THIRD DIVISION

[G.R. No. 172242. August 14, 2007.]

PERKIN ELMER SINGAPORE PTE LTD. , petitioner, vs . DAKILA

TRADING CORPORATION , respondent.

DECISION

CHICO-NAZARIO , J : p

The case before this Court is a Petition for Review 1 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 a rmed the
Orders, dated 4 November 2002 3 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 Agreement 5 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. ADCEcI

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 a liate 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 scienti c, 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 le before the RTC of Mandaluyong City, Branch 212, a
Complaint 6 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.

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 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 led 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. 1 0
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 dismiss 1 1 the Complaint led 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 2000 1 2 and 15 November 2000, 1 3 to the respondent and to the
RTC, respectively, to inform them of the wrongful service of summons upon Perkinelmer
Asia.
Accordingly, respondent led an Ex-Parte Motion to Admit Amended Complaint,
together with the Amended Complaint claiming that PEIA had become a sole
proprietorship 1 4 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
Complaint 1 5 respondent sought to change the name of PEIA to that of the petitioner. In an
Order, dated 24 July 2001, 1 6 the RTC admitted the Amended Complaint led by the
respondent. Respondent then filed another Motion 1 7 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, 1 8 the RTC
deputized respondent's General Manager to serve summons on petitioner in Singapore.
The RTC thus issued summons 1 9 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 led with the RTC a Special Appearance and Motion to
Dismiss 2 0 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 led 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
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 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]. EcaDCI

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 .
. . and from no other . . . and the Court cannot consider other matters aliunde . . . .
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] . . . .

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, . . ., 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 xxx xxx

The stipulation as to the venue of a prospective action does not preclude

the ling 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 xxx 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 disapprove
their allegations. 2 1 TADaCH

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 led 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 a rming
the RTC Orders of 4 November 2002 and 20 June 2003.
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 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 INJUNCTION. cIACaT

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
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 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 led 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 led by the respondent before the RTC in the Philippines should have been
dismissed on the ground of improper venue. EcHTDI

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. 2 2
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. 2 3
Courts acquire jurisdiction over the plaintiffs upon the ling 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
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 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. 2 5
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. 2 6
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 IDEHCa

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. 2 8 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. 2 9 On the other hand, when the defendant or respondent
does not reside and is not found in the Philippines, 3 0 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
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 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
ling of the Complaint, issue an Order xing 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. EaICAD

xxx xxx xxx

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
p erson a m 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]. 3 2 (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 led 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
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 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 DHTCaI

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 led 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 nds 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 led before the trial
court, [respondent] prayed that "Upon the ling of the Complaint, issue an Order
xing 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.
xxx xxx xxx
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] . 3 4 (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 Appeals 3 5 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
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 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. HAaDcS

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 led 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. 3 6 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 led 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 le
an Answer; otherwise, the RTC would have already declared that petitioner had waived its
right to le responsive pleadings. 3 7 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 led by respondent against it. Thus, petitioner's
compulsory counterclaim is only consistent with its position that the respondent
wrongfully led a case against it and the RTC erroneously exercised jurisdiction over its
person. IDCHTE

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. 3 8 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. 3 9 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
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 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, 4 0 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 Appeals 4 1 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. 4 2 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. 4 3 (Emphasis supplied.)
In sum, this Court nds 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. 4 4 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. 4 5 While, truly, there are well-recognized exceptions 4 6 to the rule that the
allegations are hypothetically admitted as true and inquiry is con ned to the face of the
complaint, 4 7 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. EcTIDA

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, . . ., 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.
xxx xxx xxx

The stipulation as to the venue of a prospective action does not

preclude the ling of the suit in the residence of the [respondent] under
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 Section 2, Rule 4, Rules of Court, especially where the venue stipulation
was imposed by the [petitioner] for its own bene ts. 4 8 (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 ndings 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 led 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 ndings, 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. THaCAI

Finally, as regards the petitioner's counterclaim, which is purely for damages and
attorney's fees by reason of the unfounded suit led by the respondent against it, it has
long been settled that the same truly falls under the classi cation of compulsory
counterclaim and it must be pleaded in the same action, otherwise, it is barred. 4 9 In the
case at bar, this Court orders the dismissal of the Complaint led 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?
In the cases of Metal Engineering Resources Corp. v. Court of Appeals, 5 0
International Container Terminal Services, Inc. v. Court of Appeals, 5 1 and BA Finance
Corporation v. Co., 5 2 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. 5 3 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 vs. Heirs of German Santiago, 5 4 the Court
explicitly expressed that:
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 Similarly, Justice Feria notes that "the present rule rea rms 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." . .
..

. . ., 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
con icts 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 a rmed in
jurisprudence, it is only because no proper case has arisen that would warrant
express con rmation 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 . 5 5
[Emphasis supplied]. TESDcA

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 Procedure 5 6 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 ling 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.
. . . 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 ling the complaint. Moreover, such acts or omissions
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 imputed to the plaintiff are often claimed to have occurred prior to the ling 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 ling
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 su cient to obviate the
pending cause of action maintained by the defendant against the
plaintiff. 5 7

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 su cient 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. TEHIaA

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 le 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 le the
compulsory counterclaim in the present action, only that it was dismissed when
respondent's Complaint was dismissed. However, this reasoning is highly awed 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 rst 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, a rming
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
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 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.
Ynares-Santiago, Austria-Martinez and Nachura, JJ., concur.

Footnotes

1. Rollo, pp. 10-69. EDCTIa

2. Penned by Associate Justice Monina Arevalo-Zenarosa with Associate Justices Andres B.

Reyes, Jr. and Rosmari D. Carandang, concurring; id. at 76-90.

3. Penned by Judge Rizalina T. Capco-Umali; id. at 315-318.

4. Id. at 371-372.
5. Id. at 180-188.

6. Id. at 97-105.
7. The reason of the trial court in denying the prayer of the respondent for the issuance of a writ
of attachment was: "Based on the records, [respondent] is desirous of attaching the
property of [Perkin-Elmer Philippines] by invoking that [petitioner] owns 99% of [Perkin-
Elmer Philippines]. . . ., let this Court emphasize that a corporation such as [Perkin-Elmer
Philippines] has a personality separate and distinct from shareholder, [the petitioner].
Hence, the property belonging to [Perkin-Elmer Philippines] cannot be attached to pay for
the obligation incurred by its shareholder." (Id. at 731-732.)
8. Id. at 733.

9. Id. at 156-159.
10. Id. at 96.

11. Id. at 160-164.

12. Id. at 151.

13. Id. at 152.

14. A sole proprietorship is neither a natural person nor a juridical person under Article 44 of the
Civil Code. The law merely recognizes the existence of a sole proprietorship as a form of
business organization conducted for profit. It does not vest juridical or legal personality
in the sole proprietorship or empowers it to file or defend an action in court. (Yao Ka Sin
Trading v. Court of Appeals, G.R. No. 53820, 15 June 1992, 209 SCRA 763, 780.)
Likewise, a sole proprietorship does not possess any juridical personality separate and
apart from the personality of the owner of the enterprise and the personality of the
persons acting in the name of such proprietorship. Hence, any case filed against a sole
proprietorship must be brought against its owner.
15. Rollo, pp. 170-179.
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 16. Id. at 225-226.

17. Id. at 227-230.

18. Id. at 238.

19. Id. at 155.

20. Id. at 239-264.

21. Rollo, pp. 316-318.

22. Paramount Insurance Corp. v. Japzon, G.R. No. 68037, 29 July 1992, 211 SCRA 879, 884-
885.
23. De Leon v. Court of Appeals, 315 Phil. 140, 150 (1995). aTEADI

24. Bank of the Philippine Islands v. Evangelista, 441 Phil. 445, 453 (2002).

25. Paramount Insurance Corp. v. Japzon, supra note 22 at 885.

26. Banco Do Brasil v. Court of Appeals, 389 Phil. 87, 99-100 (2000).

27. Id.

28. Id.
29. Valmonte v. Court of Appeals, 322 Phil. 96, 106 (1996).

30. Romualdez-Licaros v. Licaros, 449 Phil. 824, 833 (2003).

31. Banco Do Brasil v. Court of Appeals, supra note 26.

32. Rollo, pp. 85-87.

33. Civil Law Commentaries by Justice Jose Y. Feria, Vol. 1, 2001 Edition, p. 138, citing therein
El Banco Español-Filipino v. Palanca, 37 Phil. 921, 927 (1918).
34. Rollo, pp. 88-89.

35. G.R. No. L-77760, 11 December 1987, 156 SCRA 305, 312.
36. Hongkong and Shanghai Banking Corporation Limited v. Catalan, G.R. No. 159590, 18
October 2004, 440 SCRA 498, 516.

37. Id.
38. Civil Procedure Commentaries by Justice Jose Y. Feria, Vol. 1 (2001 Edition), p. 277, citing
the case of Golden Ribbon Lumber Co., Inc. v. Santos, 52 O.G. 1477 (1955); Civil
Procedure Commentaries by Justice Florenz D. Regalado, Vol. 1 (Seventh Revised
Edition), p. 128.

39. Section 6, Rule 6 of the 1997 Revised Rules of Civil Procedure; Reyes v. Court of Appeals,
148 Phil. 135, 149 (1971); Lafarge Cement Philippines, Inc. v. Continental Cement
Corporation, G.R. No. 155173, 23 November 2004, 443 SCRA 522, 533.
40. G.R. No. L-34314, 13 May 1975, 64 SCRA 23, 31.
41. G.R. No. 103200, 31 August 1994, 236 SCRA 78, 86.

42. Millennium Industrial Commercial Corporation v. Tan, 383 Phil. 468, 478 (2000).
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 43. 1997 Revised Rules of Civil Procedure.
44. Section 1 (g), Rule 16, 1997 Revised Rules of Civil Procedure.

45. Indiana Aerospace University v. Commission on Higher Education, G.R. No. 139371, 4 April
2001, 356 SCRA 367, 385.
46. There is no hypothetical admission of the veracity of allegations if their falsity is subject to
judicial notice, or if such allegations are legally impossible, or if these refer to facts
which are inadmissible in evidence, or if by the record or document included in the
pleading these allegations appear unfounded. Also, inquiry is not confined to the
complaint if there is evidence which has been presented to the court by stipulation of the
parties, or in the course of hearings related to the case.
47. Dabuco v. Court of Appeals, 379 Phil. 939, 950 (2000). CTAIHc

48. Rollo, pp. 317-318.

49. Tiu Po vs. Bautista, G.R. No. L-55514, 17 March 1981, 103 SCRA 388, 391; Alday vs. FGU
Insurance Corporation, G.R. No. 138822, 23 January 2001, 350 SCRA 113, 123.
50. G.R. No. 95631, 28 October 1991, 203 SCRA 273, 282.

51. G.R. No. 90530, 7 October 1992, 214 SCRA 456.

52. G.R. No. 105751, 30 June 1993, 224 SCRA 163, 167.

53. Supra note 50.

54. G.R. No. 170354, 30 June 2006, 494 SCRA 393, 414-415.

55. Supra note 54.

56. SEC. 3 . Dismissal due to fault of plaintiff. — If, for no justifiable cause, the plaintiff fails to
appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules or
any order of the court, the complaint may be dismissed upon motion of the defendant or
upon the court's own motion without prejudice to the right of the defendant to prosecute
his counterclaim in the same or in a separate action. This dismissal shall have the effect
of an adjudication upon the merits, unless otherwise declared by the court.
57. Pinga vs. Heirs of German Santiago, id. at 418-419.

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