated December 10, 1990, id., p. 492.
[32] Order dated January 23, 1991, Records, Vol. 2, p.
506. The records (pp. 493-495), however, show that only Duraproof Service,
Singkong Trading and M/V Star Ace were served summons.
[33] RTC Decision, p. 7; Rollo, p. 92; penned by
Judge Arsenio M. Gonong.
[34] Memorandum of Agreement, id., pp. 511-512.
[35] Italics supplied.
[36] Records, Vol. 2, pp. 535-538.
[37] Order dated March 6, 1991, ibid., pp. 539-541.
Private respondent entered into two separate compromise agreements with
Singkong Trading Co. (id., pp. 535-536) and another with Omega (id.,
pp. 537-538). Both agreements were dated March 4, 1991.
[38] Rollo, pp. 67-73.
[39] Rollo, pp. 74-80.
[40] Rollo, pp. 81-82.
[41] Records, Vol. 3, pp. 103-105.
[42] Rollo, p. 83.
[43] Docketed as CA-G.R. SP No. 24669.
[44] Docketed as CA-G.R. SP No. 28387.
[45] Penned by Judge Bernardo P. Pardo, then Executive
Judge, and now Associate Justice of the Supreme Court.
[46] Docketed as CA-G.R. SP No. 29317.
[47] See Note 1, supra.
[48] Rollo, p. 46.
[49] Rollo, pp. 107.
[50] See Note 2, supra.
[51] Rollo, pp. 19-21.
[52] Rollo, p. 22-23.
[53] Section 17. Extraterritorial service – When the
defendant does not reside and is not found in the Philippines and the action
affects the personal status of the plaintiff or relates to, or the subject of
which, is property within the Philippines, in which the defendant has or claims
a lien or interest, actual or contingent, or in which relief demanded consists,
wholly or in part, in excluding the defendant from any interest therein, or the
property of the defendant has been attached in the Philippines, service may, by
leave of court, be effected out of the Philippines by personal service as under
section 7; or by publication in a newspaper of general circulation in such
places and for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by registered mail to the last
known address of the defendant, or in any other manner the court may deem
sufficient. Any order granting such leave shall specify a reasonable time,
which shall not be less than sixty (60) days after notice, within which the
defendant must answer.
[54] Ibid., now Sec. 15 of the 1997 Rules of Civil
Procedure.
[55] Ibid..
[56] Asiavest Limited v. Court of Appeals, 296 SCRA
539, 552-554 [1998]; Valmonte v. Court of Appeals, 252 SCRA 92, 99-102
[1996].
[57] The Dial Corporation v. Soriano, 161 SCRA 737,
743 [1988] citing Boudard v. Tait, 67 Phil 170, 174 [1939].
[58] Asiavest Limited v. Court of Appeals, supra.
at 554.
[59] Records, Vol. 1, pp. 128-129.
[60] Records, Vol. 2, p. 567.
[61] Villareal v. Court of Appeals, 295 SCRA 511,
525 [1998].
[62] The Dial Corporation v. Soriano, supra.
at 742 citing Hernandez v. Development Bank of the Phil., 71 SCRA 290,
292-293 [1976].
[63] Decision in G.R. Nos. 121662-64, p. 27.
[64] Ibid.
[65] Rollo, pp. 67-80.