LINGNER & FISHER GMBH, PETITIONER, VS. INTERMEDIATE APPELLATE COURT, HON. RICARDO L. PRONOVE, JR. AND PHILIPPINE CHEMICAL LABORATORIES, INC., RESPONDENTS.

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 the other hand, LINGNER
was a subsidiary of BEECHAM GROUP LTD. which, through BEECHAM PRODUCTS
INTERNATIONAL (BEECHAM, for brevity), had opened an office in this country at
Unit A, Padilla Building,
Emerald Avenue, Pasig, Metro Manila, under the
supervision or managership of one named TANNER.
LINGNER and BEECHAM can be deemed to constitute a single personality.
Subsequent reference to LINGNER will include reference to DMW and 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
LINGER was doing business in the Philippines; and the second was whether or not LINGNER
could be validly summoned through the Law Find 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 Sur-rejoinder
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 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^[1] of the Rules before service of process can
be effected upon 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,^[2] in relation to Rule 4 of the Rules of Court,
which recognizes the principle that venue agreed 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.

Teehankee, (Chairman), Plana, Relova, and Gutierrez, Jr., JJ.,
concur.

^[1]
“Sec. 14. Service upon private foreign
corporations. – If the defendant is a foreign corporation, or a
non-resident joint stock company or association, doing business in
the Philippines, service may be made on its resident agent designated in accordance with law
for that purpose, or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents with­in
the Philippines” (Emphasis supplied).

^[2]
“Sec. 17. Extraterritorial
service. – When the defendant does not reside and is not found in the
Philippines and the action affects the personal status of the plaintiff or
relates to, or the subject of which is, property within the Philip­pines, in which the defendant
has or claims a lien or inte­rest actual or contingent, or in which the relief demanded consists, wholly or in part, in
excluding the defendant from any interest therein, or the property of the
defendant has been attached within the Philippines, service may, by leave of
court, be effected out of the Philippines by personal service as under section
7; or by publication in a newspaper of general circulation in such places and
for such time as the court may order, in which case a copy of the summons and
order of the court shall be sent by registered mail to the last known address of
the defendant or in any other manner the court may deem sufficient. Any order
granting such leave shall specify a reasonable time, which shall not be less
than sixty (60) days after notice, within which the defendant must answer.”