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FIRST DIVISION

G.R. No. L-63557 October 28, 1983

LINGNER & FISHER GMBH, Petitioner, vs. INTERMEDIATE APPELLATE COURT, HON. RICARDO L. PRONOVE JR. and PHILIPPINE CHEMICAL LABORATORIES, INC., Respondents.

R E S O L U T I O N

MELENCIO-HERRERA, J.:

The factual background of this case may be stated as follows: DEUTCHE MILCHWERKE DR. A. SAUER (DMW for brevity) was a firm in West Germany manufacturing PRODUCTS (probably chemicals) under the trademarks FISSAN, etc. Private respondent Philippine Chemical Laboratories, Inc. (PHILCHEM, for brevity) is a local company which apparently also manufactures and sells chemicals.chanroblesvirtualawlibrary chanrobles virtual law library

On February 28, 1963, DMW and PHILCHEM executed a so-called Agency AGREEMENT the basic provision of which was that PHILCHEM would be the exclusive importer of the PRODUCTS into the Philippines. The benefit to PHILCHEM would be the profits realized from re-sale in this country of imported PRODUCTS. Other relevant provisions, generally stated, were that: chanrobles virtual law library

(a) The term of the AGREEMENT was five years renewable automatically for five years each time unless one party gives due notice of termination to the other.chanroblesvirtualawlibrary chanrobles virtual law library

(b) PHILCHEM could manufacture the PRODUCTS locally with raw materials from sources other than LINGNER, but in such case DMW will have to be paid 5% of 80% of PHILCHEM's wholesale prices.chanroblesvirtualawlibrary chanrobles virtual law library

(c) After termination of the AGREEMENT, PHILCHEM will be entitled, for five years, to 10% royalty on sales of PRODUCTS in the Philippines (hereinafter to be referred to as the ROYALTY CLAUSE).chanroblesvirtualawlibrary chanrobles virtual law library

(d) "All legal settlements within the compass of this AGREEMENT shall fall under the jurisdiction of Philippine courts."

It appears that, subsequently, the DMW interests were acquired by LINGNER & FISHER GMBH LINGNER for brevity). On other hand, LINGNER was a subsidiary of chanrobles virtual law library

BEECHAM GROUP LTD. which, through BEECHAM PRODUCTS INTERNATIONAL (BEECHAM, for brevity), had opened an office in this country at Unit A, Padilla Building, Emerald Avenue, Pasig, Metro Manila, under the supervision or managership of one named TANNER. LINGNER and BEECHAM can be deemed to constitute a single personality. Subsequent reference to LINGNER will include reference to DMW and BEECHAM.chanroblesvirtualawlibrary chanrobles virtual law library

The AGREEMENT was automatically renewed once, or up to February 28, 1973, and finally terminated on August 31, 1977. The events relative to the termination were as follows: chanrobles virtual law library

Before February 28, 1973, the parties agreed to extend the AGREEMENT up to February 28, 1975. If it is not terminated by prior notice six months before February 28, 1975, as it was not, it would be extended for a further two years up to February 28, 1977.chanroblesvirtualawlibrary chanrobles virtual law library

By letter dated February 25, 1977, through the law firm of Ozaeta Romulo, De Leon, Mabanta, Buenaventura, Sayoc and De los Angeles (the Law Firm, for brevity) PHILCHEM was advised that LINGNER was interested in continuing business relationship with PHILCHEM and will be interested in negotiating a new contract and that, prior to the signing of a new contract, LINGNER was proposing that the old contract be extended by mutual agreement for a period of six (6) calendar months beginning March 1, 1977 to expire automatically on August 31, 1977 if no contract is entered into. The proposal was accepted by PHILCHEM, and no new contract having been signed by August 31, 1977, the AGREEMENT terminated on that date, chanrobles virtual law library

On July 20, 1979, PHILCHEM presented a claim to LINGNER for P1,055,000.00 under the ROYALTY CLAUSE. The claim was discussed between PHILCHEM and TANNER of BEECHAM with the intervention of the Law Firm. No settlement having been arrived at, PHILCHEM, on August 6, 1980, filed a complaint against BEECHAM alone in Civil Case No. 38086 of the then Court of First Instance of Rizal. The summons issued could not be served on BEECHAM, the Sheriff having reported that BEECHAM was neither a company registered in the Philippines, nor resident at the given address of Unit A, Padilla Building, Emerald Avenue, Pasig, Metro Manila.chanroblesvirtualawlibrary chanrobles virtual law library

PHILCHEM then filed an amended complaint, this time making LINGNER and BEECHAM as the defendants, and pleading that summons could be served on the Law Firm as an agent of the defendants. The Law Firm submitted a special appearance in the case on behalf of LINGNER, and, also on behalf of LINGNER, moved for dismissal on the grounds (a) that LINGNER was not a foreign corporation doing business in the Philippines and hence could not be sued locally, and, (b) that LINGNER could not be served with summons through the Law Firm. It will thus be noted that two issues were being raised. The first was whether or not LINGNER was doing business in the Philippines; and the second was whether or not LINGNER could be validly summoned through the Law Firm as its agent. The Trial Court denied the Motion to Dismiss, assuming that LINGNER could be sued in this jurisdiction, and holding that LINGNER can be served with summons through the Law Firm.chanroblesvirtualawlibrary chanrobles virtual law library

LINGNER went on certiorari to the Intermediate Appellate Court where it reiterated the plea that summons could not be validly served on it through the Law Firm; and it also requested that a hearing be held, conformably to the provisions of Section 9(3) of Batas Pambansa Blg. 129, on the question of whether or not LINGNER was doing business in this country.chanroblesvirtualawlibrary chanrobles virtual law library

The Appellate Court held that summons served through the Law Firm was valid on the strength of Johnlo Trading Co. vs. Flores (88 Phil. 741 [1951]); and it further ruled that receiving evidence on whether or not LINGNER was doing business in the Philippines could not be justified under the cited Batas Pambansa Blg. 129.chanroblesvirtualawlibrary chanrobles virtual law library

Considering the Comment, Reply, Rejoinder and Surrejoinder submitted by the parties, we resolved to give due course, without requiring the submittal of memoranda.chanroblesvirtualawlibrary chanrobles virtual law library

The Appellate Court acted correctly in denying the request for an evidentiary hearing. Evidence necessary in regards to factual issues raised in cases falling within the Appellate Court's original and appellate jurisdiction contemplates "incidental" facts which were not touched upon, or fully heard by the trial or respondent Court. The law could not have intended that the Appellate Court would hold an original and full trial of a main factual issue in a case, which properly pertains to Trial Courts.chanroblesvirtualawlibrary chanrobles virtual law library

It is our view that evidence as to whether LINGNER was doing business in the Philippines, even before the Trial Court, is no longer necessary in view of the fact that PHILCHEM and LINGNER were contractees in the AGREEMENT and the claim of PHILCHEM is based on the ROYALTY CLAUSE of that AGREEMENT. Whether LINGNER is or is not doing business in the Philippines will not matter because the parties had expressly stipulated in the AGREEMENT that all controversies based on the AGREEMENT "shall fall under the jurisdiction of Philippine courts". In other words, there was a covenant on venue to the effect that LINGNER can be sued by PHILCHEM before Philippine Courts in regards to a controversy related to the AGREEMENT.chanroblesvirtualawlibrary chanrobles virtual law library

A case should not be dismissed simply because an original summons was wrongfully served. It should be difficult to conceive, for example, that when a defendant personally appears before a Court complaining that he had not been validly summoned, that the case filed against him should be dismissed. An alias summons can be actually served on said defendant.chanroblesvirtualawlibrary chanrobles virtual law library

For the expeditious determination of this controversy, therefore, in view of the insufficiency of evidence that LINGNER is doing business in the Philippines, which is a sine qua non requirement under the provision of Section 14, Rule 14 ¹ of the Rules before service of process can be effected upon a foreign corporation and jurisdiction over the same may be acquired, it is best that alias summons on LINGNER be issued, in this case under the provisions of Section 17, Rule 14, ² in relation to Rule 4 of the Rules of Court, which recognizes the principle that venue can be agreed upon by the parties. If a local plaintiff and a foreign corporation have agreed on Philippine venue, summons by publication can be made on the foreign corporation under the principle of liberal construction of the rules to promote just determination of actions.chanroblesvirtualawlibrary chanrobles virtual law library

ACCORDINGLY, the judgment under review of the Intermediate Appellate Court (Third Special Cases Division) is hereby upheld insofar as it sustained the Orders, dated August 24, 1981 and December 18, 1981, of the then Court of First Instance of Rizal, Branch XI, Pasig, denying petitioner's Motion to Dismiss and the subsequent Motion for Reconsideration, albeit on grounds different from those relied upon by the Intermediate Appellate Court. The now Regional Trial Court, to which the case below has been assigned, is hereby directed to allow private respondent Philippine Chemical Laboratories, Inc., to apply for the issuance of alias summons on petitioner Lingner and Fischer GMBH by publication under the provisions of Section 17, Rule 14 in relation to Rule 4 of the Rules of Court, and after issues have been joined, to proceed to trial and judgment accordingly.chanroblesvirtualawlibrary chanrobles virtual law library

No pronouncement as to costs.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

Endnotes:

1 Sec. 14. Service upon private foreign corporations. - If the defendant is a foreign corporation, or a non-resident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines (Emphasis supplied).chanrobles virtual law library

2 Sec. 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 the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within 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.