Banco do Brasil vs.

Court of Appeals
BANCO DO BRASIL, petitioner, vs. THE COURT OF APPEALS, HON. ARSENIO M. GONONG, and CESAR S.
URBINO, SR., respondents.

G.R. Nos. 121576-78. June 16, 2000.

Extraterritorial service of summons = only in action in rem

Requisites: 1. Defendant is not resident of the Philippines and is not found here

Through: (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.

Extraterritorial service of summons is not applicable in actions in personam.

Personal or Substituted service of summons = only in action in personam

1. Personal service to the defendant

NATURE OF THE ACTION: Before us is a petition for review on certiorari of the Decision 1 and the
Resolution 2 of the Court of Appeals 3 dated July 19, 1993 and August 15, 1995, respectively, which
reinstated the entire Decision dated February 18, 1991 of the Regional Trial Court of Manila, Branch 8,
holding, among others, petitioner Banco do Brasil liable to private respondent Cesar Urbino, Sr. for
damages amounting to $300,000.00

SC DECISION: WHEREFORE, the subject petition is hereby GRANTED. The Decision and the Resolution of
the Court of Appeals dated July 19, 1993 and August 15, 1995, respectively, in CA-G.R. SP Nos. 24669,
28387 and 29317 are hereby REVERSED and SET ASIDE insofar as they affect petitioner Banco do Brasil.
The Order dated May 20, 1991 of the Regional Trial Court of Manila, Branch 8 in Civil Case No. 89-51451
is REINSTATED.

FACTS:

o Poro Point Shipping Services, a Panamanian Company, requested permission for its vessel M/V
Star Ace, which had engine trouble, to unload its cargo and to store it at the Philippine Ports
Authority (PPA) compound in San Fernando, La Union while awaiting transhipment to
Hongkong. The request was approved by the Bureau of Customs.
o Despite the approval, the customs personnel boarded the vessel when it docked on
suspicion that it was the hijacked M/V Silver Med and that its cargo would be smuggled into the
country.
 o The bureau of customs seized said vessel and its cargo.
o While seizure proceedings were ongoing, La Union was hit by three typhoons, and the
vessel ran aground and was abandoned.

o Respondent Cesar Urbino, Sr. sued Poro Point Shipping Services for damages. Urbino impleaded
Banco Do Brasil (BDB), a foreign corporation not engaged in business in the Philippines nor does
it have any office here or any agent. BDB was impleaded simply because it has a claim over the
sunken ship. BDB however failed to appear multiple times.

o Upon motion of the private respondent, the trial court allowed summons by publication to
be served upon defendant.

o Eventually, a judgment was rendered and BDB was adjudged to pay $300,000.00 in damages in
favor of Urbino for BDB being a nuisance defendant.

o Petitioner Banco do Brasil filed, by special appearance, an Urgent Motion to Vacate Judgement
and to Dismiss Case on the ground that the February 18, 1991 Decision of the trial court is void
with respect to it for having been rendered without validly acquiring jurisdiction over the person
of Banco do Brasil.
o The trial court granted petitioner’s motion and set aside as against petitioner the decision for
having been rendered without jurisdiction over Banco do Brasil’s person. The respondent filed a
motion for reconsideration which was denied.
o The respondent filed a certiorari petition before the CA. The CA granted the respondent and
reinstated the decision of the RTC that petitioner is liable to the respondent for a sum of
$300,000.00. The CA ruled that the suit below is in rem, not in personam, thus, service of
summons by publication was sufficient for the court to acquire jurisdiction over the person of
petitioner Banco do Brasil, and thereby liable to private respondent Cesar Urbino for damages
claimed, amounting to $300,000.00

o Petitioner filed a motion for reconsideration on the ground that there was no valid service of
summons as service was on the wrong party—the ambassador of Brazil. Hence, it argued, the
trial court did not acquire jurisdiction over petitioner Banco do Brasil. CA denied it. Hence, this
petition.

PETITIONER’S CONTENTION
Petitioner avers that the action filed against it is an action for damages, as such it is an action in
personam which requires personal service of summons be made upon it for the court to
acquire jurisdiction over it. However, inasmuch as petitioner Banco do Brasil is a non-resident
foreign corporation, not engaged in business in the Philippines, unless it has property located in
the Philippines which may be attached to convert the action into an action in rem, the court
cannot acquire jurisdiction over it in respect of an action in personam.

ISSUES: WON the RTC validly acquires jurisdiction over the person of the petitioner through publication
of summons and thus may execute its judgment against the petitioner. (NO)
RULING: NO, The RTC did not acquire jurisdiction over the person the petitioner and therefore it cannot
execute its judgment against it. Since the action against the petitioner is action in personam and not in
rem, RTC failed to serve the summons to the herein petitioner when it served the same through
extraterritorial service of summons by publication, which is not applicable to action in personam.

When the defendant is a nonresident and he is not found in the country, summons may be
served extraterritorially in accordance with Rule 14, Section 17 of the Rules of Court. Under this
provision, there are only four (4) instances when extraterritorial service of summons is proper, namely:

(1) when the action affects the personal status of the plaintiffs;

(2) 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;

(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 nonresident’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.

Extraterritorial service of summons applies only where the action is in rem, an action against the
thing itself instead of against the person, or in an action quasi in rem, where an individual is named as
defendant and the purpose of the proceeding is to subject his interest therein to the obligation or loan
burdening the property. This is so inasmuch as, in in rem and quasi in rem actions, 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.

Where the action is in personam, one brought against a person on the basis of his personal
liability, jurisdiction over the person of the defendant is necessary for the court to validly try and
decide the case. When the defendant is a nonresident, personal service of summons within the state is
essential to the acquisition of jurisdiction over the person. This cannot be done, however, if the
defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over
his person and therefore cannot validly try and decide the case against him.

It must be stressed that any relief granted in rem or quasi in rem actions must be confined to
the res, and the court cannot lawfully render a personal judgment against the defendant. Clearly, the
publication of summons effected by private respondent is invalid and ineffective for the trial court to
acquire jurisdiction over the person of petitioner, since by seeking to recover damages from petitioner
for the alleged commission of an injury to his person or property caused by petitioner’s being a nuisance
defendant, private respondent’s action became in personam. Bearing in mind the in personam nature of
the action, personal or, if not possible, substituted service of summons on petitioner, and not
extraterritorial service, is necessary to confer jurisdiction over the person of petitioner and validly hold
it liable to private respondent for damages. Thus, the trial court had no jurisdiction to award damages
amounting to $300,000.00 in favor of private respondent and as against herein petitioner.
 Clearly, the publication of summons effected by private respondent is invalid and ineffective for
the trial court to acquire jurisdiction over the person of petitioner, since by seeking to recover damages
from petitioner for the alleged commission of an injury to his person or property caused by petitioner’s
being a nuisance defendant, private respondent’s action became in personam. Bearing in mind the in
personam nature of the action, personal or, if not possible, substituted service of summons on
petitioner, and not extraterritorial service, is necessary to confer jurisdiction over the person of
petitioner and validly hold it liable to private respondent for damages. Thus, the trial court had no
jurisdiction to award damages amounting to $300,000.00 in favor of private respondent and as against
herein petitioner.