G.R. No. 238041 /G.R. No. 238502, February 15, 2022
BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH AND JAMES L. KENNEDY, TRUSTEE OF THE BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH, PETITIONERS, VS. MERCANTILE INSURANCE COMPANY, INC., RESPONDENT. [G.R. No. 238502] MERCANTILE INSURANCE COMPANY, INC., PETITIONER, VS. BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH AND JAMES L. KENNEDY, TRUSTEE OF THE BANKRUPTCY ESTATE OF CHARLES B. MITICH a.k.a. CHARLIE MITICH, RESPONDENTS.

FACTS

On April 7, 1998, the Bankruptcy Estate of Charles B. Mitich and its trustee James L. Kennedy (Mitich, et al.) filed a civil case for recognition and enforcement of a foreign judgment against Mercantile Insurance Company, Inc. (Mercantile) before the Regional Trial Court of Manila. The judgment sought to be enforced was a Default Judgment dated July 21, 1994, rendered by the Superior Court of the State of California, USA (California Court) in an insurance bad faith case. The California Court awarded Mitich $1,135,929.14 against Mercantile. This judgment stemmed from a wrongful death action filed against Mitich, the owner of Club Tronix in San Diego, for which Mercantile had issued an insurance policy. Mitich tendered defense to Mercantile, which initially provided a lawyer but stopped paying fees, leading to a default judgment against Mitich in the wrongful death case. Mitich then sued Mercantile in California for insurance bad faith. Summons for this case was served on Mercantile’s Claims Clerk III, Imelda Caseres, in the Philippines. Mercantile did not appear, leading to the Default Judgment, which was later personally served on Mercantile in Manila on October 13, 1994. Mercantile did not appeal, and the judgment became final.
Mercantile moved to dismiss the Philippine enforcement case, arguing: (1) the foreign judgment was void due to invalid extraterritorial service of summons under California law, as service was not made on an authorized corporate officer; and (2) the certifications against forum shopping in the complaint were defective and not properly authenticated. The RTC denied the motion and later granted the petition for enforcement, ordering Mercantile to pay the judgment amount plus legal interest and attorney’s fees. The Court of Appeals affirmed the enforcement but deleted the awards for legal interest and attorney’s fees. Both parties filed petitions before the Supreme Court: Mitich, et al. assailed the deletion of interest and attorney’s fees ( G.R. No. 238041 ), and Mercantile assailed the enforcement order itself (G.R. No. 238502).

ISSUE

The main issues were: (1) Whether the Default Judgment of the California Court is entitled to recognition and enforcement in the Philippines; and (2) Whether the awards of legal interest and attorney’s fees by the RTC were proper.

RULING

The Supreme Court denied both petitions and affirmed the Decision of the Court of Appeals with modification. The Court held that the foreign judgment is presumptively valid and enforceable, and Mercantile failed to overcome this presumption by proving any grounds for non-recognition under Section 48, Rule 39 of the Rules of Court.
1. On the Validity and Enforcement of the Foreign Judgment: The Court ruled that the California Court properly acquired jurisdiction over Mercantile. The service of summons on Mercantile’s claims clerk in the Philippines was valid under the California Code of Civil Procedure, which allows service on a person “apparently in charge” at the corporation’s office. Mercantile’s argument that the clerk was not authorized was a factual issue that should have been raised in the California proceedings, not collaterally attacked in the Philippine enforcement case. Since Mercantile voluntarily chose not to participate in the California case, it was deemed to have submitted to that court’s jurisdiction. Furthermore, the foreign judgment appeared final, conclusive, and rendered by a court of competent jurisdiction upon due notice and a hearing on the merits. The minor clerical error in the judgment (the handwritten date “1992” instead of “1994”) did not affect its validity. Thus, the foreign judgment must be given effect under the principle of comity.
2. On the Award of Legal Interest and Attorney’s Fees: The Court reinstated the award of legal interest. The foreign judgment itself provided for “interest on such judgment as provided by law.” Applying the rules on execution of judgments, the legal interest on the dollar-denominated judgment should be computed at the rate of six percent (6%) per annum from the date of the foreign judgment’s finality (July 22, 1994) until its full satisfaction. However, the Court sustained the deletion of attorney’s fees. The award of attorney’s fees in the Philippine enforcement case was not justified under Article 2208 of the Civil Code, as the case was merely a proceeding for recognition of a foreign judgment, not an ordinary action where such fees are typically awarded for unfounded litigation. The foreign judgment already included an award for attorney’s fees incurred in the California litigation.
The dispositive portion ordered Mercantile to pay the amount of US$1,135,929.14, or its Philippine Peso equivalent at the time of payment, with legal interest at 6% per annum from July 22, 1994, until fully paid.