G.R. No.

L-63557 October 28, 1983

LINGNER & FISHER GMBH, petitioner,

Romulo, Mabanta, Buenaventura & Sayoc & De los Reyes Law Office for petitioner.

Bueno, Bilog and Villa Law Office for respondent.

RESOLUTION

MELENCIO-HERRERA, J.:

The factual background of this case may be stated as follows: DEUTCHE MILCHWERKE DR. A.
SAUER (DMW for brevity) was a firm in West Germany manufacturing PRODUCTS (probably
chemicals) under the trademarks FISSAN, etc. Private respondent Philippine Chemical Laboratories,
Inc. (PHILCHEM, for brevity) is a local company which apparently also manufactures and sells
chemicals.

On February 28, 1963, DMW and PHILCHEM executed a so-called Agency AGREEMENT the basic
provision of which was that PHILCHEM would be the exclusive importer of the PRODUCTS into the
Philippines. The benefit to PHILCHEM would be the profits realized from re-sale in this country of
imported PRODUCTS. Other relevant provisions, generally stated, were that:

(a) The term of the AGREEMENT was five years renewable automatically for five years each time
unless one party gives due notice of termination to the other.

(b) PHILCHEM could manufacture the PRODUCTS locally with raw materials from sources other
than LINGNER, but in such case DMW will have to be paid 5% of 80% of PHILCHEM's wholesale
prices.

(c) After termination of the AGREEMENT, PHILCHEM will be entitled, for five years, to 10% royalty
on sales of PRODUCTS in the Philippines (hereinafter to be referred to as the ROYALTY CLAUSE).

(d) "All legal settlements within the compass of this AGREEMENT shall fall under the jurisdiction of
Philippine courts."

It appears that, subsequently, the DMW interests were acquired by LINGNER & FISHER GMBH
LINGNER for brevity). On other hand, LINGNER was a subsidiary of

BEECHAM GROUP LTD. which, through BEECHAM PRODUCTS INTERNATIONAL (BEECHAM,

The AGREEMENT was automatically renewed once, or up to February 28, 1973, and finally
terminated on August 31, 1977. The events relative to the termination were as follows:

Before February 28, 1973, the parties agreed to extend the AGREEMENT up to February 28, 1975.
If it is not terminated by prior notice six months before February 28, 1975, as it was not, it would be
extended for a further two years up to February 28, 1977.

By letter dated February 25, 1977, through the law firm of Ozaeta Romulo, De Leon, Mabanta,
Buenaventura, Sayoc and De los Angeles (the Law Firm, for brevity) PHILCHEM was advised that
LINGNER was interested in continuing business relationship with PHILCHEM and will be interested
in negotiating a new contract and that, prior to the signing of a new contract, LINGNER was
proposing that the old contract be extended by mutual agreement for a period of six (6) calendar
months beginning March 1, 1977 to expire automatically on August 31, 1977 if no contract is entered
into. The proposal was accepted by PHILCHEM, and no new contract having been signed by August
31, 1977, the AGREEMENT terminated on that date,
On July 20, 1979, PHILCHEM presented a claim to LINGNER for P1,055,000.00 under the
ROYALTY CLAUSE. The claim was discussed between PHILCHEM and TANNER of BEECHAM with
the intervention of the Law Firm. No settlement having been arrived at, PHILCHEM, on August 6,
1980, filed a complaint against BEECHAM alone in Civil Case No. 38086 of the then Court of First
Instance of Rizal. The summons issued could not be served on BEECHAM, the Sheriff having
reported that BEECHAM was neither a company registered in the Philippines, nor resident at the
given address of Unit A, Padilla Building, Emerald Avenue, Pasig, Metro Manila.

PHILCHEM then filed an amended complaint, this time making LINGNER and BEECHAM as the
defendants, and pleading that summons could be served on the Law Firm as an agent of the
defendants. The Law Firm submitted a special appearance in the case on behalf of LINGNER, and,
also on behalf of LINGNER, moved for dismissal on the grounds (a) that LINGNER was not a foreign
corporation doing business in the Philippines and hence could not be sued locally, and, (b) that
LINGNER could not be served with summons through the Law Firm. It will thus be noted that two
issues were being raised. The first was whether or not LINGNER was doing business in the
Philippines; and the second was whether or not LINGNER could be validly summoned through the
Law Firm as its agent. The Trial Court denied the Motion to Dismiss, assuming that LINGNER could
be sued in this jurisdiction, and holding that LINGNER can be served with summons through the Law
Firm.

LINGNER went on certiorari to the Intermediate Appellate Court where it reiterated the plea that
summons could not be validly served on it through the Law Firm; and it also requested that a hearing
be held, conformably to the provisions of Section 9(3) of Batas Pambansa Blg. 129, on the question
of whether or not LINGNER was doing business in this country.

The Appellate Court held that summons served through the Law Firm was valid on the strength
of Johnlo Trading Co. vs. Flores (88 Phil. 741 [1951]); and it further ruled that receiving evidence on
whether or not LINGNER was doing business in the Philippines could not be justified under the cited
Batas Pambansa Blg. 129.

Considering the Comment, Reply, Rejoinder and Surrejoinder submitted by the parties, we resolved
to give due course, without requiring the submittal of memoranda.

The Appellate Court acted correctly in denying the request for an evidentiary hearing. Evidence
necessary in regards to factual issues raised in cases falling within the Appellate Court's original and
appellate jurisdiction contemplates "incidental" facts which were not touched upon, or fully heard by
the trial or respondent Court. The law could not have intended that the Appellate Court would hold
an original and full trial of a main factual issue in a case, which properly pertains to Trial Courts.

It is our view that evidence as to whether LINGNER was doing business in the Philippines, even
before the Trial Court, is no longer necessary in view of the fact that PHILCHEM and LINGNER were
contractees in the AGREEMENT and the claim of PHILCHEM is based on the ROYALTY CLAUSE of
that AGREEMENT. Whether LINGNER is or is not doing business in the Philippines will not matter
because the parties had expressly stipulated in the AGREEMENT that all controversies based on the
AGREEMENT "shall fall under the jurisdiction of Philippine courts". In other words, there was a
covenant on venue to the effect that LINGNER can be sued by PHILCHEM before Philippine Courts
in regards to a controversy related to the AGREEMENT.

A case should not be dismissed simply because an original summons was wrongfully served. It
should be difficult to conceive, for example, that when a defendant personally appears before a
Court complaining that he had not been validly summoned, that the case filed against him should be
dismissed. An alias summons can be actually served on said defendant.

For the expeditious determination of this controversy, therefore, in view of the insufficiency of
evidence that LINGNER is doing business in the Philippines, which is a sine qua non requirement
under the provision of Section 14, Rule 14 of the Rules before service of process can be effected
1

upon a foreign corporation and jurisdiction over the same may be acquired, it is best that alias
summons on LINGNER be issued, in this case under the provisions of Section 17, Rule 14, in 2

relation to Rule 4 of the Rules of Court, which recognizes the principle that venue can be agreed
upon by the parties. If a local plaintiff and a foreign corporation have agreed on Philippine venue,
summons by publication can be made on the foreign corporation under the principle of liberal
construction of the rules to promote just determination of actions.

ACCORDINGLY, the judgment under review of the Intermediate Appellate Court (Third Special
Cases Division) is hereby upheld insofar as it sustained the Orders, dated August 24, 1981 and
December 18, 1981, of the then Court of First Instance of Rizal, Branch XI, Pasig, denying
petitioner's Motion to Dismiss and the subsequent Motion for Reconsideration, albeit on grounds
different from those relied upon by the Intermediate Appellate Court. The now Regional Trial Court,
to which the case below has been assigned, is hereby directed to allow private respondent
Philippine Chemical Laboratories, Inc., to apply for the issuance of alias summons on petitioner
Lingner and Fischer GMBH by publication under the provisions of Section 17, Rule 14 in relation to
Rule 4 of the Rules of Court, and after issues have been joined, to proceed to trial and judgment
accordingly.

No pronouncement as to costs.

SO ORDERED.