Summons on Foreign Corporations: What Philippine Courts Require Before Service on an Agent

When a foreign corporation does business in the Philippines, Philippine courts can only hear a case against it if summons is properly served. A 1998 Supreme Court ruling in French Oil Mill Machinery Co., Inc. v. Regional Trial Court of Cebu City (G.R. No. 126477) clarifies what a complaint must allege before a court may validly serve summons on a foreign corporation's alleged local agent.

The case involved a breach of contract suit filed by Ludo & Luym Oleochemical Co. against French Oil Mill Machinery Co. (FOMMCO), an Ohio corporation. The complaint alleged that FOMMCO was doing business in the Philippines through its agent, Trans-World Trading Company. Summons was served on Trans-World, which moved to dismiss, denying that it was FOMMCO's agent. FOMMCO also filed a special appearance, arguing improper service.

The issue

The central question was whether summons served on Trans-World validly bound FOMMCO. FOMMCO argued that it was not doing business in the Philippines and that Trans-World was not its agent, so the court never acquired jurisdiction over its person.

What the Court ruled

The Supreme Court denied FOMMCO's petition, holding that the service of summons was valid. In doing so, the Court laid down important rules on how complaints must be drafted when suing foreign corporations.

First, the Court emphasized that a complaint must contain specific factual allegations showing that the foreign corporation is doing business in the Philippines. It is not enough to simply state the conclusion. In this case, the complaint alleged that FOMMCO entered into a contract to supply and install machinery and that the first shipment was received. These were sufficient allegations of doing business.

Second, the Court addressed what must be alleged about the agency relationship. A general statement that a local company is the foreign corporation's "agent" is insufficient. The complaint must contain specific allegations that establish the connection between the principal and the alleged agent with respect to the transaction in question.

A note of caution on headnotes

The Court took the opportunity to correct a common misconception. Both parties cited the case of Signetics Corporation v. CA, relying on a statement in the headnote (the summary at the start of a published decision) that summons can be served on an alleged agent even without prior evidence of the agency. The Court clarified that this statement appeared only in the headnote, not in the actual decision. Headnotes are prepared by reporters for convenience and are not part of the Court's decision. They do not carry the force of law.

Tentative findings, not final

The Court also clarified that the determination of "doing business" and the existence of an agency relationship, based on the complaint's allegations, is only preliminary. It exists to allow the court to acquire jurisdiction over the foreign corporation. The foreign corporation can still contest these findings later, and the court can make a different determination based on evidence presented during trial.

Filing an answer is not always voluntary appearance

Finally, the Court addressed FOMMCO's concern that filing an answer would amount to a voluntary appearance, waiving its objection to jurisdiction. The Court stated that when a defendant's appearance is precisely to object to the court's jurisdiction over its person, it is not considered a voluntary appearance. However, this point was not decisive in this case because FOMMCO never filed an answer.

Practical takeaways

• When suing a foreign corporation, the complaint must contain specific factual allegations showing it is doing business in the Philippines, not just a bare legal conclusion.
• A general allegation that a local company is the foreign corporation's "agent" is not enough. The complaint must state facts connecting the alleged agent to the transaction at issue.
• Courts may rely on these allegations to serve summons, but the findings are tentative. The foreign corporation can still contest jurisdiction and agency during trial.
• Headnotes in published decisions are not part of the Court's ruling and should not be cited as authority.
• A defendant who appears only to object to jurisdiction does not necessarily waive that objection by later filing an answer.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.