Toward a more sensible long arm statute

SERVICE of summons refers to the court process of notifying a person that an action against him has been taken in court. Unless a person voluntarily submits or is deemed to have submitted himself to the court’s jurisdiction, no binding decision can be rendered against him without proper service of summons.
Service of summons on foreign corporations that do not have an office or agent in the country has always been problematic. The result is that local residents are unable to effectively sue such corporations before Philippine courts either for torts or breach of contract.

The reason for this injustice is that our Rules of Court did not contain any provision on service of summons to corporations not registered in the Philippines.

AM No. 11-3-6-SC

In an effort to address this longtime problem, the Supreme Court recently amended the Rules of Court and expanded the ways by which service of summons may be done on foreign private juridical entities that are either not registered or have no resident agent in the country.

This new rule introduces radical changes to our long-arm statute. Before, our long-arm statute applied only to limited cases and could be availed of only where the (a) court action “affects the personal status of the plaintiff;” (b) the case “relates to, or the subject of which, is property within the Philippines, in which the defendant has a claim or interest, actual or contingent;” (c) when “the relief demanded consists, wholly or in part, of excluding the defendant from any interest” in any property within the Philippines; or (c) the property of the defendant has been attached in the Philippines (Section 15, Rule 14, Revised Rules of Court; De Midgeley v. Ferandos, G.R. No. L-34313, May 13, 1975, 64 SCRA 23; Cariaga, et al. v. Malaya, et al., G.R. No. L-48375, Aug. 13, 1986, 143 SCRA 441).

As a result of these limitations, the Supreme Court held that extraterritorial service of summons could not be availed of in a money judgment sought by the plaintiff (Boudard et al. v. Tait, 67 Phil. 170 [1939]) or in an action for injunction (Kawasaki Port Service Corp. et al. v. Amores et al., G.R. No. 58340, July 16, 1991, 199 SCRA 230).

Under the amended rules, however, extraterritorial service of summons is now available for purely personal actions or actions in personam such as an action for recovery of damages, breach of contract or an action for injunction against an unregistered foreign corporation.

In addition, the new rule expanded the modes of extraterritorial service. Service of summons may now be done, with the permission of the court, on foreign private juridical entities that are either not registered or have no resident agent through any of the following ways:

• By personal service coursed through the appropriate court in the foreign country with the assistance of the Department of Foreign Affairs.

• By publication once in a newspaper of general circulation in the country where the defendant may be found and by serving a copy of the summons and the court order by registered mail at the last known address of the defendant.

• By facsimile or any recognized electronic means that could generate proof of service.

• By such other means as the court may in its discretion direct.

Obviously, summons to these entities now go beyond our country’s borders. And, in keeping up with the times, the Supreme Court has allowed service of summons through facsimile or electronic devices.

A word of caution

The new rule makes our long arm statute more sensible and practical, designed as it is to prevent injustice to local plaintiffs who are disadvantaged vis-a-vis their foreign counterparts in terms of seeking redress against foreign entities in the courts of their own country.

Lest we lawyers get excited, a word of caution. We have to consider that a case does not end with the judgment of the court. The court judgment should be enforceable in the country of residence of the defendant or where its properties may be found. In this regard, it is an accepted principle in private international law that a court may exercise personal jurisdiction over a nonresident defendant for purposes of rendering valid and enforceable judgment against it only if there exist “minimum contacts” between the defendant and the forum state. This principle aims to protect the defendant against the burden of litigating in a distant forum even as it ensures that states, through their courts, do not reach out beyond the limits imposed on them by their status as co-equal sovereigns (World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 [1980]).

The presence of “minimum contacts,” often exhibited through defendant’s doing or transacting business in the forum state, is a requirement of due process. As the US Supreme Court has stated, “the Due Process Clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations.” Doing so would lay “too great and unreasonable a burden on the corporation to comport with due process” (International Shoe Co. v. Washington, 326 U.S. 310, 318 [1945]).

In short, the new rule should not be taken as an unbridled license for haling foreign juridical entities before our courts of law. An indiscriminate use of the new rule, without the required minimum contacts, will serve no useful purpose because a favorable judgment that may be rendered therein cannot be enforced against the foreign defendant.

(The author, a co-managing partner and head of the corporate and special projects department of Accralaw, is a law professor at the Ateneo Law School. He may be contacted at [email protected].)