1. National Equipment Rental, Ltd., v. Szukhent Et Al.

Issue: Judicial Power - Federal Rules of Civil Procedure

Decision Direction: Conservative (5-4) / Date of Decision: January 06, 1964
Petitioner: Creditor, including institution appearing as such; e.g., a finance company
Respondent: Debtor, excluding bankrupt person or business
The Federal Rules of Civil Procedure provide that service of process upon an individual may be made 'by
delivering a copy of the summons and of the complaint to an agent authorized by appointment * * * to receive
service of process.' The petitioner is a corporation with its principal place of business in New York. It sued the
respondents, residents of Michigan, in a New York federal court, claiming that the respondents had defaulted
under a farm equipment lease. The only question now before us is whether the person upon whom the
summons and complaint were served was 'an agent authorized by appointment' to receive the same, so as to
subject the respondents to the jurisdiction of the federal court in New York.
The respondents obtained certain farm equipment from the petitioner under a lease executed in 1961. The
lease was on a printed form less than a page and a half in length, and consisted of 18 numbered paragraphs.
The last numbered paragraph, appearing just above the respondents' signatures and printed in the same type
used in the remainder of the instrument, provided that 'the Lessee hereby designates Florence Weinberg,
21 Forty-first Street, Long Island City, N.Y., as agent for the purpose of accepting service of any process within
the State of New York.' The respondents were not acquainted with Florence Weinberg.
In 1962 the petitioner commenced the present action by filing in the federal court in New York a complaint
which alleged that the respondents had failed to make any of the periodic payments specified by the lease.
The Marshal delivered two copies of the summons and complaint to Florence Weinberg. That same day she
mailed the summons and complaint to the respondents, together with a letter stating that the documents had
been served upon her as the respondents' spondents' agent for the purpose of accepting service of process in
New York, in accordance with the agreement contained in the lease. The petitioner itself also notified the
respondents by certified mail of the service of process upon Florence Weinberg.
Upon motion of the respondents, the District Court quashed service of the summons and complaint, holding
that, although Florence Weinberg had promptly notified the respondents of the service of process and mailed
copies of the summons and complaint to them, the lease agreement itself had not explicitly required her to do
so, and there was therefore a 'failure of the agency arrangement to achieve intrinsic and continuing reality.' .
The Court of Appeals affirmed and we granted certiorari. For the reasons stated in this opinion, we have
concluded that Florence Weinberg was 'an agent authorized by appointment * * * to receive service of
process,' and accordingly we reverse the judgment before us.
We need not and do not in this case reach the situation where no personal notice has been given to the
defendant. Since the respondents did in fact receive complete and timely notice of the lawsuit pending against
them, no due process claim has been made. The case before us is therefore quite different from cases where
there was no actual notice. Similarly, as the Court of Appeals recognized, this Court's decision in Wuchter v.
Pizzutti, is inapposite here. In that case a state nonresident motorist statute which failed to provide explicitly
for communication of notice was held unconstitutional, despite the fact that notice had been given to the
defendant in that particular case. Wuchter dealt with the limitations imposed by the Fourteenth Amendment
upon a statutory scheme by which a State attempts to subject nonresident individuals to the jurisdiction of its
courts. The question presented here, on the other hand, is whether a party to a private contract may appoint
an agent to receive service of process within the meaning of Federal Rule of Civil Procedure 4(d)(1), where
the agent is not personally known to the party, and where the agent has not expressly undertaken to transmit
notice to the party.
The purpose underlying the contractual provision here at issue seems clear. The clause was inserted by the
petitioner and agreed to by the respondents in order to assure that any litigation under the lease should be
conducted in the State of New York. The contract specifically provided that 'This agreement shall be deemed

to have been made in Nassau County, New York, regardless of the order in which the signatures of the parties
shall be affixed hereto, and shall be interpreted, and the rights and liabilities of the parties here determined, in
accordance with the laws of the State of New York.' And it is settled, as the courts below recognized, that
parties to a contract may agree in advance to submit to the jurisdiction of a given court, to permit notice to be
served by the opposing party, or even to waive notice altogether.
Under well-settled general principles of the law of agency Florence Weinberg's prompt acceptance and
transmittal to the respondents of the summons and complaint pursuant to the authorization was itself sufficient
to validate the agency, even though there was no explicit previous promise on her part to do so. 'The
principal's authorization may neither expressly nor impliedly request any expression of assent by the agent as
a condition of the authority, and in such a case any exercise of power by the agent within the scope of the
authorization, during the term for which it was given, or within a reasonable time if no fixed term was
mentioned, will bind the principal.
We deal here with a Federal Rule, applicable to federal courts in all 50 States. But even if we were to assume
that this uniform federal standard should give way to contrary local policies, there is no relevant concept of
state law which would invalidate the agency here at issue. In Michigan, where the respondents reside, the
statute which validates service of process under the circumstances present in this case contains no provision
requiring that the appointed agent expressly undertake to notify the principal of the service of process.
Similarly, New York law, which it was agreed should be applicable to the lease provisions, does not require any
such express promise by the agent in order to create a valid agency for receipt of process. The New York
statutory short form of general power of attorney, which specifically includes the power to accept service of
process, is entirely silent as to any such requirement Indeed, the identical contractual provision at issue here
has been held by a New York court to create a valid agency for service of process under the law of that State.
It is argued, finally, that the agency sought to be created in this case was invalid because Florence Weinberg
may have had a conflict of interest. This argument is based upon the fact that she was not personally known to
the respondents at the time of her appointment and upon a suggestion in the record that she may be related to
an officer of the petitioner corporation. But such a contention ignores the narrowly limited nature of the agency
here involved. Florence Weinberg was appointed the respondents' agent for the single purpose of receiving
service of process. An agent with authority so limited can in no meaningful sense be deemed to have had an
interest antagonistic to the respondents, since both the petitioner and the respondents had an equal interest in
assuring that, in the event of litigation, the latter be given that adequate and timely notice which is a
prerequisite to a valid judgment.
A different case would be presented if Florence Weinberg had not given prompt notice to the respondents, for
then the claim might well be made that her failure to do so had operated to invalidate the agency. We hold only
that, prompt notice to the respondents having been given, Florence Weinberg was their 'agent authorized by
appointment' to receive process within the meaning of Federal Rule of Civil Procedure 4(d)(1).
The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent
with this opinion. It is so ordered.
Judgment of Court of Appeals reversed and case remanded.
2. International Shoe v. State of Washington, 326 U.S. 310 (1945)
No. 107 / Argued November 14, 1945 / Decided December 3, 1945
APPEAL FROM THE SUPREME COURT OF WASHINGTON
Syllabus
Activities within a State of salesmen in the employ of a foreign corporation, exhibiting samples of merchandise
and soliciting orders from prospective buyers to be accepted or rejected by the corporation at a point outside
the State, were systematic and continuous, and resulted in a large volume of interstate business. A statute of
the State requires employers to pay into the state unemployment compensation fund a specified percentage of
the wages paid for the services of employees within the State.
Held:

1. In view of 26 U.S.C. 1606(a) , providing that no person shall be relieved from compliance with a state law
requiring payments to an unemployment fund on the ground that he is engaged in interstate commerce, the
fact that the corporation is engaged in interstate commerce does not relieve it from liability for payments to the
state unemployment compensation fund.
2. The activities in behalf of the corporation render it amenable to suit in courts of the State to recover
payments due to the state unemployment compensation fund.
(a) The activities in question established between the State and the corporation sufficient contacts or ties to
make it reasonable and just, and in conformity to the due process requirements of the Fourteenth Amendment,
for the State to enforce against the corporation an obligation arising out of such activities.
(b) In such a suit to recover payments due to the unemployment compensation fund, service of process upon
one of the corporation's salesmen within the State, and notice sent by registered mail to the corporation at its
home office, satisfies the requirements of due process.
3. The tax imposed by the state unemployment compensation statute -- construed by the state court, in its
application to the corporation, as a tax on the privilege of employing salesmen within the State -- does not
violate the due process clause of the Fourteenth Amendment.
22 Wash.2d 146, 154 P.2d 801, affirmed.
APPEAL from a judgment upholding the constitutionality of a state unemployment compensation statute as
applied to the appellant corporation.
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
The questions for decision are (1) whether, within the limitations of the due process clause of the Fourteenth
Amendment, appellant, a Delaware corporation, has, by its activities in the State of Washington, rendered
itself amenable to proceedings in the courts of that state to recover unpaid contributions to the state
unemployment compensation fund exacted by state statutes, Washington Unemployment Compensation Act,
Washington Revised Statutes, 9998-103a through 9998-123a, 1941 Supp., and (2) whether the state can
exact those contributions consistently with the due process clause of the Fourteenth Amendment.
The statutes in question set up a comprehensive scheme of unemployment compensation, the costs of which
are defrayed by contributions required to be made by employers to a state unemployment compensation fund.
The contributions are a specified percentage of the wages payable annually by each employer for his
employees' services in the state. The assessment and collection of the contributions and the fund are
administered by appellees. Section 14(c) of the Act (Wash.Rev.Stat., 1941 Supp., 9998-114c) authorizes
appellee Commissioner to issue an order and notice of assessment of delinquent contributions upon
prescribed personal service of the notice upon the employer if found within the state, or, if not so found, by
mailing the notice to the employer by registered mail at his last known address. That section also authorizes
the Commissioner to collect the assessment by distraint if it is not paid within ten days after service of the
notice. By 14e and 6b, the order of assessment may be administratively reviewed by an appeal tribunal
within the office of unemployment upon petition of the employer, and this determination is, by 6i, made
subject to judicial review on questions of law by the state Superior Court, with further right of appeal in the
state Supreme Court, as in other civil cases.
In this case, notice of assessment for the years in question was personally served upon a sales solicitor
employed by appellant in the State of Washington, and a copy of the notice was mailed by registered mail to
appellant at its address in St. Louis, Missouri. Appellant appeared specially before the office of unemployment,
and moved to set aside the order and notice of assessment on the ground that the service upon appellant's
salesman was not proper service upon appellant; that appellant was not a corporation of the State of
Washington, and was not doing business within the state; that it had no agent within the state upon whom
service could be made; and that appellant is not an employer, and does not furnish employment within the
meaning of the statute.
The motion was heard on evidence and a stipulation of facts by the appeal tribunal, which denied the motion
and ruled that appellee Commissioner was entitled to recover the unpaid contributions. That action was
affirmed by the Commissioner; both the Superior Court and the Supreme Court affirmed. Appellant in each of
these courts assailed the statute as applied, as a violation of the due process clause of the Fourteenth

Amendment, and as imposing a constitutionally prohibited burden on interstate commerce. The cause comes
here on appeal under 237(a) of the Judicial Code, 28 U.S.C. 344(a), appellant assigning as error that the
challenged statutes, as applied, infringe the due process clause of the Fourteenth Amendment and the
commerce clause.
The facts, as found by the appeal tribunal and accepted by the state Superior Court and Supreme Court, are
not in dispute. Appellant is a Delaware corporation, having its principal place of business in St. Louis, Missouri,
and is engaged in the manufacture and sale of shoes and other footwear. It maintains places of business in
several states other than Washington, at which its manufacturing is carried on and from which its merchandise
is distributed interstate through several sales units or branches located outside the State of Washington.
Appellant has no office in Washington, and makes no contracts either for sale or purchase of merchandise
there. It maintains no stock of merchandise in that state, and makes there no deliveries of goods in intrastate
commerce. During the years from 1937 to 1940, now in question, appellant employed eleven to thirteen
salesmen under direct supervision and control of sales managers located in St. Louis. These salesmen
resided in Washington; their principal activities were confined to that state, and they were compensated by
commissions based upon the amount of their sales. The commissions for each year totaled more than
$31,000. Appellant supplies its salesmen with a line of samples, each consisting of one shoe of a pair, which
they display to prospective purchasers. On occasion, they rent permanent sample rooms, for exhibiting
samples, in business buildings, or rent rooms in hotels or business buildings temporarily for that purpose. The
cost of such rentals is reimbursed by appellant.
The authority of the salesmen is limited to exhibiting their samples and soliciting orders from prospective
buyers, at prices and on terms fixed by appellant. The salesmen transmit the orders to appellant's office in St.
Louis for acceptance or rejection, and, when accepted, the merchandise for filling the orders is shipped f.o.b.
from points outside Washington to the purchasers within the state. All the merchandise shipped into
Washington is invoiced at the place of shipment, from which collections are made. No salesman has authority
to enter into contracts or to make collections.
The Supreme Court of Washington was of opinion that the regular and systematic solicitation of orders in the
state by appellant's salesmen, resulting in a continuous flow of appellant's product into the state, was sufficient
to constitute doing business in the state so as to make appellant amenable to suit in its courts. But it was also
of opinion that there were sufficient additional activities shown to bring the case within the rule, frequently
stated, that solicitation within a state by the agents of a foreign corporation plus some additional activities
there are sufficient to render the corporation amenable to suit brought in the courts of the state to enforce an
obligation arising out of its activities there. The court found such additional activities in the salesmen's display
of samples sometimes in permanent display rooms, and the salesmen's residence within the state, continued
over a period of years, all resulting in a substantial volume of merchandise regularly shipped by appellant to
purchasers within the state. The court also held that the statute, as applied, did not invade the constitutional
power of Congress to regulate interstate commerce, and did not impose a prohibited burden on such
commerce.
Appellant's argument, renewed here, that the statute imposes an unconstitutional burden on interstate
commerce need not detain us. For 53 Stat. 1391, 26 U.S.C. 1606(a) provides that
"No person required under a State law to make payments to an unemployment fund shall be relieved from
compliance therewith on the ground that he is engaged in interstate or foreign commerce, or that the State law
does not distinguish between employees engaged in interstate or foreign commerce and those engaged in
intrastate commerce."
It is no longer debatable that Congress, in the exercise of the commerce power, may authorize the states, in
specified ways, to regulate interstate commerce or impose burdens upon it.
Appellant also insists that its activities within the state were not sufficient to manifest its "presence" there, and
that, in its absence, the state courts were without jurisdiction, that, consequently, it was a denial of due
process for the state to subject appellant to suit. It refers to those cases in which it was said that the mere
solicitation of orders for the purchase of goods within a state, to be accepted without the state and filled by
shipment of the purchased goods interstate, does not render the corporation seller amenable to suit within the
state. And appellant further argues that, since it was not present within the state, it is a denial of due process
to subject it to taxation or other money exaction. It thus denies the power of the state to lay the tax or to

subject appellant to a suit for its collection.

Historically, the jurisdiction of courts to render judgment in personam is grounded on their de facto power over
the defendant's person. Hence, his presence within the territorial jurisdiction of a court was prerequisite to its
rendition of a judgment personally binding him. But now that the capias ad respondendum has given way to
personal service of summons or other form of notice, due process requires only that, in order to subject a
defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain
minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play
and substantial justice."
Since the corporate personality is a fiction, although a fiction intended to be acted upon as though it were a
fact, it is clear that, unlike an individual, its "presence" without, as well as within, the state of its origin can be
manifested only by activities carried on in its behalf by those who are authorized to act for it. To say that the
corporation is so far "present" there as to satisfy due process requirements, for purposes of taxation or the
maintenance of suits against it in the courts of the state, is to beg the question to be decided. For the terms
"present" or "presence" are used merely to symbolize those activities of the corporation's agent within the
state which courts will deem to be sufficient to satisfy the demands of due process. L. Hand, J., in Hutchinson
v. Chase & Gilbert, 45 F.2d 139, 141. Those demands may be met by such contacts of the corporation with the
state of the forum as make it reasonable, in the context of our federal system of government, to require the
corporation to defend the particular suit which is brought there. An "estimate of the inconveniences" which
would result to the corporation from a trial away from its "home" or principal place of business is relevant in
this connection.
"Presence" in the state in this sense has never been doubted when the activities of the corporation there have
not only been continuous and systematic, but also give rise to the liabilities sued on, even though no consent
to be sued or authorization to an agent to accept service of process has been given. Conversely, it has been
generally recognized that the casual presence of the corporate agent, or even his conduct of single or isolated
items of activities in a state in the corporation's behalf, are not enough to subject it to suit on causes of action
unconnected with the activities there. To require the corporation in such circumstances to defend the suit away
from its home or other jurisdiction where it carries on more substantial activities has been thought to lay too
great and unreasonable a burden on the corporation to comport with due process.
While it has been held, in cases on which appellant relies, that continuous activity of some sorts within a state
is not enough to support the demand that the corporation be amenable to suits unrelated to that activity, there
have been instances in which the continuous corporate operations within a state were thought so substantial
and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from
those activities.
Finally, although the commission of some single or occasional acts of the corporate agent in a state sufficient
to impose an obligation or liability on the corporation has not been thought to confer upon the state authority to
enforce it, other such acts, because of their nature and quality and the circumstances of their commission,
may be deemed sufficient to render the corporation liable to suit. True, some of the decisions holding the
corporation amenable to suit have been supported by resort to the legal fiction that it has given its consent to
service and suit, consent being implied from its presence in the state through the acts of its authorized agents.
But, more realistically, it may be said that those authorized acts were of such a nature as to justify the fiction.
It is evident that the criteria by which we mark the boundary line between those activities which justify the
subjection of a corporation to suit and those which do not cannot be simply mechanical or quantitative. The
test is not merely, as has sometimes been suggested, whether the activity, which the corporation has seen fit
to procure through its agents in another state, is a little more or a little less. Whether due process is satisfied
must depend, rather, upon the quality and nature of the activity in relation to the fair and orderly administration
of the laws which it was the purpose of the due process clause to insure. That 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.
But, to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the
benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations, and,
so far as those obligations arise out of or are connected with the activities within the state, a procedure which
requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to
be undue.

Applying these standards, the activities carried on in behalf of appellant in the State of Washington were
neither irregular nor casual. They were systematic and continuous throughout the years in question. They
resulted in a large volume of interstate business, in the course of which appellant received the benefits and
protection of the laws of the state, including the right to resort to the courts for the enforcement of its rights.
The obligation which is here sued upon arose out of those very activities. It is evident that these operations
establish sufficient contacts or ties with the state of the forum to make it reasonable and just, according to our
traditional conception of fair play and substantial justice, to permit the state to enforce the obligations which
appellant has incurred there. Hence, we cannot say that the maintenance of the present suit in the State of
Washington involves an unreasonable or undue procedure.
We are likewise unable to conclude that the service of the process within the state upon an agent whose
activities establish appellant's "presence" there was not sufficient notice of the suit, or that the suit was so
unrelated to those activities as to make the agent an inappropriate vehicle for communicating the notice. It is
enough that appellant has established such contacts with the state that the particular form of substituted
service adopted there gives reasonable assurance that the notice will be actual. Nor can we say that the
mailing of the notice of suit to appellant by registered mail at its home office was not reasonably calculated to
apprise appellant of the suit.
Only a word need be said of appellant's liability for the demanded contributions to the state unemployment
fund. The Supreme Court of Washington, construing and applying the statute, has held that it imposes a tax on
the privilege of employing appellant's salesmen within the state measured by a percentage of the wages, here,
the commissions payable to the salesmen. This construction we accept for purposes of determining the
constitutional validity of the statute. The right to employ labor has been deemed an appropriate subject of
taxation in this country and England, both before and since the adoption of the Constitution. And such a tax
imposed upon the employer for unemployment benefits is within the constitutional power of the states.
Appellant having rendered itself amenable to suit upon obligations arising out of the activities of its salesmen
in Washington, the state may maintain the present suit in personam to collect the tax laid upon the exercise of
the privilege of employing appellant's salesmen within the state. For Washington has made one of those
activities which, taken together, establish appellant's "presence" there for purposes of suit the taxable event by
which the state brings appellant within the reach of its taxing power. The state thus has constitutional power to
lay the tax and to subject appellant to a suit to recover it. The activities which establish its "presence" subject it
alike to taxation by the state and to suit to recover the tax.
Affirmed.
MR. JUSTICE JACKSON took no part in the consideration or decision of this case.
MR. JUSTICE BLACK delivered the following opinion.
Congress, pursuant to its constitutional power to regulate commerce, has expressly provided that a State shall
not be prohibited from levying the kind of unemployment compensation tax here challenged. We have twice
decided that this Congressional consent is an adequate answer to a claim that imposition of the tax violates
the Commerce Clause. Two determinations by this Court of an issue so palpably without merit are sufficient.
Consequently, that part of this appeal which again seeks to raise the question seems so patently frivolous as
to make the case a fit candidate for dismissal. Nor is the further ground advanced on this appeal, that the
State of Washington has denied appellant due process of law, any less devoid of substance. It is my view,
therefore, that we should dismiss the appeal as unsubstantial, and decline the invitation to formulate broad
rules as to the meaning of due process, which here would amount to deciding a constitutional question "in
advance of the necessity for its decision."
Certainly appellant cannot, in the light of our past decisions, meritoriously claim that notice by registered mail
and by personal service on its sales solicitors in Washington did not meet the requirements of procedural due
process. And the due process clause is not brought in issue any more by appellant's further conceptualistic
contention that Washington could not levy a tax or bring suit against the corporation because it did not honor
that State with its mystical "presence." For it is unthinkable that the vague due process clause was ever
intended to prohibit a State from regulating or taxing a business carried on within its boundaries simply
because this is done by agents of a corporation organized and having its headquarters elsewhere. To read this
into the due process clause would, in fact, result in depriving a State's citizens of due process by taking from
the State the power to protect them in their business dealings within its boundaries with representatives of a

foreign corporation. Nothing could be more irrational, or more designed to defeat the function of our federative
system of government. Certainly a State, at the very least, has power to tax and sue those dealing with its
citizens within its boundaries, as we have held before. Hoopeston Canning Co. v. Cullen, 318 U. S. 313. Were
the Court to follow this principle, it would provide a workable standard for cases where, as here, no other
questions are involved. The Court has not chosen to do so, but instead has engaged in an unnecessary
discussion, in the course of which it has announced vague Constitutional criteria applied for the first time to the
issue before us. It has thus introduced uncertain elements confusing the simple pattern and tending to curtail
the exercise of State powers to an extent not justified by the Constitution.
The criteria adopted, insofar as they can be identified, read as follows: Due Process does permit State courts
to "enforce the obligations which appellant has incurred" if it be found "reasonable and just according to our
traditional conception of fair play and substantial justice." And this, in turn, means that we will "permit" the
State to act if, upon "an 'estimate of the inconveniences' which would result to the corporation from a trial away
from its 'home' or principal place of business," we conclude that it is "reasonable" to subject it to suit in a State
where it is doing business.
It is true that this Court did use the terms "fair play" and "substantial justice" in explaining the philosophy
underlying the holding that it could not be "due process of law" to render a personal judgment against a
defendant without notice and an opportunity to be heard.. In McDonald v. Mabee, cited in the Milliken, case,
Mr. Justice Holmes, speaking for the Court, warned against judicial curtailment of this opportunity to be heard,
and referred to such a curtailment as a denial of "fair play," which even the common law would have deemed
"contrary to natural justice." And previous cases had indicated that the ancient rule against judgments without
notice had stemmed from "natural justice" concepts. These cases, while giving additional reasons why notice
under particular circumstances is inadequate, did not mean thereby that all legislative enactments which this
Court might deem to be contrary to natural justice ought to be held invalid under the due process clause. None
of the cases purport to support or could support a holding that a State can tax and sue corporations only if its
action comports with this Court's notions of "natural justice." I should have thought the Tenth Amendment
settled that.
I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts," a power to tax and to
open the doors of its courts for its citizens to sue corporations whose agents do business in those States.
Believing that the Constitution gave the States that power, I think it a judicial deprivation to condition its
exercise upon this Court's notion of "fair play," however appealing that term may be. Nor can I stretch the
meaning of due process so far as to authorize this Court to deprive a State of the right to afford judicial
protection to its citizens on the ground that it would be more "convenient" for the corporation to be sued
somewhere else.
There is a strong emotional appeal in the words "fair play," "justice," and "reasonableness." But they were not
chosen by those who wrote the original Constitution or the Fourteenth Amendment as a measuring rod for this
Court to use in invalidating State or Federal laws passed by elected legislative representatives. No one, not
even those who most feared a democratic government, ever formally proposed that courts should be given
power to invalidate legislation under any such elastic standards. Express prohibitions against certain types of
legislation are found in the Constitution, and, under the long-settled practice, courts invalidate laws found to
conflict with them. This requires interpretation, and interpretation, it is true, may result in extension of the
Constitution's purpose. But that is no reason for reading the due process clause so as to restrict a State's
power to tax and sue those whose activities affect persons and businesses within the State, provided proper
service can be had. Superimposing the natural justice concept on the Constitution's specific prohibitions could
operate as a drastic abridgment of democratic safeguards they embody, such as freedom of speech, press
and religion,and the right to counsel. This has already happened. For application of this natural law concept,
whether under the terms "reasonableness," "justice," or "fair play," makes judges the supreme arbiters of the
country's laws and practices. This result, I believe, alters the form of government our Constitution provides. I
cannot agree.
True, the State's power is here upheld. But the rule announced means that tomorrow's judgment may strike
down a State or Federal enactment on the ground that it does not conform to this Court's idea of natural
justice. I therefore find myself moved by the same fears that caused Mr. Justice Holmes to say in 1930:
"I have not yet adequately expressed the more than anxiety that I feel at the ever-increasing scope given to
the Fourteenth Amendment in cutting down what I believe to be the constitutional rights of the States. As the

decisions now stand, I see hardly any limit but the sky to the invalidating of those rights if they happen to strike
a majority of this Court as for any reason undesirable."
This Court has, on several occasions, pointed out the undesirable consequences of a failure to dismiss
frivolous appeals.
These First Amendment liberties -- freedom of speech, press and religion -- provide a graphic illustration of the
potential restrictive capacity of a rule under which they are protected at a particular time only because the
Court, as then constituted, believes them to be a requirement of fundamental justice. Consequently, under the
same rule, another Court, with a different belief as to fundamental justice, could, at least as against State
action, completely or partially withdraw Constitutional protection from these basic freedoms, just as though the
First Amendment had never been written.
3. Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437 (1952)
No. 85 / Argued November 27-28, 1951 / Decided March 3, 1952
Syllabus
A foreign corporation, owning gold and silver mines in the Philippine Islands, temporarily carried on in Ohio
(during the Japanese occupation of the Philippines) a continuous and systematic, but limited, part of its
general business -- consisting of directors' meetings, business correspondence, banking, stock transfers,
payment of salaries, purchasing of machinery, etc. While engaged in doing such business in Ohio, its
president was served with summons in an action in personam against the corporation filed in an Ohio state
court by a nonresident of Ohio. The cause of action did not arise in Ohio, and did not relate to the corporation's
activities there. A judgment sustaining a motion to quash the service was affirmed by the State Supreme Court.
Held:
1. The Federal Constitution does not compel Ohio to open its courts to such a case -- even though Ohio
permits a complainant to maintain a proceeding in personam in its courts against a properly served
nonresident natural person to enforce a cause of action which does not arise out of anything done within the
State.
2. The Due Process Clause of the Fourteenth Amendment also does not prohibit Ohio from granting such relief
against a foreign corporation.
3. As a matter of federal due process, the business done by the corporation in Ohio was sufficiently substantial
and of such a nature as to permit Ohio to entertain the cause of action against it, though the cause of action
arose from activities entirely distinct from its activities in Ohio.
4. It not clearly appearing, under the Ohio practice as to the effect of the syllabus, whether the Supreme Court
of Ohio rested its decision on Ohio law or on the Fourteenth Amendment, the cause is remanded to that court
for further proceedings in the light of the opinion of this Court.
155 Ohio St. 116, 98 N.E.2d 33, vacated and remanded.
In two actions in an Ohio state court, the trial court sustained a motion to quash the service on the respondent
foreign corporation. The Court of Appeals of Ohio affirmed, 88 Ohio App. 118, 95 N.E.2d 5, as did the State
Supreme Court, 155 Ohio St. 116, 98 N.E.2d 33. This Court granted certiorari. 3
Judgment vacated and cause remanded.
4. McGee v. International Life Ins. Co., 355 U.S. 220 (1957)
No. 50 / Argued November 20, 1957 / Decided December 16, 1957
CERTIORARI TO THE COURT OF CIVIL APPEALS OF TEXAS,
FIRST SUPREME JUDICIAL DISTRICT
Syllabus
Petitioner's son, a resident of California, bought a life insurance policy from an Arizona corporation, naming
petitioner as beneficiary. Later, respondent, a Texas corporation, agreed to assume the insurance obligations

of the Arizona corporation, and mailed a reinsurance certificate to petitioner's son in California, offering to
insure him in accordance with his policy. He accepted this offer, and paid premiums by mail from his California
home to respondent's office in Texas. Neither corporation has ever had any office or agent in California or
done any other business in that State. Petitioner sent proofs of her son's death to respondent, but it refused to
pay the claim. Under a California statute subjecting foreign corporations to suit in California on insurance
contracts with residents of California, even though such corporations cannot be served with process within the
State, petitioner sued respondent and obtained judgment in a California court, process being served only by
registered mail to respondent's principal place of business in Texas.
Held:
1. The Due Process Clause of the Fourteenth Amendment did not preclude the California court from entering a
judgment binding on respondent, since the suit was based on a contract which had a substantial connection
with California.
2. Respondent's insurance contract was not unconstitutionally impaired by the fact that the California statute
here involved did not become effective until after respondent had assumed the obligation of the insurance
policy.
288 S.W.2d 579, reversed and remanded.
Opinion of the Court by MR. JUSTICE BLACK, announced by MR. JUSTICE DOUGLAS.
Petitioner, Lulu B. McGee, recovered a judgment in a California state court against respondent, International
Life Insurance Company, on a contract of insurance. Respondent was not served with process in California,
but by registered mail at its principal place of business in Texas. The California court based its jurisdiction on a
state statute which subjects foreign corporations to suit in California on insurance contracts with residents of
that State even though such corporations cannot be served with process within its borders.
Unable to collect the judgment in California petitioner went to Texas, where she filed suit on the judgment in a
Texas court. But the Texas courts refused to enforce her judgment, holding it was void under the Fourteenth
Amendment because service of process outside California could not give the courts of that State jurisdiction
over respondent. 288 S.W.2d 579. Since the case raised important questions not only to California, but to
other States which have similar laws, we granted certiorari. 352 U.S. 924. It is not controverted that, if the
California court properly exercised jurisdiction over respondent, the Texas courts erred in refusing to give its
judgment full faith and credit.
The material facts are relatively simple. In 1944, Lowell Franklin, a resident of California, purchased a life
insurance policy from the Empire Mutual Insurance Company, an Arizona corporation. In 1948, the respondent
agreed with Empire Mutual to assume its insurance obligations. Respondent then mailed a reinsurance
certificate to Franklin in California offering to insure him in accordance with the terms of the policy he held with
Empire Mutual. He accepted this offer, and, from that time until his death in 1950, paid premiums by mail from
his California home to respondent's Texas office. Petitioner, Franklin's mother, was the beneficiary under the
policy. She sent proofs of his death to the respondent, but it refused to pay, claiming that he had committed
suicide. It appears that neither Empire Mutual nor respondent has ever had any office or agent in California.
And, so far as the record before us shows, respondent has never solicited or done any insurance business in
California apart from the policy involved here.
Since Pennoyer v. Neff, this Court has held that the Due Process Clause of the Fourteenth Amendment
places some limit on the power of state courts to enter binding judgments against persons not served with
process within their boundaries. But just where this line of limitation falls has been the subject of prolific
controversy, particularly with respect to foreign corporations. In a continuing process of evolution, this Court
accepted and then abandoned "consent," "doing business," and "presence" as the standard for measuring the
extent of state judicial power over such corporations. See Henderson, The Position of Foreign Corporations in
American Constitutional Law, c. V. More recently, in International Shoe Co. v. Washington, the Court decided
that "due process requires only that, in order to subject a defendant to a judgment in personam, if he be not
present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of
the suit does not offend 'traditional notions of fair play and substantial justice.'"
Looking back over this long history of litigation, a trend is clearly discernible toward expanding the permissible
scope of state jurisdiction over foreign corporations and other nonresidents. In part, this is attributable to the

fundamental transformation of our national economy over the years. Today, many commercial transactions
touch two or more States, and may involve parties separated by the full continent. With this increasing
nationalization of commerce has come a great increase in the amount of business conducted by mail across
state lines. At the same time, modern transportation and communication have made it much less burdensome
for a party sued to defend himself in a State where he engages in economic activity.
Turning to this case, we think it apparent that the Due Process Clause did not preclude the California court
from entering a judgment binding on respondent. It is sufficient for purposes of due process that the suit was
based on a contract which had substantial connection with that State. The contract was delivered in California,
the premiums were mailed from there, and the insured was a resident of that State when he died. It cannot be
denied that California has a manifest interest in providing effective means of redress for its residents when
their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to
follow the insurance company to a distant State in order to hold it legally accountable. When claims were small
or moderate, individual claimants frequently could not afford the cost of bringing an action in a foreign forum -thus in effect making the company judgment-proof. Often the crucial witnesses -- as here, on the company's
defense of suicide -- will be found in the insured's locality.
Of course, there may be inconvenience to the insurer if it is held amenable to suit in California, where it had
this contract, but certainly nothing which amounts to a denial of due process. There is no contention that
respondent did not have adequate notice of the suit, or sufficient time to prepare its defenses and appear.
The California statute became law in 1949, after respondent had entered into the agreement with Franklin to
assume Empire Mutual's obligation to him. Respondent contends that application of the statute to this existing
contract improperly impairs the obligation of the contract. We believe that contention is devoid of merit. The
statute was remedial in the purest sense of that term, and neither enlarged nor impaired respondent's
substantive rights or obligations under the contract. It did nothing more than to provide petitioner with a
California forum to enforce whatever substantive rights she might have against respondent. At the same time,
respondent was given a reasonable time to appear and defend on the merits after being notified of the suit.
Under such circumstances, it had no vested right not to be sued in California.
The judgment is reversed, and the cause is remanded to the Court of Civil Appeals of the State of Texas, First
Supreme Judicial District, for further proceedings not inconsistent with this opinion. It is so ordered.
5. G.R. No. 103493 June 19, 1997
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA
HOLDINGS, N.V., petitioners, vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC,
VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.
MENDOZA, J.:
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala
International Finance Limited (hereafter called AYALA) and Philsec Investment Corporation (hereafter called
PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of
P14,088,995.00. In order to facilitate the payment of the loans, private respondent 1488, Inc., through its
president, private respondent Drago Daic, assumed Ducat's obligation under an Agreement, dated January 27,
1983, whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold to petitioner Athona
Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for
US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00
as initial payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a
promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered
to 1488, Inc. all the shares of stock in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note
became due and demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued
petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the balance of US$307,209.02
and for damages for breach of contract and for fraud allegedly perpetrated by petitioners in misrepresenting
the marketability of the shares of stock delivered to 1488, Inc. under the Agreement. Originally instituted in the

United States District Court of Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the
venue of the action was later transferred to the United States District Court for the Southern District of Texas,
where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed
an answer with counterclaim, impleading private respondents herein as counterdefendants, for allegedly
conspiring in selling the property at a price over its market value. Private respondent Perlas, who had allegedly
appraised the property, was later dropped as counterdefendant. ATHONA sought the recovery of damages and
excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the property. For
their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person,
but, as their motion was denied, they later filed a joint answer with counterclaim against private respondents
and Edgardo V. Guevarra, PHILSEC's own former president, for the rescission of the sale on the ground that
the property had been overvalued. On March 13, 1990, the United States District Court for the Southern
District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was "frivolous
and [was] brought against him simply to humiliate and embarrass him." For this reason, the U.S. court
imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed a
complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against private respondents
in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated
the allegation of petitioners in their respective counterclaims in Civil Action No. H-86-440 of the United States
District Court of Southern Texas that private respondents committed fraud by selling the property at a price
400 percent more than its true value of US$800,000.00. Petitioners claimed that, as a result of private
respondents' fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the
Agreement and to purchase the Houston property. Petitioners prayed that private respondents be ordered to
return to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the trial
court issued a writ of preliminary attachment against the real and personal properties of private respondents. 2
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-avis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure
of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat contended that the alleged overpricing of
the property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not
parties to the sale and whose only participation was to extend financial accommodation to ATHONA under a
separate loan agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a joint
"Special Appearance and Qualified Motion to Dismiss," contending that the action being in personam,
extraterritorial service of summons by publication was ineffectual and did not vest the court with jurisdiction
over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary
requirements of the controversy may be more suitably tried before the forum of the litis pendentia in the U.S.,
under the principle in private international law of forum non conveniens," even as it noted that Ducat was not a
party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9, 1988, the
trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia
considering that
the "main factual element" of the cause of action in this case which is the validity of the sale of
real property in the United States between defendant 1488 and plaintiff ATHONA is the subject
matter of the pending case in the United States District Court which, under the doctrine of forum
non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine the
assessment and/or fluctuations of the fair market value of real estate situated in Houston,
Texas, U.S.A. from the date of the transaction in 1983 up to the present and verily, . . .
(emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were nonresidents and the action was not an action in rem or quasi in rem, so that extraterritorial service of
summons was ineffective. The trial court subsequently lifted the writ of attachment it had earlier issued
against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis

pendentia and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the
previous attachment of shares of stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against Ducat,
1488, Inc., and Daic on the ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are
Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the Athona Holdings,
NV. The case at bar involves the same parties. The transaction sued upon by the parties, in
both cases is the Warranty Deed executed by and between Athona Holdings and 1488 Inc. In
the U.S. case, breach of contract and the promissory note are sued upon by 1488 Inc., which
likewise alleges fraud employed by herein appellants, on the marketability of Ducat's securities
given in exchange for the Texas property. The recovery of a sum of money and damages, for
fraud purportedly committed by appellees, in overpricing the Texas land, constitute the action
before the Philippine court, which likewise stems from the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery
of a sum of money for alleged tortious acts, so that service of summons by publication did not vest the
trial court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case No. 16563 on
the ground of forum non conveniens was likewise affirmed by the Court of Appeals on the ground that
the case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main transaction, and involve foreign
elements, to wit: 1) the property subject matter of the sale is situated in Texas, U.S.A.; 2) the
seller, 1488 Inc. is a non-resident foreign corporation; 3) although the buyer, Athona Holdings, a
foreign corporation which does not claim to be doing business in the Philippines, is wholly
owned by Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also a
foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES
FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS
IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE CIVIL ACTION IS NOT
APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT
OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL ACTION
IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED
IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION, NOT
THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE
CIVIL ACTION FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE
PETITIONERS' RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM
HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.
First. It is important to note in connection with the first point that while the present case was pending in the
Court of Appeals, the United States District Court for the Southern District of Texas rendered judgment 5 in the
case before it. The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit
Court of Appeals. 6 Thus, the principal issue to be resolved in this case is whether Civil Case No. 16536 is
barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting
the foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be
given the effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39,
50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact."

Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign judgments
in several cases, 7 it was after the parties opposed to the judgment had been given ample opportunity to repel
them on grounds allowed under the law. 8 It is not necessary for this purpose to initiate a separate action or
proceeding for enforcement of the foreign judgment. What is essential is that there is opportunity to challenge
the foreign judgment, in order for the court to properly determine its efficacy. This is because in this
jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment
merely
constitutes
prima
facie
evidence
of
9
the justness of the claim of a party and, as such, is subject to proof to the contrary. Rule 39, 50 provides:
Sec. 50. Effect of foreign judgments. The effect of a judgment of a tribunal of a foreign
country, having jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the
thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as
between the parties and their successors in interest by a subsequent title; but the judgment may
be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd., 10
which private respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the
foreign judgment was considered res judicata because this Court found "from the evidence as well as from
appellant's own pleadings" 11 that the foreign court did not make a "clear mistake of law or fact" or that its
judgment was void for want of jurisdiction or because of fraud or collusion by the defendants. Trial had been
previously held in the lower court and only afterward was a decision rendered, declaring the judgment of the
Supreme Court of the State of Washington to have the effect of res judicata in the case before the lower court.
In the same vein, in Philippines International Shipping Corp. v. Court of Appeals, 12 this Court held that the
foreign judgment was valid and enforceable in the Philippines there being no showing that it was vitiated by
want of notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under
the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the
U.S. court as basis for declaring it res judicata or conclusive of the rights of private respondents. The
proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this
case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its
disputed order dated March 9, 1988.
On the plaintiff's claim in its Opposition that the causes of action of this case and the pending
case in the United States are not identical, precisely the Order of January 26, 1988 never found
that the causes of action of this case and the case pending before the USA Court, were
identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners' action is barred by the
principle of res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over their
persons, but their claim was brushed aside by both the trial court and the Court of Appeals. 13
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of
judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned
to Branch 134, although the proceedings were suspended because of the pendency of this case. To sustain
the appellate court's ruling that the foreign judgment constitutes res judicata and is a bar to the claim of
petitioners would effectively preclude petitioners from repelling the judgment in the case for enforcement. An
absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is
invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign
judgment is sought to be enforced against him in a separate proceeding. This is plainly untenable. It has been
held therefore that:

[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where
affirmative relief is being sought. Hence, in the interest of justice, the complaint should be
considered as a petition for the recognition of the Hongkong judgment under Section 50 (b),
Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may
present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if
applicable. 14
Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be
consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas,
this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending
in Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have the burden of
impeaching the foreign judgment and only in the event they succeed in doing so may they proceed with their
action against private respondents.
Second. Nor is the trial court's refusal to take cognizance of the case justifiable under the principle of forum
non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which does not include
forum non conveniens. 16 The propriety of dismissing a case based on this principle requires a factual
determination, hence, it is more properly considered a matter of defense. Second, while it is within the
discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after "vital
facts are established, to determine whether special circumstances" require the court's desistance. 17
In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private
respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC)
is a domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the
extinguishment of the latter's debt which was the object of the transaction under litigation. The trial court
arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc.
and Daic could not be obtained because this is an action in personam and summons were served by
extraterritorial service. Rule 14, 17 on extraterritorial service provides that service of summons on a nonresident defendant may be effected out of the Philippines by leave of Court where, among others, "the
property of the defendant has been attached within the Philippines." 18 It is not disputed that the properties,
real and personal, of the private respondents had been attached prior to service of summons under the Order
of the trial court dated April 20, 1987. 19
Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the
proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions
imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to be enforced is
severable from the main judgment under consideration in Civil Case No. 16563. The separability of Guevara's
claim is not only admitted by petitioners, 20 it appears from the pleadings that petitioners only belatedly
impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence, the TRO should be lifted and Civil Case
No. 92-1445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED
to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings
in accordance with this decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.