Kawasaki Port Service Corporation vs. Amores

Extraterritorial service of summons under Section 17, Rule 14 of the Rules of Court is permissible only in four specific instances, namely: (1) where the action affects the personal status of the plaintiff; (2) where the action 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; (3) where the relief demanded consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; or (4) where the non-resident defendant’s property has been attached within the Philippines. An action for declaratory relief and injunction that merely seeks to establish a corporation’s separate identity and to prevent foreign creditors from making demands is an action in personam. In such an action, extraterritorial service is void and does not confer jurisdiction over non-resident defendants.

C.F. Sharp & Co., Inc., a Philippine corporation, faced demands from numerous Japanese corporations to pay obligations owed by C.F. Sharp Kabushiki Kaisha, a separate Japanese corporation. The Philippine firm maintained it was distinct and bore no liability. To forestall the demands, it initiated a civil action against the Japanese firms in the Court of First Instance of Manila. All the Japanese defendants were non-resident foreign corporations with no business addresses in the Philippines.

• Nature of the Complaint: Private respondent C.F. Sharp & Co., Inc. (a Philippine corporation) filed a complaint for injunction and/or declaratory relief against seventy-nine Japanese corporations, including the ten petitioners. The complaint alleged that C.F. Sharp & Co., Inc. was entirely separate and distinct from C.F. Sharp Kabushiki Kaisha, a Japanese corporation, and that the plaintiff had no participation in or liability for the obligations of the Japanese entity.

• The Alleged Demands: Because C.F. Sharp Kabushiki Kaisha had defaulted on obligations to the Japanese defendants, the latter had been demanding, or attempting to demand, that C.F. Sharp & Co., Inc. pay those debts.

• Reliefs Prayed: Private respondent sought (a) an injunction to restrain the defendants from demanding payment, and (b) in the alternative, a judicial declaration that it was not liable for the debts of C.F. Sharp Kabushiki Kaisha. The complaint did not seek to exclude defendants from any interest in Philippine property, nor was it alleged that the defendants owned any property in the Philippines or that any such property had been attached.

• Extraterritorial Service: As all defendants were non-residents with no business addresses in the Philippines, the trial court, upon ex parte motion, authorized extraterritorial service of summons by registered mail with return cards, pursuant to Section 17, Rule 14 of the Rules of Court.

• Special Appearances and Denial: Petitioners entered special appearances to contest jurisdiction over their persons. They argued that the action did not involve personal status, did not relate to property in the Philippines in which they claimed an interest, and did not fall under any of the four situations permitting extraterritorial service under Section 17, Rule 14. The respondent judge denied the special appearances and the motion for reconsideration.

• Action Not Affecting Personal Status: Petitioners contended that private respondent’s cause of action — a prayer for injunction based on its alleged non-liability for the debts of a separate Japanese corporation — conclusively established that the action did not affect the plaintiff’s personal status.

• No Property in the Philippines Subject to the Action: Petitioners argued that the respondent court could not take jurisdiction over them as they were non-residents who owned no property in the Philippines, and they had not claimed any lien or interest in property within the country at the time the complaint was filed, a requisite under Section 17, Rule 14.

• Relief Does Not Exclude Defendants from an Interest in Philippine Property: Petitioners maintained that extraterritorial service upon a non-resident defendant is authorized, among other cases, only when the subject of the action is property within the Philippines and the relief demanded consists in excluding the defendant from any interest therein — a situation not present here.

• Action Is In Personam: Petitioners argued that since the reliefs prayed for were in personam, service by registered mail could not be availed of; Section 17, Rule 14 authorizes that mode of service only in actions in rem or quasi in rem.

• Action Affects Personal Status: Respondent contended that the action referred to its status because the basic issue was whether it possessed a corporate personality separate, distinct, and independent from C.F. Sharp Kabushiki Kaisha of Japan.

• Property of the Plaintiff Is Sufficient: Respondent maintained that under Section 17, Rule 14, the subject matter or property involved in the action need not belong to the defendants; the provision contemplates a situation where the property belongs to the plaintiff but the defendant has a claim — whether actual or contingent — over that property.

• Relief Excludes Defendants from Interest: Respondent asserted that the prayer for a declaration that defendants be excluded from any interest in plaintiff’s Philippine properties had the effect of excluding them from those properties for purposes of answering the debts of C.F. Sharp Kabushiki Kaisha, thus satisfying Section 17, Rule 14.

• Action Is Quasi in Rem: Respondent argued that the action was quasi in rem because the remedies affected its personal status as a separate corporation and related to its properties in the Philippines, over which petitioners had or claimed an interest, actual or contingent.

• Extraterritorial Service: Whether a complaint for injunction and/or declaratory relief seeking a declaration of corporate separateness and non-liability for another entity’s debts, and to enjoin mere demands for payment, falls within any of the instances permitting extraterritorial service of summons under Section 17, Rule 14 of the Rules of Court.

• Extraterritorial Service: The complaint did not fall within any of the four exclusive instances in Section 17, Rule 14, and extraterritorial service was therefore void. An action for declaratory relief that seeks a judicial declaration of non-liability for monetary obligations does not affect the personal status of the plaintiff; status refers to a legal personal relationship of a relatively permanent character, whereas obligations are temporary. Moreover, a declaratory judgment is unavailable where the judgment would determine disputed factual issues rather than construe stated rights; here, private respondent itself anticipated that petitioners might seek to pierce the corporate veil, necessitating a judicial investigation of disputed matters. The action also did not relate to, or have as its subject, property in the Philippines in which the defendants claimed any lien or interest, actual or contingent. The defendants had merely made extrajudicial demands; no action had been filed in court. The relief demanded — an injunction against further demands — did not seek to exclude defendants from any interest in Philippine property, nor was any property of the defendants attached. Consequently, the action was purely an injunction suit, which is a personal action in personam. In such an action, personal or substituted service of summons is necessary to confer jurisdiction; extraterritorial service cannot subject non-resident defendants to the processes of Philippine courts and is null and void.

• Four Instances for Extraterritorial Service under Section 17, Rule 14 — Under Section 17, Rule 14 of the Rules of Court, extraterritorial service of summons is proper only in four instances: (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 has or 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 located in the Philippines; and (4) when the non-resident defendant’s property has been attached within the Philippines. (Citing De Midgely v. Ferandos, 64 SCRA 23 [1975]; The Dial Corporation v. Soriano, 161 SCRA 737 [1988]). Here, none of the four instances was present, rendering the extraterritorial service void.

• “Status” in the Context of Extraterritorial Service — Status means a legal personal relationship, not temporary in nature nor terminable at the mere will of the parties, with which third persons and the state are concerned. A suit seeking a declaration of non-liability for monetary obligations does not affect status; obligations are temporary, whereas status is relatively permanent.

• Declaratory Relief Unavailable for Disputed Factual Issues — A declaratory judgment is not proper where the judgment would determine or try disputed factual issues rather than construe definite stated rights, status, and other relations commonly expressed in a written instrument. Where a factual dispute is inevitable — such as a potential corporate veil-piercing claim — the case is not one for declaratory relief.

• Injunction Actions Are In Personam — An action purely for injunction is an action in personam, not in rem or quasi in rem. Consequently, it requires personal or substituted service of summons upon the defendants; extraterritorial service is improper and cannot confer jurisdiction over non-resident defendants.

• “This Court had ruled that extraterritorial service of summons is proper only in four (4) instances, 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 has or 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.’” — This passage constitutes the ratio decidendi by articulating the exclusive grounds for extraterritorial service and framing the entire analysis.

• “[W]here the complaint does not involve the personal status of plaintiff, nor any property in the Philippines in which defendants have or claim an interest, or which the plaintiff has attached, but purely an action for injunction, it is a personal action as well as an action in personam, not an action in rem or quasi in rem. As a personal action, personal or substituted service of summons on the defendants, not extraterritorial service, is necessary to confer jurisdiction on the court.” — This excerpt concisely states the rule that categorizes injunction suits and mandates the correct mode of service.

• De Midgely v. Ferandos, 64 SCRA 23 (1975) — Cited as controlling authority for the enumeration of the four instances in which extraterritorial service of summons is allowed under Section 17, Rule 14.

• The Dial Corporation v. Soriano, 161 SCRA 737 (1988) — Followed for the doctrine that an action for injunction is a personal action in personam; extraterritorial service of summons on non-resident defendants does not subject them to the court’s processes and is void.

• Dy Poco v. Commissioner of Immigration, 16 SCRA 618 (1966) — Cited for the principle that declaratory relief is unavailable where the judgment would determine disputed factual issues rather than construe stated rights, thereby reinforcing the conclusion that the action did not affect personal status.

• Section 17, Rule 14, Rules of Court — Enumerates the situations in which extraterritorial service of summons may be effected: when the defendant is not found in the Philippines and the action affects the plaintiff’s personal status, relates to property in the Philippines in which the defendant claims an interest, seeks to exclude the defendant from such interest, or follows attachment of the defendant’s property. The provision was held inapplicable because the action was a purely personal action for injunction and declaratory relief that did not meet any of the enumerated grounds.

• Section 3-a, Interim Rules of Court; Section 21(1), Batas Pambansa Blg. 129 — Mentioned in The Dial Corporation v. Soriano as underscoring the territorial limits of trial courts’ processes, reinforcing the rule that extraterritorial service does not enable a Philippine court to compel obedience from non-resident defendants.

Gutierrez, Jr., Feliciano, and Davide, Jr., JJ., concurred. Fernan, C.J., took no part.