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LITTON MILLS, INC.,
          Petitioner,

    G. R. No. 9498

May 15, 1996

COURT OF APPEALS
and GELHAAR UNIFORM COMPANY, INC.,
                      Respondents.

 

MENDOZA, J.:

This is a Petition to Review the Decision of the Court of Appeals annulling the order of the Regional Trial Court which denied private respondent's plea that it is a foreign corporation not doing business in the Philippines and therefore not subject to the jurisdiction of Philippine courts. Petitioner Litton Mills, Inc. [Litton] entered into an agreement with Empire Sales Philippines Corporation [Empire], as local agent of private respondent Gelhaar Uniform Company [Gelhaar], a corporation organized under the laws of the United States, whereby Litton agreed to supply Gelhaar 7,770 dozens of soccer jersey. The agreement stipulated that before it could collect from the bank on the letter of credit, Litton must present an inspection certificate issued by Gelhaar's agent in the Philippines, Empire Sales, that the goods were in satisfactory condition.

Litton sent four shipments totaling 4,770 dozens of the soccer jerseys between December 2 and December 30, 1983. A fifth shipment, consisting of 2,110 dozens of the jerseys, was inspected by Empire from January 9 to January 19, 1984, but Empire refused to issue the required certificate of inspection.cralaw:red

Alleging that Empire's refusal to issue a certificate was without valid reason, Litton filed a complaint with the Regional Trial Court of Pasig [Branch 158] on January 23, 1984, for specific performance. Litton alleged that under the terms of the letter of credit, the goods should be shipped not later than January 30, 1984; that the vessel stipulated to carry the shipment was scheduled to receive the cargo only on January 27, 1984; and that the letter of credit itself was due to expire on February 14, 1984. Litton sought the issuance of a writ of preliminary mandatory injunction to compel Empire to issue the inspection certificate covering the 2,110 dozen jerseys and the recovery of compensatory and exemplary damages, costs, attorney's fees and other just and equitable relief.cralaw:red

The trial court issued the writ on January 25, 1984. The next day, Empire issued the inspection certificate so that the cargo was shipped on time.cralaw:red

On February 8, 1984, Atty. Remie Noval filed in behalf of the defendants a "Motion For Extension of Time To File An Answer/Responsive Pleading." He filed on February 17, February 22, March 2, March 14, 26, April 5, April 16, May 2, May 16, May 31, all in 1984, ten other motions for extension, all of which were granted by the court with the exception of the last, which the Court denied. On his motion, the court later reconsidered its order of denial and admitted the answer of the defendants. On September 10, 1984, Atty. Noval filed the pre-trial brief for the defendants.cralaw:red

On January 29, 1985, the Law Firm of Sycip, Salazar, Feliciano and Hernandez entered a special appearance for the purpose of objecting to the jurisdiction of the court over Gelhaar. On February 4, 1985, it moved to dismiss the case and to quash the summons on the ground that Gelhaar was a foreign corporation not doing business in the Philippines, and as such, was beyond the reach of the local courts.cralaw:red

It contended that Litton failed to allege and prove that Gelhaar was doing business in the Philippines, which they argued was required by the ruling in Pacific Micronesian Lines, Inc., v. Del Rosario,[1] before summons could be served under Rule 14, Section 14.cralaw:red

It likewise denied the authority of Atty. Noval to appear for Gelhaar and contended that the answer filed by Atty. Noval on June 15, 1984 could not bind Gelhaar and its filing did not amount to Gelhaar's submission to the jurisdiction of the court.cralaw:red

Litton opposed the motion. On the other hand, Empire moved to dismiss on the ground of failure of the complaint to state a cause of action since the complaint alleged that Empire only acted as agent of Gelhaar; that it was made party-defendant only for the purpose of securing the issuance of an inspection certificate; and that it had already issued such certificate and the shipment had already been shipped on time.cralaw:red

For his part, Atty. Remie Noval claimed that he had been authorized by Gelhaar to appear for it in the case; that he had in fact given legal advice to Empire and his advice had been transmitted to Gelhaar; that Gelhaar had been furnished a copy of the answer; that Gelhaar denied his authority only on December of 1984; and that the belated repudiation of his authority could be only an afterthought because of problems which had developed between Gelhaar and Empire. [Gelhaar refused to pay Empire for its services as agent]. Nevertheless, Atty. Noval withdrew his appearance with respect to Gelhaar.cralaw:red

On September 24, 1986, the trial court issued an order denying for lack of merit Gelhaar's motion to dismiss and to quash the summons. It held that Gelhaar was doing business in the Philippines, and that the service of summons on Gelhaar was therefore valid. Gelhaar filed a motion for reconsideration, but its motion was denied.  Gelhaar then filed a special civil action of certiorari with the Court of Appeals, which on August 20, 1990, set aside the orders of the trial court. The appellate court held that proof that Gelhaar was doing business in the Philippines should have been presented because, under the doctrine of Pacific Micronesian, this is a condition sine qua non for the service of summons under Rule 14, Section 14 of the Rules of Court, and that it was error for the trial court to rely on the mere allegations of the complaint.cralaw:red

The appellate court held that neither did the trial court acquire jurisdiction over Gelhaar through voluntary submission because the authority of Atty. Noval to represent Gelhaar had been questioned. Pursuant to Rule 138, Section 21, the trial court should have required Atty. Noval to prove his authority.

Consequently, the appellate court ordered the trial court to issue a new summons to be served on Empire Sales Philippines Corporation, after the allegation in the complaint that Gelhaar was doing business in the Philippines had been established.cralaw:red

Hence this petition.cralaw:red

Litton contends that jurisdiction over Gelhaar was acquired by the trial court by the service of summons through Gelhaar's agent and, at any rate, by the voluntary appearance of Atty. Remie Noval as counsel of Gelhaar.cralaw:red

We sustain petitioner's contention based on the first ground, namely, that the trial court acquired jurisdiction over Gelhaar by service of summons upon its agent pursuant to Rule 14, Section 14.cralaw:red

First. The appellate court invoked the ruling in Pacific Micronesian, in which it was stated that the fact of doing business must first be established before summons can be served in accordance with Rule 14, Section 14. The Court of Appeals quoted the following portion of the opinion in that case:

The above Section [referring to Rule 14, Section 14] provides for three modes of effecting service upon a private corporation, namely: [enumerates the three modes of service of summons]. But, it should be noted, in order that service may be effected in the manner above stated said section also requires that the foreign corporation be one which is doing business in the Philippines. This is a sine qua non requirement. This fact must first be established in order that summons can made and jurisdiction acquired. [Emphasis by the Court of Appeals).[2]

In the later case of Signetics Corporation v. Court of Appeals,[3] however, We clarified the holding in Pacific Micronesian, thus:

The petitioner opines that the phrase, "the fact [of doing business in the Philippines] must first be established in order that summons be made and jurisdiction acquired," used in the above pronouncement, would indicate that a mere allegation to that effect in the complaint is not enough  there must instead be proof of doing business. In any case, the petitioner points out, the allegations themselves did not sufficiently show the fact of its doing business in the Philippines.

It should be recalled that jurisdiction and venue of actions are, as they should so be, initially determined by the allegations of the complaint. Jurisdiction cannot be made to depend on independent pleas set up in a mere motion to dismiss, otherwise jurisdiction would become dependent almost entirely upon the defendant. The fact of doing business must then, in the first place, be established by appropriate allegations in the complaint. This is what the Court should be seen to have meant in the Pacific Micronesian case. The complaint, it is true, may have been vaguely structured but, taken correlatively, not disjunctively, as the petitioner would rather suggest, it is not really so weak as to be fatally deficient in the above requirement.

Hence, a court need not go beyond the allegations in the complaint to determine whether or not a defendant foreign corporation is doing business for the purpose of Rule 14, Section 14. In the case at bar, the allegation that Empire, for and in behalf of Gelhaar, ordered 7,770 dozens of soccer jerseys from Litton and for this purpose, Gelhaar caused the opening of an irrevocable letter of credit in favor of Litton, is a sufficient allegation that Gelhaar was doing business in the Philippines.cralaw:red

Second. Gelhaar contends that the contract with Litton was a single, isolated transaction and that it did not constitute "doing business." Reference is made to Pacific Micronesian in which the only act done by the foreign company was to employ a Filipino as a member of the crew on one of its ships. This Court held that the act was an isolated, incidental or casual transaction, not sufficient to indicate a purpose to engage in business.cralaw:red

It is not really the fact that there is only a single act done that is material. The other circumstances of the case must be considered. Thus, in Wang Laboratories, Inc. v. Mendoza,[4] it was held that where a single act or transaction of a foreign corporation is not merely incidental or casual but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, such act will be considered as constituting doing business.[5] This Court referred to acts which were in the ordinary course of business of the foreign corporation.cralaw:red

In the case at bar, the trial court was certainly correct in holding that Gelhaar' s act in purchasing soccer jerseys to be within the ordinary course of business of the company considering that it was engaged in the manufacture of uniforms. The acts noted above are of such a character as to indicate a purpose to do business.cralaw:red

In accordance with Rule 14, Section 14, service upon Gelhaar could be made in three ways:

[1] by serving upon the agent designated in accordance with law to accept service of summons;

[2] if there is no resident agent, by service on the government official designated by law to that effect; and

[3] by serving on any officer or agent of said corporation within the Philippines.[6] Here, service was made through Gelhaar's agent, the Empire Sales Philippines Corp. There was, therefore, a valid service of summons on Gelhaar, sufficient to confer on the trial court jurisdiction over the person of Gelhaar.

Third. On the question, however, of whether the appearance of Atty. Noval in behalf of Gelhaar was binding on the latter, We hold that the Court of Appeals correctly ruled that it was not.

Atty. Noval admits that he was not appointed by Gelhaar as its counsel. What he claims is simply that Gelhaar knew of the filing of the case in the trial court and of his representation but Gelhaar did not object. Atty. Noval contends that there was thus a tacit confirmation of his authority.cralaw:red

Gelhaar claims, however, that it was only sometime in December, 1994, when it found out that the answer which Atty. Noval had filed in June was also made in its behalf. Gelhaar in fact sent a telex message dated January 15, 1985 to its counsel, the Sycip Law Firm stating:

WE NEVER AUTHORIZED THE RETENTION OF MR. NOVAL ON OUR BEHALF. WE HAVE NEVER EXCHANGED CORRESPONDENCE NOR HAD ANY TELEPHONE CONVERSATIONS WITH HIM RE ANY ASPECT OF THIS CASE, INCL. HIS FEES. WE ARE TOLD THAT HE HAS FILED AN ANSWER TO LTN'S [Litton's] COMPLT. PURPORTEDLY ON OUR BEHALF BUT HE HAS NEVER DISCUSSED THAT ANSWER WITH US NOR EVEN SENT US A DRAFT OR THE FINAL VERSION OF SUCH ANSWER. WE ARE SENDING SWORN AFFIDAVITS TO THIS EFFECT BY COURIER.[7]

Atty. Noval has not denied any of these statements. He claims that the advisory opinions he had rendered in the case was sent to Gelhaar by the President of Empire, Enoch Chiu; and that he was informed by Chiu that Gelhaar had been advised on all developments in the case and the necessity of filing an answer, and that a copy of the answer he had filed was furnished Gelhaar.

All this is, however, merely hearsay. Noval does not claim that he ever directly conferred with Gelhaar regarding the case. There is no evidence to show that he notified Gelhaar of his appearance in its behalf or that he furnished Gelhaar with copies of pleadings or the answer which he filed in its behalf.cralaw:red

No voluntary appearance by Gelhaar can, therefore, be inferred from the acts of Atty. Noval. Nor can Atty. Noval's representations in the answer be considered binding on Gelhaar. Gelhaar should be allowed a new period for filing its own answer.cralaw:red

WHEREFORE, the decision of the Court of Appeals is reversed. The order of the trial court denying the motion to dismiss is hereby reinstated, with the modification that Gelhaar is given a new period of ten [10] days for the purpose of filing its answer.cralaw:red

SO ORDERED.cralaw:red

Regalado, Romero, Puno and Torres, Jr., JJ., concur.cralaw:red

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Endnotes