[G.R. NO.

172242 : August 14, 2007]

PERKIN ELMER SINGAPORE PTE LTD., Petitioner, v. DAKILA TRADING CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

The case before this Court is a Petition for Review1 on Certiorari under Rule 45 of the 1997 Revised Rules of
Civil Procedure seeking to annul and set aside the Decision,2 dated 4 April 2006, of the Court of Appeals in
CA-G.R. SP No. 78981, which affirmed the Orders, dated 4 November 20023 and 20 June 2003,4 of the
Mandaluyong City Regional Trial Court (RTC), Branch 212, in Civil Case No. MC99-605, which, in turn,
denied the Motion to Dismiss and subsequent Motion for Reconsideration of herein petitioner Perkin Elmer
Singapore Pte Ltd.

Petitioner is a corporation duly organized and existing under the laws of Singapore. It is not considered as a
foreign corporation "doing business" in the Philippines. Herein respondent Dakila Trading Corporation is a
corporation organized and existing under Philippine laws, and engaged in the business of selling and leasing
out laboratory instrumentation and process control instrumentation, and trading of laboratory chemicals and
supplies.

The antecedents of the present case are as follows:

Respondent entered into a Distribution Agreement5 on 1 June 1990 with Perkin-Elmer Instruments Asia Pte
Ltd. (PEIA), a corporation duly organized and existing under the laws of Singapore and engaged in the
business of manufacturing, producing, selling or distributing various laboratory/analytical instruments. By
virtue of the said agreement, PEIA appointed the respondent as the sole distributor of its products in the
Philippines. The respondent was likewise granted the right to purchase and sell the products of PEIA subject
to the terms and conditions set forth in the Distribution Agreement. PEIA, on the other hand, shall give
respondent a commission for the sale of its products in the Philippines.

Under the same Distribution Agreement, respondent shall order the products of PEIA, which it shall sell in
the Philippines, either from PEIA itself or from Perkin-Elmer Instruments (Philippines) Corporation (PEIP), an
affiliate of PEIA. PEIP is a corporation duly organized and existing under Philippine laws, and involved in the
business of wholesale trading of all kinds of scientific, biotechnological, and analytical instruments and
appliances. PEIA allegedly owned 99% of the shares of PEIP.

On 2 August 1997, however, PEIA unilaterally terminated the Distribution Agreement, prompting respondent
to file before the RTC of Mandaluyong City, Branch 212, a Complaint6 for Collection of Sum of Money and
Damages with Prayer for Issuance of a Writ of Attachment against PEIA and PEIP, docketed as Civil Case No.
MC99-605.

The RTC issued an Order,7 dated 26 March 1999, denying respondent's prayer for the issuance of a writ of
attachment. The respondent moved for the reconsideration of the said Order but it was denied in another
Order, dated 11 January 2000.8

Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of Court to Deputize
Respondent's General Manager, Richard A. Tee, to Serve Summons Outside of the Philippines,9 which the
RTC granted in its Order, dated 27 April 2000.10 Thus, an Alias Summons, dated 4 September 2000, was
issued by the RTC to PEIA. But the said Alias Summons was served on 28 September 2000 and received by
Perkinelmer Asia, a Singaporean based sole proprietorship, owned by the petitioner and, allegedly, a
separate and distinct entity from PEIA.

PEIP moved to dismiss11 the Complaint filed by respondent on the ground that it states no cause of action.
Perkinelmer Asia, on the other hand, through its counsel, sent letters, dated 12 October 200012 and 15
November 2000,13 to the respondent and to the RTC, respectively, to inform them of the wrongful service of
summons upon Perkinelmer Asia.
Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint, together with the Amended
Complaint claiming that PEIA had become a sole proprietorship14 owned by the petitioner, and subsequently
changed its name to Perkinelmer Asia. Being a sole proprietorship of the petitioner, a change in PEIA's name
and juridical status did not detract from the fact that all its due and outstanding obligations to third parties
were assumed by the petitioner. Hence, in its Amended Complaint15 respondent sought to change the name
of PEIA to that of the petitioner. In an Order, dated 24 July 2001,16 the RTC admitted the Amended
Complaint filed by the respondent. Respondent then filed another Motion17 for the Issuance of Summons and
for Leave of Court to Deputize Respondent's General Manager, Richard A. Tee, to Serve Summons Outside
the Philippines. In another Order, dated 4 March 2002,18 the RTC deputized respondent's General Manager
to serve summons on petitioner in Singapore. The RTC thus issued summons19 to the petitioner. Acting on
the said Order, respondent's General Manager went to Singapore and served summons on the petitioner.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to Dismiss filed by PEIP,
compelling the latter to file its Answer to the Amended Complaint.

Petitioner subsequently filed with the RTC a Special Appearance and Motion to Dismiss20 respondent's
Amended Complaint on 30 May 2002 based on the following grounds: (1) the RTC did not acquire
jurisdiction over the person of the petitioner; (2) the respondent failed to state a cause of action against the
petitioner because it is not the real party-in-interest; (3) even assuming arguendo that the respondent
correctly filed the case against the petitioner, the Distribution Agreement which was the basis of its claim
grants PEIA the right to terminate the contract at any time; and (4) the venue was improperly laid. The RTC
in its Order, dated 4 November 2002, denied petitioner's Motion to Dismiss, ratiocinating as follows:

Prescinding from the above arguments of both parties, the [RTC] is inclined to DENY the Motion to Dismiss.

A careful scrutiny on (sic) the allegation in the (Amended) Complaint would show that [herein respondent]
alleges ownership by the [herein petitioner] of shares of stocks in the [PEIP]. Such allegation of ownership
of shares of stocks by the [petitioner] would reveal that there is an allegation of personal property in the
Philippines. Shares of stocks represent personal property of the shareholder. Thus, it follows that even
though the Amended Complaint is primarily for damages, it does relate to a property of the [petitioner], to
which the latter has a claim interest (sic), or an actual or contingent lien, which will make it fall under one of
the requisite (sic) for extraterritorial service under Section 15, Rule 14, of the Rules of Court. Thus, it could
be gainfully said that the summons had been validly served for [RTC] to acquire jurisdiction over the
[petitioner].

The [petitioner] hinges its dismissal on the failure of the [respondent] to state a cause of action. The [RTC]
would like to emphasize that in a Motion to Dismiss, it hypothetically admits the truth of the facts alleged in
a complaint.

When the ground for dismissal is that the complaint states no cause of action, such fact can be determined
only from the facts alleged in the complaint x x x and from no other x x x and the Court cannot consider
other matters aliunde x x x. This implies that the issue must be passed upon on the basis of the allegations
and declare them to be false, otherwise it would be a procedural error and a denial of due process to the
[respondent] x x x.

The three (3) essential elements of a cause of action are the following:

a) The plaintiff's legal rights;

b) A correlative obligation of the defendant;

c) The omission of the defendant in violation of the legal rights.

A cursory reading of the Amended Complaint would reveal that all of the essential elements of a cause of
action are attendant in the Amended Complaint.

As for the contention that venue was improperly laid, x x x, the [RTC] in its ultimate desire that the ends of
justice could be served in its fullest, cannot rule that venue was improperly laid.
 xxx

The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the
residence of the [respondent] under Section 2, Rule 4, Rules of Court, especially where the venue stipulation
was imposed by the [petitioner] for its own benefits.

xxx

The [RTC] further believes that it is imperative that in order to ferret out the truth, a full-blown trial is
necessary for parties to be able to prove or disprove their allegations.21

Petitioner moved for the reconsideration of the aforesaid Order but, it was denied by the RTC in its Order,
dated 20 June 2003.

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997 Revised Rules of Civil
Procedure with application for temporary restraining order and/or preliminary injunction before the Court of
Appeals alleging that the RTC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in refusing to dismiss the Amended Complaint. The Court of Appeals never issued any temporary
restraining order or writ of injunction. On 4 April 2006, the Court of Appeals rendered a Decision affirming
the RTC Orders of 4 November 2002 and 20 June 2003.

This brings us to the present Petition before this Court wherein petitioner raised the following issues.

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE
SERVICE OF SUMMONS ON PETITIONER WAS DEFECTIVE AND THAT THE TRIAL COURT THUS FAILED TO
ACQUIRE JURISDICTION OVER THE PERSON OF THE PETITIONER.

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE "SOLE
ISSUE" IN THE PETITION FOR CERTIORARI FILED BEFORE IT IS THE QUESTION OF WHETHER THE TRIAL
COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE PETITIONER THROUGH THE
EXTRATERRITORIAL SERVICE OF SUMMONS.

A.

WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE PETITION FOR CERTIORARI AND
REVERSED THE RTC ORDERS ON THE GROUND THAT THE AMENDED COMPLAINT FAILED TO STATE A
CAUSE OF ACTION AGAINST PETITIONER.

1. BASED ON THE ALLEGATIONS IN THE EX-PARTE MOTION TO ADMIT AMENDED COMPLAINT, AMENDED
COMPLAINT, AND ALL DOCUMENTS ATTACHED AND/OR RELATED THERETO, PETITIONER IS NOT THE REAL
PARTY-IN-INTEREST DEFENDANT IN THE CASE BELOW.

2. ASSUMING ARGUENDO THAT RESPONDENT DAKILA FILED THIS CASE AGAINST THE CORRECT [PARTY],
INASMUCH AS THE DISTRIBUTION AGREEMENT DATED 1 JUNE 1990 GRANTS [PEIA] THE RIGHT TO
TERMINATE THE CONTRACT AT ANY TIME, RESPONDENT DAKILA FAILS TO STATE A CAUSE OF ACTION IN
THE CASE BELOW.

B.

WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE PETITION FOR CERTIORARI AND
REVERSED THE RTC ORDERS ON THE GROUND OF IMPROPER VENUE.
 III.

WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR WRIT OF

The foregoing issues raised by petitioner essentially requires this Court to make a determination of the (1)
proper service of summons and acquisition of jurisdiction by the RTC over the person of the petitioner; (2)
existence of a cause of action against petitioner in respondent's Amended Complaint; and (3) proper venue
for respondent's civil case against petitioner.

Petitioner contends that Civil Case No. MC99-605 involves an action for collection of sum of money and
damages arising from the alleged breach of the Distribution Agreement. The action is one in personam, or
an action against a person based on his personal liability; and for the court a quo to acquire jurisdiction over
the person of the petitioner, personal service of summons, and not extraterritorial service of summons,
must be made within the state even if the petitioner is a non-resident. Petitioner avers that extraterritorial
service of summons stated under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, is only
proper in in rem and quasi in rem cases; thus, resort to an extraterritorial service of summons in the case at
bar was erroneous. Petitioner asseverates that the allegations in the respondent's Amended Complaint that
the petitioner has personal properties within the Philippines does not make the present case one that relates
to, or the subject of which is, property within the Philippines warranting the extraterritorial service of
summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner states that for
an action to be considered as one that relates to, or the subject of which is, property within the Philippines,
the main subject matter of the action must be the property within the Philippines itself, and such was not
the situation in this case. Likewise, the prayer in respondent's Amended Complaint for the issuance of a writ
of attachment over the personal property of PEIP, which is 99% owned by petitioner (as the supposed
successor of PEIA), did not convert the action from one in personam to one that is quasi in rem. Also, the
petitioner points out that since the respondent's prayer for the issuance of a writ of attachment was denied
by the RTC in its Order, dated 26 March 1999, then the nature of Civil Case No. MC99-605 remains in
personam, contrary to the ruling of the Court of Appeals that by the attachment of the petitioner's interest
in PEIP the action in personam was converted to an action quasi in rem. Resultantly, the extraterritorial
service of summons on the petitioner was not validly effected, and did not give the RTC jurisdiction over the
petitioner.

Petitioner further argues that the appellate court should have granted its Petition for Certiorari on the
ground that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in
refusing to dismiss respondent's Amended Complaint for failure to state a cause of action against petitioner
which was not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that it had never used
the name PEIA as its corporate name, and neither did it change its name from that of PEIA. Petitioner
stresses that PEIA is an entirely different corporate entity that is not connected in whatever manner to the
petitioner. Even assuming arguendo that petitioner is the real party-in-interest in Civil Case No. MC99-605
or that petitioner and PEIA are one and the same entity, petitioner still avows that the respondent failed to
state a cause of action against it because the Distribution Agreement expressly grants PEIA the right to
terminate the said contract at any time.

Lastly, it is the contention of the petitioner that the appellate court should have granted its Petition for
Certiorari because the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction
in refusing to dismiss Civil Case No. MC99-605 for having been filed in an improper venue. Petitioner asserts
that in the Distribution Agreement entered into between the respondent and PEIA, both had mutually agreed
to the exclusive jurisdiction of the courts of Singapore or of the Philippines as elected by PEIA. Absent any
waiver by PEIA of its right to choose the venue of the dispute, the Complaint filed by the respondent before
the RTC in the Philippines should have been dismissed on the ground of improper venue.

The Petition is meritorious.

Jurisdiction is the power with which courts are invested for administering justice; that is, for hearing and
deciding cases. In order for the court to have authority to dispose of the case on the merits, it must acquire
jurisdiction over the subject matter and the parties.22
Jurisdiction of the court over the subject matter is conferred only by the Constitution or by law. It is
determinable on the basis of allegations in the complaint.23

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over the
defendants in a civil case is acquired either through the service of summons upon them in the manner
required by law or through their voluntary appearance in court and their submission to its authority. If the
defendants have not been summoned, unless they voluntarily appear in court, the court acquires no
jurisdiction over their persons and a judgment rendered against them is null and void. To be bound by a
decision, a party should first be subjected to the court's jurisdiction.24

Thus, one of the modes of acquiring jurisdiction over the person of the defendant or respondent in a civil
case is through service of summons. It is intended to give notice to the defendant or respondent that a civil
action has been commenced against him. The defendant or respondent is thus put on guard as to the
demands of the plaintiff or the petitioner.25

The proper service of summons differs depending on the nature of the civil case instituted by the plaintiff or
petitioner: whether it is in personam, in rem, or quasi in rem. Actions in personam, are those actions
brought against a person on the basis of his personal liability; actions in rem are actions against the thing
itself instead of against the person; and actions are quasi in rem, where an individual is named as defendant
and the purpose of the proceeding is to subject his or her interest in a property to the obligation or loan
burdening the property.26

Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are only four instances
wherein a defendant who is a non-resident and is not found in the country may be served with summons by
extraterritorial service, to wit: (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 an 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. 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.27

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.

When the case instituted is an action in rem or quasi in rem, Philippine courts already have jurisdiction to
hear and decide the case because, in actions in rem and quasi in rem, 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.28 Thus, in such instance, extraterritorial service of summons can be made upon the
defendant. The said extraterritorial service of summons is not for the purpose of vesting the court with
jurisdiction, but for complying with the requirements of fair play or due process, so that the defendant will
be informed of the pendency of the action against him and the possibility that property in the Philippines
belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff, and
he can thereby take steps to protect his interest if he is so minded.29 On the other hand, when the
defendant or respondent does not reside and is not found in the Philippines,30 and the action involved is in
personam, Philippine courts cannot try any case against him because of the impossibility of acquiring
jurisdiction over his person unless he voluntarily appears in court.31

In the case at bar, this Court sustains the contention of the petitioner that there can never be a valid
extraterritorial service of summons upon it, because the case before the court a quo involving collection of a
sum of money and damages is, indeed, an action in personam, as it deals with the personal liability of the
petitioner to the respondent by reason of the alleged unilateral termination by the former of the Distribution
Agreement. Even the Court of Appeals, in its Decision dated 4 April 2004, upheld the nature of the instant
case as an action in personam. In the said Decision the appellate court ruled that:

In the instant petition, [respondent's] cause of action in Civil Case No. MC99-605 is anchored on the claim
that petitioner unilaterally terminated the Distribution Agreement. Thus, [respondent] prays in its
[C]omplaint that "Upon the filing of the Complaint, issue an Order fixing the amount of the bond and issue a
writ of attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are not
exempt from execution, and as much as may be sufficient to satisfy [respondent's] demands."

The action instituted by [respondent] affects the parties alone, not the whole world. Hence, it is an action in
personam, i.e., any judgment therein is binding only upon the parties properly impleaded.

x x x

The objective sought in [respondent's] [C]omplaint was to establish a claim against petitioner for its alleged
unilateral termination of [D]istribution [A]greement. Hence, to repeat, Civil Case No. MC99-605 is an action
in personam because it is an action against persons, namely, herein petitioner, on the basis of its personal
liability. As such, personal service of summons upon the [petitioner] is essential in order for the court to
acquire of (sic) jurisdiction over [its person].32 (Emphasis supplied.)

Thus, being an action in personam, personal service of summons within the Philippines is necessary in order
for the RTC to validly acquire jurisdiction over the person of the petitioner, and this is not possible in the
present case because the petitioner is a non-resident and is not found within the Philippines. Respondent's
allegation in its Amended Complaint that petitioner had personal property within the Philippines in the form
of shares of stock in PEIP did not make Civil Case No. MC99-605 fall under any of the four instances
mentioned in Section 15, Rule 14 of the Rules of Court, as to convert the action in personam to an action in
rem or quasi in rem and, subsequently, make the extraterritorial service of summons upon the petitioner
valid.

It is incorrect for the RTC to have ruled that the allegations made by the respondent in its Amended
Complaint, which is primarily for collection of a sum of money and damages, that the petitioner owns shares
of stock within the Philippines to which the petitioner claims interest, or an actual or contingent lien, would
make the case fall under one of the aforesaid instances wherein extraterritorial service of summons under
Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, would be valid. The RTC in arriving at such
conclusions relied on the second instance, mentioned under Section 15, Rule 14 of the 1997 Revised Rules
of Civil Procedure (i.e., 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), where extraterritorial service of
summons can be properly made. However, the aforesaid second instance has no application in the case
before this Court. Primarily, the Amended Complaint filed by the respondent against the petitioner was for
the collection of sum of money and damages. The said case was neither related nor connected to any
property of the petitioner to which it claims a lien or interest. The action for collection of a sum of money
and damages was purely based on the personal liability of the petitioner towards the respondent. The
petitioner is correct in saying that "mere allegations of personal property within the Philippines does not
necessarily make the action as one that relates to or the subject of which is, property within the Philippines
as to warrant the extraterritorial service of summons. For the action to be considered one that relates to, or
the subject of which, is the property within the Philippines, the main subject matter of the action must be
the property itself of the petitioner in the Philippines." By analogy, an action involving title to or possession
of real or personal property - - such as the foreclosure of real estate or chattel mortgage where the
mortgagor does not reside or is not found in the Philippines - - can be considered as an action which relates
to, or the subject of which is, property within the Philippines, in which the defendant claims a lien or
interest, actual or contingent; and in such instance, judgment will be limited to the res.33

Moreover, the allegations made by the respondent that the petitioner has property within the Philippines
were in support of its application for the issuance of a writ of attachment, which was denied by the RTC.
Hence, it is clear from the foregoing that the Complaint filed by the respondent against the petitioner does
not really relate to, or the subject of which is, property within the Philippines of the petitioner.

This Court also finds error in the Decision of the Court of Appeals. It is provided for in the said Decision,
thus:

However, let it be emphasized that in the [C]omplaint filed before the trial court, [respondent] prayed that
"Upon the filing of the Complaint, issue an Order fixing the amount of the bond and issue a writ of
attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are not exempt
from execution, and as much as may be sufficient to satisfy [respondent's] demands.
In other words, although the [C]omplaint before the trial court does not involve the personal status of the
[respondent], nevertheless, the case involves property within the Philippines in which the [petitioner] has or
claim an interest, or which the [respondent] has attached, which is one of the instances where
extraterritorial service of summons is proper.

x x x

Hence, it is submitted that one of the instances when exterritorial service of summons under Section 15,
Rule 14 of the Rules of Court is proper may be considered to have been met. This is because the
[C]omplaint for collection of sum of money which is an action in personam was converted into an action
quasi in rem by the attachment of [petitioner's] interest in [Perkin-Elmer Philippines].34 (Emphasis supplied.)

Respondent's allegation in its Amended Complaint that petitioner had personal property within the
Philippines in the form of shares of stock in PEIP does not convert Civil Case No. MC99-605 from an action in
personam to one quasi in rem, so as to qualify said case under the fourth instance mentioned in Section 15,
Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the non-resident defendant's property has
been attached within the Philippines), wherein extraterritorial service of summons upon the petitioner would
have been valid. It is worthy to note that what is required under the aforesaid provision of the Revised Rules
of Civil Procedure is not a mere allegation of the existence of personal property belonging to the non-
resident defendant within the Philippines but, more precisely, that the non-resident defendant's personal
property located within the Philippines must have been actually attached. This Court in the case of
Venturanza v. Court of Appeals35 ruled that when the attachment was void from the beginning, the action in
personam which required personal service of summons was never converted into an action in rem where
service by publication would have been valid. Hence, the appellate court erred in declaring that the present
case, which is an action in personam, was converted to an action quasi in rem because of respondent's
allegations in its Amended Complaint that petitioner had personal property within the Philippines.

Glaringly, respondent's prayer in its Amended Complaint for the issuance of a writ of attachment over
petitioner's purported shares of stock in PEIP located within the Philippines was denied by the court a quo in
its Order dated 26 March 1999. Respondent's Motion for Reconsideration of the said Order was likewise
denied by the RTC in its subsequent Order, dated 11 January 2000. Evidently, petitioner's alleged personal
property within the Philippines, in the form of shares of stock in PEIP, had not been attached; hence, Civil
Case No. MC99-605, for collection of sum of money and damages, remains an action in personam. As a
result, the extraterritorial service of summons was not validly effected by the RTC against the petitioner,
and the RTC thus failed to acquire jurisdiction over the person of the petitioner. The RTC is therefore bereft
of any authority to act upon the Complaint filed before it by the respondent insofar as the petitioner is
concerned.

If there was no valid summons served upon petitioner, could RTC have acquired jurisdiction over the person
of the petitioner by the latter's voluntary appearance? As a rule, even if the service of summons upon the
defendant or respondent in a civil case is defective, the court can still acquire jurisdiction over his person
when he voluntary appears in court or submits himself to its authority. Nonetheless, voluntary appearance,
as a mode of acquiring jurisdiction over the person of the defendant, is likewise inapplicable in this case.

It is settled that a party who makes a special appearance in court for the purpose of challenging the
jurisdiction of said court, based on the invalidity of the service of summons, cannot be considered to have
voluntarily submitted himself to the jurisdiction of the court.36 In the present case, petitioner has been
consistent in all its pleadings in assailing the service of summons upon it and the jurisdiction of the RTC over
its person. Thus, the petitioner cannot be declared in estoppel when it filed an Answer ad cautelam with
compulsory counterclaim before the RTC while the instant Petition was still pending before this Court. The
petitioner was in a situation wherein it had no other choice but to file an Answer; otherwise, the RTC would
have already declared that petitioner had waived its right to file responsive pleadings.37 Neither can the
compulsory counterclaim contained in petitioner's Answer ad cautelam be considered as voluntary
appearance of petitioner before the RTC. Petitioner seeks to recover damages and attorney's fees as a
consequence of the unfounded suit filed by respondent against it. Thus, petitioner's compulsory counterclaim
is only consistent with its position that the respondent wrongfully filed a case against it and the RTC
erroneously exercised jurisdiction over its person.

Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC over respondent's
complaint and over petitioner's counterclaim - - while it may have no jurisdiction over the former, it may
exercise jurisdiction over the latter. The compulsory counterclaim attached to petitioner's Answer ad
cautelam can be treated as a separate action, wherein petitioner is the plaintiff while respondent is the
defendant.38 Petitioner could have instituted a separate action for the very same claims but, for the sake of
expediency and to avoid multiplicity of suits, it chose to demand the same in Civil Case No. MC99-605.39
Jurisdiction of the RTC over the subject matter and the parties in the counterclaim must thus be determined
separately and independently from the jurisdiction of the same court in the same case over the subject
matter and the parties in respondent's complaint.

Moreover, even though the petitioner raised other grounds in its Motion to Dismiss aside from lack of
jurisdiction over its person, the same is not tantamount to its voluntary appearance or submission to the
authority of the court a quo. While in De Midgely v. Ferandos,40 it was held that, in a Motion to Dismiss, the
allegation of grounds other than lack of jurisdiction over the person of the defendant, including a prayer "for
such other reliefs as" may be deemed "appropriate and proper" amounted to voluntary appearance, such
ruling must be deemed superseded by the declaration of this Court in La Naval Drug Corporation v. Court of
Appeals41 that estoppel by jurisdiction must be unequivocal and intentional. It would be absurd to hold that
petitioner unequivocally and intentionally submitted itself to the jurisdiction of the court by seeking other
reliefs to which it might be entitled when the only relief that it could properly ask from the trial court is the
dismissal of the complaint against it.42 Thus, the allegation of grounds other than lack of jurisdiction with a
prayer "for such other reliefs" as may be deemed "appropriate and proper" cannot be considered as
unequivocal and intentional estoppel. Most telling is Section 20, Rule 14 of the Rules of Court, which
expressly provides:

SEC. 20. Voluntary appearance. - The defendant's voluntary appearance in the action shall be equivalent to
service of summons. 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.43 (Emphasis supplied.)

In sum, this Court finds that the petitioner did not submit itself voluntarily to the authority of the court a
quo; and in the absence of valid service of summons, the RTC utterly failed to acquire jurisdiction over the
person of the petitioner.

Anent the existence of a cause of action against petitioner and the proper venue of the case, this Court
upholds the findings of the RTC on these issues.

Dismissal of a Complaint for failure to state a cause of action is provided for by the Rules of Court.44 When a
Motion to Dismiss is grounded on the failure to state a cause of action, a ruling thereon should be based
only on the facts alleged in the complaint. The court must pass upon this issue based solely on such
allegations, assuming them to be true. For it to do otherwise would be a procedural error and a denial of
plaintiff's right to due process.45 While, truly, there are well-recognized exceptions46 to the rule that the
allegations are hypothetically admitted as true and inquiry is confined to the face of the complaint,47 none of
the exceptions apply in this case. Hence, the general rule applies. The defense of the petitioner that it is not
the real party-in-interest is evidentiary in nature which must be proven in trial. The appellate court, then,
cannot be faulted for not granting petitioner's Motion to Dismiss on the ground of failure to state a cause of
action.

In the same way, the appellate court did not err in denying petitioner's Motion to Dismiss Civil Case No.
MC99-605 on the ground of improper venue. In arriving at such conclusion, this Court quotes with approval
the following ratiocination of the RTC:

As for the contention that venue was improperly laid, x x x, the [trial court] in its ultimate desire that the
ends of justice could be served in its fullest, cannot rule that venue was improperly laid.

x x x

The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the
residence of the [respondent] under Section 2, Rule 4, Rules of Court, especially where the venue stipulation
was imposed by the [petitioner] for its own benefits.48 (Emphasis supplied.)

Despite the venue stipulation found in the Distribution Agreement stipulating that the exclusive jurisdiction
over disputes arising from the same shall lie in the courts of Singapore or of the Territory (referring to the
Philippines), whichever is elected by PEIA (or petitioner, as PEIA's alleged successor), the RTC of the
Philippines cannot be considered as an improper venue. Truly, the venue stipulation used the word
"exclusive," however, a closer look on the Distribution Agreement would reveal that the venue stipulation
was really in the alternative i.e., courts of Singapore or of the Territory, meaning, the Philippines; thus, the
court a quo is not an improper venue for the present case.

Nonetheless, it bears to emphasize that despite our findings that based on the allegations in respondent's
Complaint in Civil Case No. MC99-605, respondent appears to have a cause of action against the petitioner
and that the RTC is the proper venue for the said case, Civil Case No. MC99-605 is still dismissible, for the
RTC never acquired jurisdiction over the person of the petitioner. The extraterritorial service of summons
upon the petitioner produces no effect because it can only be done if the action is in rem or quasi in rem.
The case for collection of sum of money and damages filed by the respondent against the petitioner being an
action in personam, then personal service of summons upon the petitioner within the Philippines is essential
for the RTC to validly acquire jurisdiction over the person of the petitioner. Having failed to do so, the RTC
can never subject petitioner to its jurisdiction. The mere allegation made by the respondent that the
petitioner had shares of stock within the Philippines was not enough to convert the action from one in
personam to one that was quasi in rem, for petitioner's purported personal property was never attached;
thus, the extraterritorial service of summons upon the petitioner remains invalid. In light of the foregoing
findings, this Court concludes that the RTC has no power to hear and decide the case against the petitioner,
because the extraterritorial service of summons was not validly effected upon the petitioner and the RTC
never acquired jurisdiction over its person.

Finally, as regards the petitioner's counterclaim, which is purely for damages and attorney's fees by reason
of the unfounded suit filed by the respondent against it, it has long been settled that the same truly falls
under the classification of compulsory counterclaim and it must be pleaded in the same action, otherwise, it
is barred.49 In the case at bar, this Court orders the dismissal of the Complaint filed by the respondent
against the petitioner because the court a quo failed to acquire jurisdiction over the person of the latter.
Since the Complaint of the respondent was dismissed, what will happen then to the counterclaim of the
petitioner? Does the dismissal of the complaint carry with it the dismissal of the counterclaim? cralaw l ibra ry

In the cases of Metal Engineering Resources Corp. v. Court of Appeals,50 International Container Terminal
Services, Inc. v. Court of Appeals,51 and BA Finance Corporation v. Co.,52 the Court ruled that if the court
does not have jurisdiction to entertain the main action of the case and dismisses the same, then the
compulsory counterclaim, being ancillary to the principal controversy, must likewise be dismissed since no
jurisdiction remained for any grant of relief under the counterclaim.53 If we follow the aforesaid
pronouncement of the Court in the cases mentioned above, the counterclaim of the herein petitioner being
compulsory in nature must also be dismissed together with the Complaint. However, in the case of Pinga v.
Heirs of German Santiago,54 the Court explicitly expressed that:

Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for the
dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion [of Justice
Regalado in BA Finance]. Retired Court of Appeals Justice Hererra pronounces that the amendment to
Section 3, Rule 17 [of the 1997 Revised Rules of Civil Procedure] settles that "nagging question "whether
the dismissal of the complaint carries with it the dismissal of the counterclaim, and opines that by reason of
the amendments, the rulings in Metals Engineering, International Container, and BA Finance "may be
deemed abandoned." x x x.

x x x, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17, those
previous jural doctrines that were inconsistent with the new rules incorporated in the 1997 Rules of Civil
Procedure were implicitly abandoned insofar as incidents arising after the effectivity of the new procedural
rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarily dismissed
along with the complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA
Finance as doctrine extends as far back as 1997, when the Court adopted the new Rules of Civil Procedure.
If, since then, abandonment has not been affirmed in jurisprudence, it is only because no proper case has
arisen that would warrant express confirmation of the new rule. That opportunity is here and now, and we
thus rule that the dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the
defendant to prosecute any pending counterclaims of whatever nature in the same or separate action. We
confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present holding
are now abandoned.55 [Emphasis supplied].
It is true that the aforesaid declaration of the Court refers to instances covered by Section 3, Rule 17 of the
1997 Revised Rules of Civil Procedure56 on dismissal of the complaint due to the fault of the plaintiff.
Nonetheless, it does not also preclude the application of the same to the instant case just because the
dismissal of respondent's Complaint was upon the instance of the petitioner who correctly argued lack of
jurisdiction over its person.

Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the situation wherein the very
filing of the complaint by the plaintiff against the defendant caused the violation of the latter's rights. As to
whether the dismissal of such a complaint should also include the dismissal of the counterclaim, the Court
acknowledged that said matter is still debatable, viz:

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint; namely a
cause (or causes) of action constituting an act or omission by which a party violates the right of another.
The main difference lies in that the cause of action in the counterclaim is maintained by the defendant
against the plaintiff, while the converse holds true with the complaint. Yet, as with a complaint, a
counterclaim without a cause of action cannot survive.

x x x 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. Moreover, such acts or omissions imputed to the plaintiff are often
claimed to have occurred prior to the filing of the complaint itself. The only apparent exception to this
circumstance is if it is alleged in the counterclaim that the very act of the plaintiff in filing the complaint
precisely causes the violation of the defendant's rights. Yet even in such an instance, it remains debatable
whether the dismissal or withdrawal of the complaint is sufficient to obviate the pending cause of action
maintained by the defendant against the plaintiff.57 ςηα ñrοb lε š ν ιr†υ αl l αω lιb rαrÿ

Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow eliminates the
cause of the counterclaim, then the counterclaim cannot survive. Conversely, if the counterclaim itself states
sufficient cause of action then it should stand independently of and survive the dismissal of the complaint.
Now, having been directly confronted with the problem of whether the compulsory counterclaim by reason of
the unfounded suit may prosper even if the main complaint had been dismissed, we rule in the affirmative.

It bears to emphasize that petitioner's counterclaim against respondent is for damages and attorney's fees
arising from the unfounded suit. While respondent's Complaint against petitioner is already dismissed,
petitioner may have very well already incurred damages and litigation expenses such as attorney's fees
since it was forced to engage legal representation in the Philippines to protect its rights and to assert lack of
jurisdiction of the courts over its person by virtue of the improper service of summons upon it. Hence, the
cause of action of petitioner's counterclaim is not eliminated by the mere dismissal of respondent's
complaint.

It may also do well to remember that it is this Court which mandated that claims for damages and attorney's
fees based on unfounded suit constitute compulsory counterclaim which must be pleaded in the same action
or, otherwise, it shall be barred. It will then be iniquitous and the height of injustice to require the petitioner
to make the counterclaim in the present action, under threat of losing his right to claim the same ever again
in any other court, yet make his right totally dependent on the fate of the respondent's complaint.

If indeed the Court dismisses petitioner's counterclaim solely on the basis of the dismissal of respondent's
Complaint, then what remedy is left for the petitioner? It can be said that he can still file a separate action
to recover the damages and attorney's fees based on the unfounded suit for he cannot be barred from doing
so since he did file the compulsory counterclaim in the present action, only that it was dismissed when
respondent's Complaint was dismissed. However, this reasoning is highly flawed and irrational considering
that petitioner, already burdened by the damages and attorney's fees it may have incurred in the present
case, must again incur more damages and attorney's fees in pursuing a separate action, when, in the first
place, it should not have been involved in any case at all.

Since petitioner's counterclaim is compulsory in nature and its cause of action survives that of the dismissal
of respondent's complaint, then it should be resolved based on its own merits and evidentiary support.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision of the Court of
Appeals, dated 4 April 2006, in CA-G.R. SP No. 78981, affirming the Orders, dated 4 November 2002 and 20
June 2003, of the Regional Trial Court of Mandaluyong City, Branch 212, in Civil Case No. MC99-605, is
hereby REVERSED AND SET ASIDE. Respondent's Amended Complaint in Civil Case No. MC99-605 as
against the petitioner is hereby ordered DISMISSED, and all the proceedings against petitioner in the court a
quo by virtue thereof are hereby DECLARED NULL AND VOID. The Regional Trial Court of Mandaluyong City,
Branch 212, is DIRECTED to proceed without further delay with the resolution of respondent's Complaint in
Civil Case No. MC99-605 as to defendant PEIP, as well as petitioner's counterclaim. No costs.

SO ORDERED.