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NORTHWEST ORIENT AIRLINES v. CA

FACTS:

The petitioner, Northwest Orient Airlines, Inc. (NORTHWEST), filed a collection suit against the respondent, C.F. Sharp & Company, Inc. (SHARP), before the Tokyo District Court in Japan. However, the summons and complaint were served on SHARP in the Philippines, where it maintains branches, and not in Japan. The Tokyo District Court declared itself without jurisdiction over SHARP because the summons was served outside its territorial jurisdiction. NORTHWEST filed a motion for reconsideration, which was denied, and subsequently appealed the case to the Court of Appeals of the Philippines. The Court of Appeals upheld the Tokyo District Court's decision, ruling that personal service of summons within the forum is required for the court to acquire jurisdiction over the defendant. NORTHWEST argued that since SHARP maintains branches in Japan, it should be considered a resident defendant, but the Court of Appeals rejected this argument. The Court of Appeals also held that the service of summons in the Philippines was null and did not confer jurisdiction upon the Tokyo District Court over SHARP. NORTHWEST appealed to the Supreme Court, arguing that SHARP was a resident of Japan and that summons could be validly served on it in the Philippines. The case involves a foreign judgment rendered by a Japanese court, wherein SHARP argues that the extraterritorial service of summons made at its home office in the Philippines was ineffective and void, thereby depriving the Japanese court of jurisdiction over the case. However, SHARP failed to present evidence regarding the Japanese procedural law and its effect on extraterritorial service, and did not establish that under Japanese law, the service was invalid. As a result, the presumption of validity and regularity of the foreign judgment stands.

ISSUES:

  1. Whether the extraterritorial service of summons on SHARP in the Philippines was valid and effective.

  2. Whether SHARP presented sufficient evidence to prove the invalidity of the extraterritorial service of process.

  3. Whether the manner of service of summons on Sharp through the Executive Judge of the Court of First Instance is valid under Philippine laws.

  4. Whether jurisdiction can be acquired over a non-resident defendant by serving him outside the state.

  5. Whether the principles and rulings in the cases of Boudard vs. Tait, Magdalena Estate, Inc. vs. Nieto, Dial Corp. vs. Soriano, and Raher vs. Raher are applicable to the present case.

  6. Whether SHARP, a foreign corporation engaged in business in Japan, can be considered a resident of Japan for jurisdictional purposes in the Philippines.

  7. Whether the extraterritorial service of summons on SHARP by the Japanese court is valid.

  8. Whether or not exemplary damages should be awarded.

  9. Whether or not NORTHWEST is entitled to attorney's fees, litigation expenses, and exemplary damages.

  10. Whether or not the trial court correctly dismissed NORTHWEST's complaint.

RULING:

  1. The presumption of validity and regularity of the service of summons and the decision rendered by the Japanese court must stand. The party challenging a foreign judgment has the burden of overcoming the presumption of its validity, and it is the party's duty to demonstrate the invalidity of such judgment. The procedural law of Japan, where the judgment was rendered, determines the validity of the extraterritorial service of process on SHARP. The court held that SHARP failed to present evidence as to what the Japanese procedural law is and failed to show that under such law, the extraterritorial service was invalid.

  2. Alternatively, the court applied the processual presumption - the presumption that the laws of two countries are similar or identical in the absence of proof to the contrary. The court presumed that the Japanese law on extraterritorial service of process is similar to the Philippine law on service of summons on a private foreign corporation doing business in the Philippines. Under Philippine law, service may be made on the resident agent designated by the foreign corporation or, if there is no resident agent, on the government official designated by law. SHARP failed to show that it had a resident agent authorized to receive court processes in Japan, therefore service on the designated government official or any of SHARP's officers or agents in Japan could be availed of.

  3. The manner of service of summons on Sharp through the Executive Judge of the Court of First Instance is valid under Philippine laws. The service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code.

  4. Jurisdiction cannot be acquired over a non-resident defendant by serving him outside the state. The court process has no extraterritorial effect and personal jurisdiction must be based on personal service within the state.

  5. The principles and rulings in the cases of Boudard vs. Tait, Magdalena Estate, Inc. vs. Nieto, Dial Corp. vs. Soriano, and Raher vs. Raher are inapplicable to the present case. These cases involved different circumstances and did not address the issue of service of summons on a non-resident defendant who is doing business in another country.

  6. Yes, SHARP can be considered a resident of Japan for jurisdictional purposes in the Philippines. The Court held that the policy in Philippine law is to assimilate foreign corporations authorized to do business in the Philippines to the status of domestic corporations. The Court also cited American law, which recognizes that the residence of a corporation is where it exercises corporate functions, does business, and maintains offices or agents. Since SHARP was doing business in Japan through its registered branches, it can be deemed a resident of Japan and subject to the jurisdiction of the courts therein.

  7. Yes, the extraterritorial service of summons on SHARP by the Japanese court is valid. The Court relied on the processual presumption and the presumption of regularity of performance of official duty. It held that since SHARP was a resident of Japan and was engaged in business there, it can be deemed to have assented to the lawful methods of serving process in that jurisdiction.

  8. The Supreme Court ruled that since NORTHWEST failed to present proof that it is entitled to moral, temperate, or compensatory damages, exemplary damages cannot be awarded in its favor.

  9. The Supreme Court denied NORTHWEST's claims for attorney's fees, litigation expenses, and exemplary damages.

  10. The trial court's dismissal of NORTHWEST's complaint was reversed, and instead, C.F. SHARP & COMPANY, INC. was ordered to pay NORTHWEST the amounts adjudged in the foreign judgment, with interest.

PRINCIPLES:

  • The party challenging a foreign judgment has the burden of overcoming the presumption of its validity.

  • Matters of remedy and procedure, such as the service of process, are governed by the lex fori or the internal law of the forum.

  • The procedural law of the jurisdiction where the judgment was rendered determines the validity of extraterritorial service of process.

  • The party challenging the extraterritorial service of process must present evidence on what the applicable procedural law is and show that the service was invalid under such law.

  • In the absence of proof regarding foreign law, the processual presumption may be invoked, presuming that the laws of two countries are similar or identical.

  • Under Philippine law, service of summons on a foreign corporation doing business in the Philippines may be made on the resident agent designated by the corporation, or if there is no resident agent, on the government official designated by law.

  • Laws authorizing service of process on designated government officials presuppose two situations: (1) the corporation has left the Philippines or ceased to transact business therein, and (2) the corporation has no designated agent.

  • Non-designation of a resident agent authorized to receive court processes creates the impression that there is none, allowing service on the designated government official.

  • The availability of other options for service, such as serving officers or agents of the corporation at its branches, does not preclude service on the designated government official.

  • Jurisdiction in personam over non-residents, for the purpose of sustaining a money judgment, must be based on personal service within the state.

  • Process issuing from the courts of one state or country cannot run into another.

  • An absent defendant can be subject to the state's jurisdiction for purposes of a personal judgment if domicile is established and the state has provided a reasonable method for apprising the absent party of the proceedings against him.

  • A corporation may be regarded as a resident in a state where it has offices and transacts business, even though its domicile is in another state.

  • Foreign corporations authorized to do business in the Philippines are assimilated to the status of domestic corporations and are considered residents of the country.

  • The residence of a corporation is determined by where it exercises corporate functions, does business, and maintains offices or agents.

  • The processual presumption and the presumption of regularity of performance of official duty can validate the extraterritorial service of summons in foreign jurisdictions.

  • In order to be awarded exemplary damages, the plaintiff must first establish his entitlement to moral, temperate, or compensatory damages.

  • Attorney's fees, litigation expenses, and exemplary damages may be denied if there is insufficient evidence to show entitlement to such damages.

  • A trial court's dismissal of a complaint may be reversed if it is found to be incorrect.