3. Avon Insurance, et al., vs.

CA, RTC of Manila, Yupangco Cotton Mills and Worldwide Surety & Insurance Co.,
GR 97642 August 29, 1997

Facts:
a. Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance Co. Inc., several of its
properties from 1979-1980 for a coverage of P100 million and from 1980-1981 also for P100 million. Both
contracts were covered by reinsurance treaties between Worldwide Surety and Insurance and several
foreign reinsurance companies, including the petitioners. The reinsurance arrangements had been made
through international broker C.J. Boatwright and Co. Ltd., acting as agent of Worldwide Surety and
Insurance.
b. As fate would have it, the properties therein insured were razed by fire, thereby giving rise to the
obligation of the insurer to indemnify the Yupangco Cotton Mills. Partial payments were made by
Worldwide Surety and Insurance and some of the reinsurance companies.
c. Worldwide Surety and Insurance, in a Deed of Assignment, acknowledged a remaining balance of
P19,444,447.75 still due Yupangco Cotton Mills, and assigned to the latter all reinsurance proceeds still
collectible from all the foreign reinsurance companies. Thus, in its interest as assignee and original
insured, Yupangco Cotton Mills instituted this collection suit against the petitioners.
d. Yupangco filed an action against foreign reinsurance companies for that balance of 19M.
e. Foreign reinsurance companies manifested by way of special appearance to object to the trial court’s
jurisdiction.
Issue:
a. Whether the court has jurisdiction over the foreign reinsurance companies.
Held:
a. No. It is not doing business in the Philippines. There is lack of jurisdiction.
b. As it is, private respondent has made no allegation or demonstration of the existence of petitioners'
domestic agent, but avers simply that they are doing business not only abroad but in the Philippines as
well. It does not appear at all that the petitioners had performed any act which would give the general
public the impression that it had been engaging, or intends to engage in its ordinary and usual business
undertakings in the country. The reinsurance treaties between the petitioners and Worldwide Surety and
Insurance were made through an international insurance broker, and not through any entity or means
remotely connected with the Philippines. Moreover, there is authority to the effect that a reinsurance
company is not doing business in a certain state merely because the property or lives which are insured by
the original insurer company are located in that state. The reason for this is that a contract of reinsurance
is generally a separate and distinct arrangement from the original contract of insurance, whose contracted
risk is insured in the reinsurance agreement. Hence, the original insured has generally no interest in the
contract of reinsurance.
c. In civil cases, jurisdiction over the person of the defendant is acquired either by his voluntary appearance
in court and his submission to its authority or by service of summons.

d. Fundamentally, the service of summons is intended to give official notice to the defendant or respondent
that an action has been commenced against it. The service of summons upon the defendant becomes an
important element in the operation of a court's jurisdiction upon a party to a suit, as service of summons
upon the defendant is the means by which the court acquires jurisdiction over his person. Without service
of summons, or when summons are improperly made, both the trial and the judgment, being in violation
of due process, are null and void, unless the defendant waives the service of summons by voluntarily
appearing and answering the suit.
e. When a defendant voluntarily appears, he is deemed to have submitted himself to the jurisdiction of the
court. This is not, however, always the case. Admittedly, and without subjecting himself to the court's
jurisdiction, the defendant in an action can, by special appearance object to the court's assumption on the
ground of lack of jurisdiction. It was held that the action of a court in refusing to rule or deferring its ruling
on a motion to dismiss for lack or excess of jurisdiction is correctable by a writ of prohibition
or certiorari sued out in the appellate court even before trial on the merits is had. The same remedy is
available should the motion to dismiss be denied, and the court, over the foreign corporation's objections,
threatens to impose its jurisdiction upon the same.

f. If the defendant, besides setting up in a motion to dismiss his objection to the jurisdiction of the court,
alleges at the same time any other ground for dismissing the action, or seeks an affirmative relief in the
motion, he is deemed to have submitted himself to the jurisdiction of the court.

g. In this instance, however, the petitioners from the time they filed their motions to dismiss, their
submissions have been consistently and unfailingly to object to the trial court's assumption of jurisdiction,
anchored on the fact that they are all foreign corporations not doing business in the Philippines.

h. As we have consistently held, if the appearance of a party in a suit is precisely to question the jurisdiction
of the said tribunal over the person of the defendant, then this appearance is not equivalent to service of
summons, nor does it constitute an acquiescence to the court's jurisdiction. Thus, it cannot be argued that
the petitioners had abandoned their objections to the jurisdiction of the court, as their motions to dismiss
in the trial court, and all their subsequent posturings, were all in protest of the private respondent's
insistence on holding them to answer a charge in a forum where they believe they are not subject to.
Clearly, to continue the proceedings in a case such as those before Us would just "be useless and a waste
of time."