G.R. No.

L-11390 March 26, 1918

EL BANCO ESPAÑOL-FILIPINO, plaintiff-
appellant,
vs.
VICENTE PALANCA, administrator of the
estate of Engracio Palanca
Tanquinyeng, defendant-appellant.
Aitken and DeSelms for appellant.
Hartigan and Welch for appellee.
STREET, J.:
This action was instituted upon March 31, 1908,
by "El Banco Espanol-Filipino" to foreclose a
mortgage upon various parcels of real property
situated in the city of Manila. The mortgage in
question is dated June 16, 1906, and was
executed by the original defendant herein,
Engracio Palanca Tanquinyeng y Limquingco, as
security for a debt owing by him to the bank.
Upon March 31, 1906, the debt amounted to
P218,294.10 and was drawing interest at the
rate of 8 per centum per annum, payable at the
end of each quarter. It appears that the parties to
this mortgage at that time estimated the value of
the property in question at P292,558, which was
about P75,000 in excess of the indebtedness.
After the execution of this instrument by the
mortgagor, he returned to China which appears
to have been his native country; and he there
died, upon January 29, 1810, without again
returning to the Philippine Islands.
As the defendant was a nonresident at the time
of the institution of the present action, it was
necessary for the plaintiff in the foreclosure
proceeding to give notice to the defendant by
publication pursuant to section 399 of the Code
of Civil Procedure. An order for publication was
accordingly obtained from the court, and
publication was made in due form in a
newspaper of the city of Manila. At the same
time that the order of the court should deposit in
the post office in a stamped envelope a copy of
the summons and complaint directed to the
defendant at his last place of residence, to wit,
the city of Amoy, in the Empire of China. This
order was made pursuant to the following
provision contained in section 399 of the Code of
Civil Procedure:
 In case of publication, where the residence of
a nonresident or absent defendant is known,
the judge must direct a copy of the summons
and complaint to be forthwith deposited by
the clerk in the post-office, postage prepaid,
directed to the person to be served, at his
place of residence
Whether the clerk complied with this order does
not affirmatively appear. There is, however,
among the papers pertaining to this case, an
affidavit, dated April 4, 1908, signed by Bernardo
Chan y Garcia, an employee of the attorneys of
the bank, showing that upon that date he had
deposited in the Manila post-office a registered
letter, addressed to Engracio Palanca
Tanquinyeng, at Manila, containing copies of the
complaint, the plaintiff's affidavit, the summons,
and the order of the court directing publication as
aforesaid. It appears from the postmaster's
receipt that Bernardo probably used an envelope
obtained from the clerk's office, as the receipt
purports to show that the letter emanated from
the office.
The cause proceeded in usual course in the
Court of First Instance; and the defendant not
having appeared, judgment was, upon July 2,
1908, taken against him by default. Upon July 3,
1908, a decision was rendered in favor of the
plaintiff. In this decision it was recited that
publication had been properly made in a
periodical, but nothing was said about this notice
having been given mail. The court, upon this
occasion, found that the indebtedness of the
defendant amounted to P249,355. 32, with
interest from March 31, 1908. Accordingly it was
ordered that the defendant should, on or before
July 6, 1908, deliver said amount to the clerk of
the court to be applied to the satisfaction of the
judgment, and it was declared that in case of the
failure of the defendant to satisfy the judgment
within such period, the mortgage property
located in the city of Manila should be exposed
to public sale. The payment contemplated in said
order was never made; and upon July 8, 1908,
the court ordered the sale of the property. The
sale took place upon July 30, 1908, and the
property was bought in by the bank for the sum
of P110,200. Upon August 7, 1908, this sale was
confirmed by the court.
About seven years after the confirmation of this
sale, or to the precise, upon June 25, 1915, a
motion was made in this cause by Vicente
Palanca, as administrator of the estate of the
original defendant, Engracio Palanca
Tanquinyeng y Limquingco, wherein the
applicant requested the court to set aside the
order of default of July 2, 1908, and the
judgment rendered upon July 3, 1908, and to
vacate all the proceedings subsequent thereto.
The basis of this application, as set forth in the
motion itself, was that the order of default and
the judgment rendered thereon were void
because the court had never acquired
jurisdiction over the defendant or over the
subject of the action.
At the hearing in the court below the application
to vacate the judgment was denied, and from
this action of the court Vicente Planca, as
administrator of the estate of the original
defendant, has appealed. No other feature of the
case is here under consideration than such as
related to the action of the court upon said
motion.
The case presents several questions of
importance, which will be discussed in what
appears to be the sequence of most convenient
development. In the first part of this opinion we
shall, for the purpose of argument, assume that
the clerk of the Court of First Instance did not
obey the order of the court in the matter of
mailing the papers which he was directed to
send to the defendant in Amoy; and in this
connection we shall consider, first, whether the
court acquired the necessary jurisdiction to
enable it to proceed with the foreclosure of the
mortgage and, secondly, whether those
proceedings were conducted in such manner as
to constitute due process of law.
The word "jurisdiction," as applied to the faculty
of exercising judicial power, is used in several
different, though related, senses since it may
have reference (1) to the authority of the court to
entertain a particular kind of action or to
administer a particular kind of relief, or it may
refer to the power of the court over the parties, or
(2) over the property which is the subject to the
litigation.
The sovereign authority which organizes a court
determines the nature and extent of its powers in
general and thus fixes its competency or
jurisdiction with reference to the actions which it
may entertain and the relief it may grant.
Jurisdiction over the person is acquired by the
voluntary appearance of a party in court and his
submission to its authority, or it is acquired by
the coercive power of legal process exerted over
the person.
Jurisdiction over the property which is the
subject of the litigation may result either from a
seizure of the property under legal process,
whereby it is brought into the actual custody of
the law, or it may result from the institution of
legal proceedings wherein, under special
provisions of law, the power of the court over the
property is recognized and made effective. In the
latter case the property, though at all times within
the potential power of the court, may never be
taken into actual custody at all. An illustration of
the jurisdiction acquired by actual seizure is
found in attachment proceedings, where the
property is seized at the beginning of the action,
or some subsequent stage of its progress, and
held to abide the final event of the litigation. An
illustration of what we term potential jurisdiction
over the res, is found in the proceeding to
register the title of land under our system for the
registration of land. Here the court, without
taking actual physical control over the property
assumes, at the instance of some person
claiming to be owner, to exercise a jurisdiction in
rem over the property and to adjudicate the title
in favor of the petitioner against all the world.
In the terminology of American law the action to
foreclose a mortgage is said to be a proceeding
quasi in rem, by which is expressed the idea that
while it is not strictly speaking an action in
rem yet it partakes of that nature and is
substantially such. The expression "action in
rem" is, in its narrow application, used only with
reference to certain proceedings in courts of
admiralty wherein the property alone is treated
as responsible for the claim or obligation upon
which the proceedings are based. The action
quasi rem differs from the true action in rem in
the circumstance that in the former an individual
is named as defendant, and the purpose of the
proceeding is to subject his interest therein to the
obligation or lien burdening the property. All
proceedings having for their sole object the sale
or other disposition of the property of the
defendant, whether by attachment, foreclosure,
or other form of remedy, are in a general way
thus designated. The judgment entered in these
proceedings is conclusive only between the
parties.
In speaking of the proceeding to foreclose a
mortgage the author of a well known treaties,
has said:
Though nominally against person, such suits
are to vindicate liens; they proceed upon
seizure; they treat property as primarily
indebted; and, with the qualification above-
mentioned, they are substantially property
actions. In the civil law, they are styled
hypothecary actions, and their sole object is
the enforcement of the lien against the res; in
the common law, they would be different in
chancery did not treat the conditional
conveyance as a mere hypothecation, and
the creditor's right ass an equitable lien; so,
in both, the suit is real action so far as it is
against property, and seeks the judicial
 recognition of a property debt, and an order
for the sale of the res. (Waples, Proceedings
In Rem. sec. 607.)
It is true that in proceedings of this character, if
the defendant for whom publication is made
appears, the action becomes as to him a
personal action and is conducted as such. This,
however, does not affect the proposition that
where the defendant fails to appear the action
is quasi in rem; and it should therefore be
considered with reference to the principles
governing actions in rem.
There is an instructive analogy between the
foreclosure proceeding and an action of
attachment, concerning which the Supreme
Court of the United States has used the following
language:
If the defendant appears, the cause becomes
mainly a suit in personam, with the added
incident, that the property attached remains
liable, under the control of the court, to
answer to any demand which may be
established against the defendant by the final
judgment of the court. But, if there is no
 appearance of the defendant, and no service
of process on him, the case becomes, in its
essential nature, a proceeding in rem, the
only effect of which is to subject the property
attached to the payment of the defendant
which the court may find to be due to the
plaintiff. (Cooper vs. Reynolds, 10 Wall.,
308.)
In an ordinary attachment proceeding, if the
defendant is not personally served, the
preliminary seizure is to, be considered
necessary in order to confer jurisdiction upon the
court. In this case the lien on the property is
acquired by the seizure; and the purpose of the
proceedings is to subject the property to that
lien. If a lien already exists, whether created by
mortgage, contract, or statute, the preliminary
seizure is not necessary; and the court proceeds
to enforce such lien in the manner provided by
law precisely as though the property had been
seized upon attachment. (Roller vs. Holly, 176 U.
S., 398, 405; 44 L. ed., 520.) It results that the
mere circumstance that in an attachment the
property may be seized at the inception of the
proceedings, while in the foreclosure suit it is not
taken into legal custody until the time comes for
the sale, does not materially affect the
fundamental principle involved in both cases,
which is that the court is here exercising a
jurisdiction over the property in a proceeding
directed essentially in rem.
Passing now to a consideration of the jurisdiction
of the Court of First Instance in a mortgage
foreclosure, it is evident that the court derives its
authority to entertain the action primarily from the
statutes organizing the court. The jurisdiction of
the court, in this most general sense, over the
cause of action is obvious and requires no
comment. Jurisdiction over the person of the
defendant, if acquired at all in such an action, is
obtained by the voluntary submission of the
defendant or by the personal service of process
upon him within the territory where the process is
valid. If, however, the defendant is a nonresident
and, remaining beyond the range of the personal
process of the court, refuses to come in
voluntarily, the court never acquires jurisdiction
over the person at all. Here the property itself is
in fact the sole thing which is impleaded and is
the responsible object which is the subject of the
exercise of judicial power. It follows that the
jurisdiction of the court in such case is based
exclusively on the power which, under the law, it
possesses over the property; and any discussion
relative to the jurisdiction of the court over the
person of the defendant is entirely apart from the
case. The jurisdiction of the court over the
property, considered as the exclusive object of
such action, is evidently based upon the
following conditions and considerations, namely:
(1) that the property is located within the district;
(2) that the purpose of the litigation is to subject
the property by sale to an obligation fixed upon it
by the mortgage; and (3) that the court at a
proper stage of the proceedings takes the
property into custody, if necessary, and expose it
to sale for the purpose of satisfying the mortgage
debt. An obvious corollary is that no other relief
can be granted in this proceeding than such as
can be enforced against the property.
We may then, from what has been stated,
formulated the following proposition relative to
the foreclosure proceeding against the property
of a nonresident mortgagor who fails to come in
and submit himself personally to the jurisdiction
of the court: (I) That the jurisdiction of the court is
derived from the power which it possesses over
the property; (II) that jurisdiction over the person
is not acquired and is nonessential; (III) that the
relief granted by the court must be limited to
such as can be enforced against the property
itself.
It is important that the bearing of these
propositions be clearly apprehended, for there
are many expressions in the American reports
from which it might be inferred that the court
acquires personal jurisdiction over the person of
the defendant by publication and notice; but such
is not the case. In truth the proposition that
jurisdiction over the person of a nonresident
cannot be acquired by publication and notice
was never clearly understood even in the
American courts until after the decision had been
rendered by the Supreme Court of the United
States in the leading case of Pennoyer vs. Neff
(95 U. S. 714; 24 L. ed., 565). In the light of that
decision, and of other decisions which have
subsequently been rendered in that and other
courts, the proposition that jurisdiction over the
person cannot be thus acquired by publication
and notice is no longer open to question; and it is
now fully established that a personal judgment
upon constructive or substituted service against
a nonresident who does not appear is wholly
invalid. This doctrine applies to all kinds of
constructive or substituted process, including
service by publication and personal service
outside of the jurisdiction in which the judgment
is rendered; and the only exception seems to be
found in the case where the nonresident
defendant has expressly or impliedly consented
to the mode of service. (Note to Raher vs.
Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R.
A., 585; 35 L. R. A. [N. S.], 312
The idea upon which the decision in Pennoyer
vs. Neff (supra) proceeds is that the process
from the tribunals of one State cannot run into
other States or countries and that due process of
law requires that the defendant shall be brought
under the power of the court by service of
process within the State, or by his voluntary
appearance, in order to authorize the court to
pass upon the question of his personal liability.
The doctrine established by the Supreme Court
of the United States on this point, being based
upon the constitutional conception of due
process of law, is binding upon the courts of the
Philippine Islands. Involved in this decision is the
principle that in proceedings in rem or quasi in
rem against a nonresident who is not served
personally within the state, and who does not
appear, the relief must be confined to the res,
and the court cannot lawfully render a personal
judgment against him. (Dewey vs. Des Moines,
173 U. S., 193; 43 L. ed., 665; Heidritter vs.
Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed.,
729.) Therefore in an action to foreclose a
mortgage against a nonresident, upon whom
service has been effected exclusively by
publication, no personal judgment for the
deficiency can be entered. (Latta vs. Tutton, 122
Cal., 279; Blumberg vs. Birch, 99 Cal., 416.)
It is suggested in the brief of the appellant that
the judgment entered in the court below offends
against the principle just stated and that this
judgment is void because the court in fact
entered a personal judgment against the absent
debtor for the full amount of the indebtedness
secured by the mortgage. We do not so interpret
the judgment.
In a foreclosure proceeding against a
nonresident owner it is necessary for the court,
as in all cases of foreclosure, to ascertain the
amount due, as prescribed in section 256 of the
Code of Civil Procedure, and to make an order
requiring the defendant to pay the money into
court. This step is a necessary precursor of the
order of sale. In the present case the judgment
which was entered contains the following words:
Because it is declared that the said
defendant Engracio Palanca Tanquinyeng y
Limquingco, is indebted in the amount of
P249,355.32, plus the interest, to the 'Banco
Espanol-Filipino' . . . therefore said appellant
is ordered to deliver the above amount etc.,
etc.
This is not the language of a personal judgment.
Instead it is clearly intended merely as a
compliance with the requirement that the amount
due shall be ascertained and that the evidence
of this it may be observed that according to the
Code of Civil Procedure a personal judgment
against the debtor for the deficiency is not to be
rendered until after the property has been sold
and the proceeds applied to the mortgage debt.
(sec. 260).
The conclusion upon this phase of the case is
that whatever may be the effect in other respects
of the failure of the clerk of the Court of First
Instance to mail the proper papers to the
defendant in Amoy, China, such irregularity
could in no wise impair or defeat the jurisdiction
of the court, for in our opinion that jurisdiction
rest upon a basis much more secure than would
be supplied by any form of notice that could be
given to a resident of a foreign country.
Before leaving this branch of the case, we wish
to observe that we are fully aware that many
reported cases can be cited in which it is
assumed that the question of the sufficiency of
publication or notice in a case of this kind is a
question affecting the jurisdiction of the court,
and the court is sometimes said to acquire
jurisdiction by virtue of the publication. This
phraseology was undoubtedly originally adopted
by the court because of the analogy between
service by the publication and personal service
of process upon the defendant; and, as has
already been suggested, prior to the decision of
Pennoyer vs. Neff (supra) the difference
between the legal effects of the two forms of
service was obscure. It is accordingly not
surprising that the modes of expression which
had already been molded into legal tradition
before that case was decided have been brought
down to the present day. But it is clear that the
legal principle here involved is not effected by
the peculiar language in which the courts have
expounded their ideas.
We now proceed to a discussion of the question
whether the supposed irregularity in the
proceedings was of such gravity as to amount to
a denial of that "due process of law" which was
secured by the Act of Congress in force in these
Islands at the time this mortgage was foreclosed.
(Act of July 1, 1902, sec. 5.) In dealing with
questions involving the application of the
constitutional provisions relating to due process
of law the Supreme Court of the United States
has refrained from attempting to define with
precision the meaning of that expression, the
reason being that the idea expressed therein is
applicable under so many diverse conditions as
to make any attempt ay precise definition
hazardous and unprofitable. As applied to a
judicial proceeding, however, it may be laid down
with certainty that the requirement of due
process is satisfied if the following conditions are
present, namely; (1) There must be a court or
tribunal clothed with judicial power to hear and
determine the matter before it; (2) jurisdiction
must be lawfully acquired over the person of the
defendant or over the property which is the
subject of the proceeding; (3) the defendant
must be given an opportunity to be heard; and
(4) judgment must be rendered upon lawful
hearing.
Passing at once to the requisite that the
defendant shall have an opportunity to be heard,
we observe that in a foreclosure case some
notification of the proceedings to the nonresident
owner, prescribing the time within which
appearance must be made, is everywhere
recognized as essential. To answer this
necessity the statutes generally provide for
publication, and usually in addition thereto, for
the mailing of notice to the defendant, if his
residence is known. Though commonly called
constructive, or substituted service of process in
any true sense. It is merely a means provided by
law whereby the owner may be admonished that
his property is the subject of judicial proceedings
and that it is incumbent upon him to take such
steps as he sees fit to protect it. In speaking of
notice of this character a distinguish master of
constitutional law has used the following
language:
. . . if the owners are named in the
proceedings, and personal notice is provided
for, it is rather from tenderness to their
interests, and in order to make sure that the
opportunity for a hearing shall not be lost to
them, than from any necessity that the case
shall assume that form. (Cooley on Taxation
[2d. ed.], 527, quoted in Leigh vs. Green, 193
U. S., 79, 80.)
It will be observed that this mode of notification
does not involve any absolute assurance that the
absent owner shall thereby receive actual notice.
The periodical containing the publication may
never in fact come to his hands, and the chances
that he should discover the notice may often be
very slight. Even where notice is sent by mail the
probability of his receiving it, though much
increased, is dependent upon the correctness of
the address to which it is forwarded as well as
upon the regularity and security of the mail
service. It will be noted, furthermore, that the
provision of our law relative to the mailing of
notice does not absolutely require the mailing of
notice unconditionally and in every event, but
only in the case where the defendant's residence
is known. In the light of all these facts, it is
evident that actual notice to the defendant in
cases of this kind is not, under the law, to be
considered absolutely necessary.
The idea upon which the law proceeds in
recognizing the efficacy of a means of
notification which may fall short of actual notice
is apparently this: Property is always assumed to
be in the possession of its owner, in person or by
agent; and he may be safely held, under certain
conditions, to be affected with knowledge that
proceedings have been instituted for its
condemnation and sale.
It is the duty of the owner of real estate, who
is a nonresident, to take measures that in
some way he shall be represented when his
property is called into requisition, and if he
 fails to do this, and fails to get notice by the
ordinary publications which have usually
been required in such cases, it is his
misfortune, and he must abide the
consequences. (6 R. C. L., sec. 445 [p.
450]).
It has been well said by an American court:
If property of a nonresident cannot be
reached by legal process upon the
constructive notice, then our statutes were
passed in vain, and are mere empty
legislative declarations, without either force,
or meaning; for if the person is not within the
jurisdiction of the court, no personal
judgment can be rendered, and if the
judgment cannot operate upon the property,
then no effective judgment at all can be
rendered, so that the result would be that the
courts would be powerless to assist a citizen
against a nonresident. Such a result would
be a deplorable one. (Quarl vs. Abbett, 102
Ind., 233; 52 Am. Rep., 662, 667.)
It is, of course universally recognized that the
statutory provisions relative to publication or
other form of notice against a nonresident owner
should be complied with; and in respect to the
publication of notice in the newspaper it may be
stated that strict compliance with the
requirements of the law has been held to be
essential. In Guaranty Trust etc. Co. vs. Green
Cove etc., Railroad Co. (139 U. S., 137, 138), it
was held that where newspaper publication was
made for 19 weeks, when the statute required
20, the publication was insufficient.
With respect to the provisions of our own statute,
relative to the sending of notice by mail, the
requirement is that the judge shall direct that the
notice be deposited in the mail by the clerk of the
court, and it is not in terms declared that the
notice must be deposited in the mail. We
consider this to be of some significance; and it
seems to us that, having due regard to the
principles upon which the giving of such notice is
required, the absent owner of the mortgaged
property must, so far as the due process of law
is concerned, take the risk incident to the
possible failure of the clerk to perform his duty,
somewhat as he takes the risk that the mail clerk
or the mail carrier might possibly lose or destroy
the parcel or envelope containing the notice
before it should reach its destination and be
delivered to him. This idea seems to be
strengthened by the consideration that placing
upon the clerk the duty of sending notice by mail,
the performance of that act is put effectually
beyond the control of the plaintiff in the litigation.
At any rate it is obvious that so much of section
399 of the Code of Civil Procedure as relates to
the sending of notice by mail was complied with
when the court made the order. The question as
to what may be the consequences of the failure
of the record to show the proof of compliance
with that requirement will be discussed by us
further on.
The observations which have just been made
lead to the conclusion that the failure of the clerk
to mail the notice, if in fact he did so fail in his
duty, is not such an irregularity, as amounts to a
denial of due process of law; and hence in our
opinion that irregularity, if proved, would not
avoid the judgment in this case. Notice was
given by publication in a newspaper and this is
the only form of notice which the law
unconditionally requires. This in our opinion is all
that was absolutely necessary to sustain the
proceedings.
It will be observed that in considering the effect
of this irregularity, it makes a difference whether
it be viewed as a question involving jurisdiction
or as a question involving due process of law. In
the matter of jurisdiction there can be no
distinction between the much and the little. The
court either has jurisdiction or it has not; and if
the requirement as to the mailing of notice
should be considered as a step antecedent to
the acquiring of jurisdiction, there could be no
escape from the conclusion that the failure to
take that step was fatal to the validity of the
judgment. In the application of the idea of due
process of law, on the other hand, it is clearly
unnecessary to be so rigorous. The jurisdiction
being once established, all that due process of
law thereafter requires is an opportunity for the
defendant to be heard; and as publication was
duly made in the newspaper, it would seem
highly unreasonable to hold that failure to mail
the notice was fatal. We think that in applying the
requirement of due process of law, it is
permissible to reflect upon the purposes of the
provision which is supposed to have been
violated and the principle underlying the exercise
of judicial power in these proceedings. Judge in
the light of these conceptions, we think that the
provision of Act of Congress declaring that no
person shall be deprived of his property without
due process of law has not been infringed.
In the progress of this discussion we have stated
the two conclusions; (1) that the failure of the
clerk to send the notice to the defendant by mail
did not destroy the jurisdiction of the court and
(2) that such irregularity did not infringe the
requirement of due process of law. As a
consequence of these conclusions the
irregularity in question is in some measure shorn
of its potency. It is still necessary, however, to
consider its effect considered as a simple
irregularity of procedure; and it would be idle to
pretend that even in this aspect the irregularity is
not grave enough. From this point of view,
however, it is obvious that any motion to vacate
the judgment on the ground of the irregularity in
question must fail unless it shows that the
defendant was prejudiced by that irregularity.
The least, therefore, that can be required of the
proponent of such a motion is to show that he
had a good defense against the action to
foreclose the mortgage. Nothing of the kind is,
however, shown either in the motion or in the
affidavit which accompanies the motion.
An application to open or vacate a judgment
because of an irregularity or defect in the
proceedings is usually required to be supported
by an affidavit showing the grounds on which the
relief is sought, and in addition to this showing
also a meritorious defense to the action. It is held
that a general statement that a party has a good
defense to the action is insufficient. The
necessary facts must be averred. Of course if a
judgment is void upon its face a showing of the
existence of a meritorious defense is not
necessary. (10 R. C. L., 718.)
The lapse of time is also a circumstance deeply
affecting this aspect of the case. In this
connection we quote the following passage from
the encyclopedic treatise now in course of
publication:
Where, however, the judgment is not void on
its face, and may therefore be enforced if
 permitted to stand on the record, courts in
many instances refuse to exercise their quasi
equitable powers to vacate a judgement after
the lapse of the term ay which it was entered,
except in clear cases, to promote the ends of
justice, and where it appears that the party
making the application is himself without fault
and has acted in good faith and with ordinary
diligence. Laches on the part of the
applicant, if unexplained, is deemed
sufficient ground for refusing the relief to
which he might otherwise be entitled.
Something is due to the finality of judgments,
and acquiescence or unnecessary delay is
fatal to motions of this character, since courts
are always reluctant to interfere with
judgments, and especially where they have
been executed or satisfied. The moving party
has the burden of showing diligence, and
unless it is shown affirmatively the court will
not ordinarily exercise its discretion in his
favor. (15 R. C. L., 694, 695.)
It is stated in the affidavit that the defendant,
Engracio Palanca Tanquinyeng y Limquingco,
died January 29, 1910. The mortgage under
which the property was sold was executed far
back in 1906; and the proceedings in the
foreclosure were closed by the order of court
confirming the sale dated August 7, 1908. It
passes the rational bounds of human credulity to
suppose that a man who had placed a mortgage
upon property worth nearly P300,000 and had
then gone away from the scene of his life
activities to end his days in the city of Amoy,
China, should have long remained in ignorance
of the fact that the mortgage had been
foreclosed and the property sold, even
supposing that he had no knowledge of those
proceedings while they were being conducted. It
is more in keeping with the ordinary course of
things that he should have acquired information
as to what was transpiring in his affairs at
Manila; and upon the basis of this rational
assumption we are authorized, in the absence of
proof to the contrary, to presume that he did
have, or soon acquired, information as to the
sale of his property.
The Code of Civil Procedure, indeed, expressly
declares that there is a presumption that things
have happened according to the ordinary habits
of life (sec. 334 [26]); and we cannot conceive of
a situation more appropriate than this for
applying the presumption thus defined by the
lawgiver. In support of this presumption, as
applied to the present case, it is permissible to
consider the probability that the defendant may
have received actual notice of these proceedings
from the unofficial notice addressed to him in
Manila which was mailed by an employee of the
bank's attorneys. Adopting almost the exact
words used by the Supreme Court of the United
States in Grannis vs. Ordeans (234 U. S., 385;
58 L. ed., 1363), we may say that in view of the
well-known skill of postal officials and employees
in making proper delivery of letters defectively
addressed, we think the presumption is clear and
strong that this notice reached the defendant,
there being no proof that it was ever returned by
the postal officials as undelivered. And if it was
delivered in Manila, instead of being forwarded
to Amoy, China, there is a probability that the
recipient was a person sufficiently interested in
his affairs to send it or communicate its contents
to him.
Of course if the jurisdiction of the court or the
sufficiency of the process of law depended upon
the mailing of the notice by the clerk, the
reflections in which we are now indulging would
be idle and frivolous; but the considerations
mentioned are introduced in order to show the
propriety of applying to this situation the legal
presumption to which allusion has been made.
Upon that presumption, supported by the
circumstances of this case, ,we do not hesitate
to found the conclusion that the defendant
voluntarily abandoned all thought of saving his
property from the obligation which he had placed
upon it; that knowledge of the proceedings
should be imputed to him; and that he
acquiesced in the consequences of those
proceedings after they had been accomplished.
Under these circumstances it is clear that the
merit of this motion is, as we have already
stated, adversely affected in a high degree by
the delay in asking for relief. Nor is it an
adequate reply to say that the proponent of this
motion is an administrator who only qualified a
few months before this motion was made. No
disability on the part of the defendant himself
existed from the time when the foreclosure was
effected until his death; and we believe that the
delay in the appointment of the administrator and
institution of this action is a circumstance which
is imputable to the parties in interest whoever
they may have been. Of course if the minor heirs
had instituted an action in their own right to
recover the property, it would have been
different.
It is, however, argued that the defendant has
suffered prejudice by reason of the fact that the
bank became the purchaser of the property at
the foreclosure sale for a price greatly below that
which had been agreed upon in the mortgage as
the upset price of the property. In this
connection, it appears that in article nine of the
mortgage which was the subject of this
foreclosure, as amended by the notarial
document of July 19, 1906, the parties to this
mortgage made a stipulation to the effect that the
value therein placed upon the mortgaged
properties should serve as a basis of sale in
case the debt should remain unpaid and the
bank should proceed to a foreclosure. The upset
price stated in that stipulation for all the parcels
involved in this foreclosure was P286,000. It is
said in behalf of the appellant that when the bank
bought in the property for the sum of P110,200 it
violated that stipulation.
It has been held by this court that a clause in a
mortgage providing for a tipo, or upset price,
does not prevent a foreclosure, nor affect the
validity of a sale made in the foreclosure
proceedings. (Yangco vs. Cruz Herrera and Wy
Piaco, 11 Phil. Rep., 402; Banco-Español
Filipino vs. Donaldson, Sim and Co., 5 Phil.
Rep., 418.) In both the cases here cited the
property was purchased at the foreclosure sale,
not by the creditor or mortgagee, but by a third
party. Whether the same rule should be applied
in a case where the mortgagee himself becomes
the purchaser has apparently not been decided
by this court in any reported decision, and this
question need not here be considered, since it is
evident that if any liability was incurred by the
bank by purchasing for a price below that fixed in
the stipulation, its liability was a personal liability
derived from the contract of mortgage; and as
we have already demonstrated such a liability
could not be the subject of adjudication in an
action where the court had no jurisdiction over
the person of the defendant. If the plaintiff bank
became liable to account for the difference
between the upset price and the price at which in
bought in the property, that liability remains
unaffected by the disposition which the court
made of this case; and the fact that the bank
may have violated such an obligation can in no
wise affect the validity of the judgment entered in
the Court of First Instance.
In connection with the entire failure of the motion
to show either a meritorious defense to the
action or that the defendant had suffered any
prejudice of which the law can take notice, we
may be permitted to add that in our opinion a
motion of this kind, which proposes to unsettle
judicial proceedings long ago closed, can not be
considered with favor, unless based upon
grounds which appeal to the conscience of the
court. Public policy requires that judicial
proceedings be upheld. The maximum here
applicable is non quieta movere. As was once
said by Judge Brewer, afterwards a member of
the Supreme Court of the United States:
Public policy requires that judicial
proceedings be upheld, and that titles
 obtained in those proceedings be safe from
the ruthless hand of collateral attack. If
technical defects are adjudged potent to
destroy such titles, a judicial sale will never
realize that value of the property, for no
prudent man will risk his money in bidding for
and buying that title which he has reason to
fear may years thereafter be swept away
through some occult and not readily
discoverable defect. (Martin vs. Pond, 30
Fed., 15.)
In the case where that language was used an
attempt was made to annul certain foreclosure
proceedings on the ground that the affidavit upon
which the order of publication was based
erroneously stated that the State of Kansas,
when he was in fact residing in another State. It
was held that this mistake did not affect the
validity of the proceedings.
In the preceding discussion we have assumed
that the clerk failed to send the notice by post as
required by the order of the court. We now
proceed to consider whether this is a proper
assumption; and the proposition which we
propose to establish is that there is a legal
presumption that the clerk performed his duty as
the ministerial officer of the court, which
presumption is not overcome by any other facts
appearing in the cause.
In subsection 14 of section 334 of the Code of
Civil Procedure it is declared that there is a
presumption "that official duty has been regularly
performed;" and in subsection 18 it is declared
that there is a presumption "that the ordinary
course of business has been followed." These
presumptions are of course in no sense
novelties, as they express ideas which have
always been recognized. Omnia presumuntur
rite et solemniter esse acta donec probetur in
contrarium. There is therefore clearly a legal
presumption that the clerk performed his duty
about mailing this notice; and we think that
strong considerations of policy require that this
presumption should be allowed to operate with
full force under the circumstances of this case. A
party to an action has no control over the clerk of
the court; and has no right to meddle unduly with
the business of the clerk in the performance of
his duties. Having no control over this officer, the
litigant must depend upon the court to see that
the duties imposed on the clerk are performed.
Other considerations no less potent contribute to
strengthen the conclusion just stated. There is
no principle of law better settled than that after
jurisdiction has once been required, every act of
a court of general jurisdiction shall be presumed
to have been rightly done. This rule is applied to
every judgment or decree rendered in the
various stages of the proceedings from their
initiation to their completion (Voorhees vs. United
States Bank, 10 Pet., 314; 35 U. S., 449); and if
the record is silent with respect to any fact which
must have been established before the court
could have rightly acted, it will be presumed that
such fact was properly brought to its knowledge.
(The Lessee of Grignon vs. Astor, 2 How., 319;
11 L. ed., 283.)
In making the order of sale [of the real state
of a decedent] the court are presumed to
have adjudged every question necessary to
justify such order or decree, viz: The death of
the owners; that the petitioners were his
administrators; that the personal estate was
insufficient to pay the debts of the deceased;
 that the private acts of Assembly, as to the
manner of sale, were within the constitutional
power of the Legislature, and that all the
provisions of the law as to notices which are
directory to the administrators have been
complied with. . . . The court is not bound to
enter upon the record the evidence on which
any fact was decided. (Florentine vs. Barton,
2 Wall., 210; 17 L. ed., 785.) Especially does
all this apply after long lapse of time.
Applegate vs. Lexington and Carter County
Mining Co. (117 U. S., 255) contains an
instructive discussion in a case analogous to that
which is now before us. It there appeared that in
order to foreclose a mortgage in the State of
Kentucky against a nonresident debtor it was
necessary that publication should be made in a
newspaper for a specified period of time, also be
posted at the front door of the court house and
be published on some Sunday, immediately after
divine service, in such church as the court
should direct. In a certain action judgment had
been entered against a nonresident, after
publication in pursuance of these provisions.
Many years later the validity of the proceedings
was called in question in another action. It was
proved from the files of an ancient periodical that
publication had been made in its columns as
required by law; but no proof was offered to
show the publication of the order at the church,
or the posting of it at the front door of the court-
house. It was insisted by one of the parties that
the judgment of the court was void for lack of
jurisdiction. But the Supreme Court of the United
States said:
The court which made the decree . . . was a
court of general jurisdiction. Therefore every
presumption not inconsistent with the record
is to be indulged in favor of its jurisdiction. . .
. It is to be presumed that the court before
making its decree took care of to see that its
order for constructive service, on which its
right to make the decree depended, had
been obeyed.
It is true that in this case the former judgment
was the subject of collateral , or indirect attack,
while in the case at bar the motion to vacate the
judgment is direct proceeding for relief against it.
The same general presumption, however, is
indulged in favor of the judgment of a court of
general jurisdiction, whether it is the subject of
direct or indirect attack the only difference being
that in case of indirect attack the judgment is
conclusively presumed to be valid unless the
record affirmatively shows it to be void, while in
case of direct attack the presumption in favor of
its validity may in certain cases be overcome by
proof extrinsic to the record.
The presumption that the clerk performed his
duty and that the court made its decree with the
knowledge that the requirements of law had
been complied with appear to be amply sufficient
to support the conclusion that the notice was
sent by the clerk as required by the order. It is
true that there ought to be found among the
papers on file in this cause an affidavit, as
required by section 400 of the Code of Civil
Procedure, showing that the order was in fact so
sent by the clerk; and no such affidavit appears.
The record is therefore silent where it ought to
speak. But the very purpose of the law in
recognizing these presumptions is to enable the
court to sustain a prior judgment in the face of
such an omission. If we were to hold that the
judgment in this case is void because the proper
affidavit is not present in the file of papers which
we call the record, the result would be that in the
future every title in the Islands resting upon a
judgment like that now before us would depend,
for its continued security, upon the presence of
such affidavit among the papers and would be
liable at any moment to be destroyed by the
disappearance of that piece of paper. We think
that no court, with a proper regard for the
security of judicial proceedings and for the
interests which have by law been confided to the
courts, would incline to favor such a conclusion.
In our opinion the proper course in a case of this
kind is to hold that the legal presumption that the
clerk performed his duty still maintains
notwithstanding the absence from the record of
the proper proof of that fact.
In this connection it is important to bear in mind
that under the practice prevailing in the
Philippine Islands the word "record" is used in a
loose and broad sense, as indicating the
collective mass of papers which contain the
history of all the successive steps taken in a
case and which are finally deposited in the
archives of the clerk's office as a memorial of the
litigation. It is a matter of general information that
no judgment roll, or book of final record, is
commonly kept in our courts for the purpose of
recording the pleadings and principal
proceedings in actions which have been
terminated; and in particular, no such record is
kept in the Court of First Instance of the city of
Manila. There is, indeed, a section of the Code
of Civil Procedure which directs that such a book
of final record shall be kept; but this provision
has, as a matter of common knowledge, been
generally ignored. The result is that in the
present case we do not have the assistance of
the recitals of such a record to enable us to pass
upon the validity of this judgment and as already
stated the question must be determined by
examining the papers contained in the entire file.
But it is insisted by counsel for this motion that
the affidavit of Bernardo Chan y Garcia showing
that upon April 4, 1908, he sent a notification
through the mail addressed to the defendant at
Manila, Philippine Islands, should be accepted
as affirmative proof that the clerk of the court
failed in his duty and that, instead of himself
sending the requisite notice through the mail, he
relied upon Bernardo to send it for him. We do
not think that this is by any means a necessary
inference. Of course if it had affirmatively
appeared that the clerk himself had attempted to
comply with this order and had directed the
notification to Manila when he should have
directed it to Amoy, this would be conclusive that
he had failed to comply with the exact terms of
the order; but such is not this case. That the
clerk of the attorneys for the plaintiff erroneously
sent a notification to the defendant at a mistaken
address affords in our opinion very slight basis
for supposing that the clerk may not have sent
notice to the right address.
There is undoubtedly good authority to support
the position that when the record states the
evidence or makes an averment with reference
to a jurisdictional fact, it will not be presumed
that there was other or different evidence
respecting the fact, or that the fact was otherwise
than stated. If, to give an illustration, it appears
from the return of the officer that the summons
was served at a particular place or in a particular
manner, it will not be presumed that service was
also made at another place or in a different
manner; or if it appears that service was made
upon a person other than the defendant, it will
not be presumed, in the silence of the record,
that it was made upon the defendant also
(Galpin vs. Page, 18 Wall., 350, 366; Settlemier
vs. Sullivan, 97 U. S., 444, 449). While we
believe that these propositions are entirely
correct as applied to the case where the person
making the return is the officer who is by law
required to make the return, we do not think that
it is properly applicable where, as in the present
case, the affidavit was made by a person who,
so far as the provisions of law are concerned,
was a mere intermeddler.
The last question of importance which we
propose to consider is whether a motion in the
cause is admissible as a proceeding to obtain
relief in such a case as this. If the motion
prevails the judgment of July 2, 1908, and all
subsequent proceedings will be set aside, and
the litigation will be renewed, proceeding again
from the date mentioned as if the progress of the
action had not been interrupted. The proponent
of the motion does not ask the favor of being
permitted to interpose a defense. His purpose is
merely to annul the effective judgment of the
court, to the end that the litigation may again
resume its regular course.
There is only one section of the Code of Civil
Procedure which expressly recognizes the
authority of a Court of First Instance to set aside
a final judgment and permit a renewal of the
litigation in the same cause. This is as follows:
SEC. 113. Upon such terms as may be just
the court may relieve a party or legal
representative from the judgment, order, or
other proceeding taken against him through
his mistake, inadvertence, surprise, or
excusable neglect; Provided, That
application thereof be made within a
reasonable time, but in no case exceeding
six months after such judgment, order, or
proceeding was taken.
An additional remedy by petition to the Supreme
Court is supplied by section 513 of the same
Code. The first paragraph of this section, in so
far as pertinent to this discussion, provides as
follows:
 When a judgment is rendered by a Court of
First Instance upon default, and a party
thereto is unjustly deprived of a hearing by
fraud, accident, mistake or excusable
negligence, and the Court of First Instance
which rendered the judgment has finally
adjourned so that no adequate remedy exists
in that court, the party so deprived of a
hearing may present his petition to the
Supreme Court within sixty days after he first
learns of the rendition of such judgment, and
not thereafter, setting forth the facts and
praying to have judgment set aside. . . .
It is evident that the proceeding contemplated in
this section is intended to supplement the
remedy provided by section 113; and we believe
the conclusion irresistible that there is no other
means recognized by law whereby a defeated
party can, by a proceeding in the same cause,
procure a judgment to be set aside, with a view
to the renewal of the litigation.
The Code of Civil Procedure purports to be a
complete system of practice in civil causes, and
it contains provisions describing with much
fullness the various steps to be taken in the
conduct of such proceedings. To this end it
defines with precision the method of beginning,
conducting, and concluding the civil action of
whatever species; and by section 795 of the
same Code it is declared that the procedure in all
civil action shall be in accordance with the
provisions of this Code. We are therefore of the
opinion that the remedies prescribed in sections
113 and 513 are exclusive of all others, so far as
relates to the opening and continuation of a
litigation which has been once concluded.
The motion in the present case does not conform
to the requirements of either of these provisions;
and the consequence is that in our opinion the
action of the Court of First Instance in dismissing
the motion was proper.
If the question were admittedly one relating
merely to an irregularity of procedure, we cannot
suppose that this proceeding would have taken
the form of a motion in the cause, since it is clear
that, if based on such an error, the came to late
for relief in the Court of First Instance. But as we
have already seen, the motion attacks the
judgment of the court as void for want of
jurisdiction over the defendant. The idea
underlying the motion therefore is that inasmuch
as the judgment is a nullity it can be attacked in
any way and at any time. If the judgment were in
fact void upon its face, that is, if it were shown to
be a nullity by virtue of its own recitals, there
might possibly be something in this. Where a
judgment or judicial order is void in this sense it
may be said to be a lawless thing, which can be
treated as an outlaw and slain at sight, or
ignored wherever and whenever it exhibits its
head.
But the judgment in question is not void in any
such sense. It is entirely regular in form, and the
alleged defect is one which is not apparent upon
its face. It follows that even if the judgment could
be shown to be void for want of jurisdiction, or for
lack of due process of law, the party aggrieved
thereby is bound to resort to some appropriate
proceeding to obtain relief. Under accepted
principles of law and practice, long recognized in
American courts, a proper remedy in such case,
after the time for appeal or review has passed, is
for the aggrieved party to bring an action to
enjoin the judgment, if not already carried into
effect; or if the property has already been
disposed of he may institute suit to recover it. In
every situation of this character an appropriate
remedy is at hand; and if property has been
taken without due process, the law concedes
due process to recover it. We accordingly old
that, assuming the judgment to have been void
as alleged by the proponent of this motion, the
proper remedy was by an original proceeding
and not by motion in the cause. As we have
already seen our Code of Civil Procedure
defines the conditions under which relief against
a judgment may be productive of conclusion for
this court to recognize such a proceeding as
proper under conditions different from those
defined by law. Upon the point of procedure here
involved, we refer to the case of People vs.
Harrison (84 Cal., 607) wherein it was held that a
motion will not lie to vacate a judgment after the
lapse of the time limited by statute if the
judgment is not void on its face; and in all cases,
after the lapse of the time limited by statute if the
judgment is not void on its face; and all cases,
after the lapse of such time, when an attempt is
made to vacate the judgment by a proceeding in
court for that purpose an action regularly brought
is preferable, and should be required. It will be
noted taken verbatim from the California Code
(sec. 473).
The conclusions stated in this opinion indicate
that the judgment appealed from is without error,
and the same is accordingly affirmed, with costs.
So ordered.
Arellano, C.J., Torres, Carson, and Avanceña,
JJ., concur.

Separate Opinions
MALCOLM, J., dissenting:
I dissent. It will not make me long to state my
reasons. An immutable attribute — the
fundamental idea — of due process of law is that
no man shall be condemned in his person or
property without notice and an opportunity of
being heard in his defense. Protection of the
parties demands a strict and an exact
compliance with this constitutional provision in
our organic law and of the statutory provisions in
amplification. Literally hundreds of precedents
could be cited in support of these axiomatic
principles. Where as in the instant case the
defendant received no notice and had no
opportunity to be heard, certainly we cannot say
that there is due process of law. Resultantly, "A
judgment which is void upon its face, and which
requires only an inspection of the judgment roll
to demonstrate its want of vitality is a dead limb
upon the judicial tree, which should be lopped
off, if the power so to do exists. It can bear no
fruit to the plaintiff, but is a constant menace to
the defendant." (Mills vs. Dickons, 6 Rich [S.
U.S. Supreme Court
Travelers Health Assn. v. Virginia, 339 U.S. 643 (1950)

Travelers Health Association v. Virginia

No. 76
Argued November 15, 1949
Reargued April 17, 1950
Decided June 5, 1950
339 U.S. 643
APPEAL FROM THE SUPREME COURT
OF APPEALS OF VIRGINIA
Syllabus
In a proceeding under § 6 of the Virginia
"Blue Sky Law," the State Corporation
Commission ordered an Association,
located in Nebraska and engaged in the
mail order health insurance business, and
its treasurer (appellants here) to cease and
desist from further offerings or sales of
certificates of insurance to Virginia
residents until the Association had
complied with the Act by furnishing
information as to its financial condition,
consenting to suit against it by service of
process on the Secretary of the
Commonwealth, and obtaining a permit.
Notice of the proceeding was served on
appellants by registered mail, as
authorized by § 6 when other forms of
service are unavailable. They appeared
specially, challenged the jurisdiction of the
State, and moved to quash the service of
summons. On recommendations from
Virginia members, the Association for
many years had been issuing insurance
certificates to residents of Virginia, and it
had approximately 800 members there. It
had caused claims for losses to be
investigated, and the Virginia courts were
open to it for the enforcement of
obligations of certificate holders.
Held:
1. The State has power to issue a cease
and desist order to enforce at least the
requirement that the Association consent
to suit against it by service of process on
the Secretary of the Commonwealth.
Pp. 339 U. S. 646-647.
2. The contacts and ties of appellants with
Virginia residents, together with that
State's interest in faithful observance of the
certificate obligations, justify subjecting
appellants to cease and desist
proceedings under § 6. Pp. 339 U. S. 647-
648.
3. Virginia's subjection of the Association
to the jurisdiction of the State Commission
in a § 6 proceeding is consistent with fair
play and substantial justice, and is not
offensive to the Due Process Clause of the
Fourteenth Amendment. P. 339 U. S. 649.
4. The power of the State to subject the
Association to the jurisdiction of the State
Commission and to authorize a cease and
Page 339 U. S. 644
desist order under § 6 is not vitiated by the
fact that business activities carried on
outside of the State are affected. P. 339 U.
S. 650.
5. Service of process on appellants by
registered mail did not violate the
requirements of due process. Pp.339 U. S.
650-651.
188 Va. 877, 51 S.E.2d 263, affirmed.
An order of the Virginia Corporation
Commission requiring appellants to cease
and desist from offering and issuing,
without a permit, certificates of insurance
to residents of the State, was affirmed by
the Supreme Court of Appeals. 188 Va.
877, 51 S.E.2d 263. On appeal to this
Court, affirmed, p. 339 U. S. 651.
MR. JUSTICE BLACK delivered the
opinion of the Court.
In an effort to protect its citizens from
"unfairness, imposition and fraud" in sales
of certificates of insurance and other forms
of securities, the Virginia "Blue Sky Law"
requires those selling or offering such
securities to obtain a permit from the State
Corporation Commission. [Footnote 1]
Applicants for permits must meet
comprehensive conditions: they must, for
example, provide detailed information
Page 339 U. S. 645
concerning their solvency, and must agree
that suits can be filed against them in
Virginia by service of process on the
Secretary of the Commonwealth. [Footnote
2]
While violation of the Act is a
misdemeanor punishable by criminal
sanctions, § 6 provides another method for
enforcement. After notice and a hearing
"on the merits," the State Corporation
Commission is authorized to issue a cease
and desist order restraining violations of
the Act. The section also provides for
service by registered mail where other
types of service are unavailable
"because the offering is by advertisement
and/or solicitation through periodicals,
mail, telephone, telegraph, radio, or other
means of communication from beyond the
limits of the State. . . ."
The highest court of Virginia rejected
contentions that this section violates
constitutional requirements of due process,
and the case is properly here on appeal
under 28 U.S.C. § 1257(2).
In this case, cease and desist proceedings
under § 6 were instituted by the State
Corporation Commission against Travelers
Health Association and against R. E. Pratt,
as treasurer of the Association and in his
personal capacity. Having received notice
by registered mail only, they appeared
"specially" for
"the sole purpose of objecting to the
alleged jurisdiction of the Virginia and of its
State Corporation Commission, and of
moving to set aside and quash service of
summons. . . ."
The agreed stipulation of facts and certain
exhibits offered by the state can be
summarized as follows:
The appellant Travelers Health Association
was incorporated in Nebraska as a
nonprofit membership association in 1904.
Since that time, its only office has been
located in Omaha, from which it has
conducted a mail order health insurance
business. New members pay an initiation
fee and obligate themselves to pay
periodic
Page 339 U. S. 646
assessments at the Omaha office. The
funds so collected are used for operating
expenses and sick benefits to members.
The Association has no paid agents; its
new members are usually obtained
through the unpaid activities of those
already members, who are encouraged to
recommend the Association to friends and
submit their names to the home office. The
appellant Pratt in Omaha mails
solicitations to these prospects. He
encloses blank applications which, if
signed and returned to the home office
with the required fee, usually result in
election of applicants as members.
Certificates are then mailed, subject to
return within 10 days "if not satisfactory."
Travelers has solicited Virginia members in
this manner since 1904, and has caused
many sick benefit claims to be
investigated. When these proceedings
were instituted, it had approximately 800
Virginia members.
The Commission, holding that the
foregoing facts supported the state's power
to act in § 6 proceedings, overruled
appellants' objection to jurisdiction and
their motion to quash service. The
Association and its treasurer were ordered
to cease and desist from further
solicitations or sales of certificates to
Virginia residents
"through medium of any advertisement
from within or from without the state,
and/or through the mails or otherwise, by
intra- or interstate communication, . . .
unless and until"
it obtained authority in accordance with the
"Blue Sky Law." This order was affirmed
by the Virginia Court of Appeals. 188 Va.
877, 882, 51 S.E.2d 263, 271.
Appellants do not question the validity of
the Virginia law
"to the extent that it provides that individual
and corporate residents of other states
shall not come into the State for the
purpose of doing business there without
first submitting to the regulatory authority
of the State."
As to such state power see, e.g., Hall v.
Geiger-Jones Co., 242 U. S. 539. Their
basic contention is that all their activities
take place in Nebraska, and that
consequently
Page 339 U. S. 647
Virginia has no power to reach them in
cease and desist proceedings to enforce
any part of its regulatory law. We cannot
agree with this general due process
objection, for we think the state has power
to issue a "cease and desist order"
enforcing at least that regulatory provision
requiring the Association to accept service
of process by Virginia claimants on the
Secretary of the Commonwealth.
Appellants' chief reliance for the due
process contention is on Minnesota
Commercial Men's Assn. v. Benn, 261 U.
S. 140. There, a Minnesota association
obtained members in Montana by the
same mail solicitation process used by
Travelers to get Virginia members. The
certificates issued to Montana members
also reserved the right to investigate
claims, although the Court pointed out that
Benn's claim had not been investigated.
This Court held that, since the contracts
were "executed and to be performed" in
Minnesota, the Association was not "doing
business" in Montana, and therefore could
not be sued in Montana courts unless
"consent" to Montana suits could be
implied. The Court found the
circumstances under which the insurance
transactions took place insufficient to
support such an implication.
But where business activities reach out
beyond one state and create continuing
relationships and obligations with citizens
of another state, courts need not resort to
a fictional "consent" in order to sustain the
jurisdiction of regulatory agencies in the
latter state. And, in considering what
constitutes "doing business" sufficiently to
justify regulation in the state where the
effects of the "business" are felt, the
narrow grounds relied on by the Court in
the Benn case cannot be deemed
controlling.
In Osborn v. Ozlin, 310 U. S. 53, 310 U. S.
62, we recognized that a state has a
legitimate interest in all insurance policies
protecting its residents against risks, an
interest which the state can protect even
though the "state action may have
repercussions beyond state lines. . . ." And
in Hoopeston
Page 339 U. S. 648
Canning Co. v. Cullen, 318 U. S. 313, 318
U. S. 316, we rejected the contention,
based on the Benn case, among others,
that a state's power to regulate must be
determined by a "conceptualistic
discussion of theories of the place of
contracting or of performance." Instead, we
accorded "great weight" to the
"consequences" of the contractual
obligations in the state where the insured
resided and the "degree of interest" that
state had in seeing that those obligations
were faithfully carried out. And
in International Shoe Co. v.
Washington, 326 U. S. 310, 326 U. S. 316,
this Court, after reviewing past cases,
concluded:
"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.'"
Measured by the principles of the Osborn,
Hoopeston, and International Shoe cases,
the contacts and ties of appellants with
Virginia residents, together with that state's
interest in faithful observance of the
certificate obligations, justify subjecting
appellants to cease and desist
proceedings under § 6. The Association
did not engage in mere isolated or short-
lived transactions. Its insurance
certificates, systematically and widely
delivered in Virginia following solicitation
based on recommendations of Virginians,
create continuing obligations between the
Association and each of the many
certificate holders in the state. Appellants
have caused claims for losses to be
investigated, and the Virginia courts were
available to them in seeking to enforce
obligations created by the group of
certificates. See International Shoe Co. v.
Washington, supra, at 326 U. S. 320.
Moreover, if Virginia is without power to
require this Association to accept service
of process on the Secretary of the
Commonwealth, the only forum for injured
certificate holders might be Nebraska.
Health benefit
Page 339 U. S. 649
claims are seldom so large that Virginia
policyholders could afford the expense and
trouble of a Nebraska law suit. In addition,
suits on alleged losses can be more
conveniently tried in Virginia, where
witnesses would most likely live and where
claims for losses would presumably be
investigated. Such factors have been given
great weight in applying the doctrine
of forum non conveniens. See Gulf Oil
Corp. v. Gilbert, 330 U. S. 501, 330 U. S.
508. And prior decisions of this Court have
referred to the unwisdom, unfairness, and
injustice of permitting policyholders to seek
redress only in some distant state where
the insurer is incorporated. [Footnote 3]
The Due Process Clause does not forbid a
state to protect its citizens from such
injustice.
There is, of course, one method by which
claimants could recover from appellants in
Virginia courts without the aid of
substituted service of process: certificate
holders in Virginia could all be garnished to
the extent of their obligations to the
Association. See Huron Holding
Corporation v. Lincoln Mine Operating
Co., 312 U. S. 183,312 U. S. 193. While
such an indirect procedure would
undeniably be more troublesome to
claimants than the plan adopted by the
state in its "Blue Sky Law," it would clearly
be even more harassing to the Association
and its Virginia members. Metaphysical
concepts of "implied consent" and
"presence" in a state should not be
solidified into a constitutional barrier
against Virginia's simple, direct, and fair
plan for service of process on the
Secretary of the Commonwealth.
We hold that Virginia's subjection of this
Association to the jurisdiction of that state's
Corporation Commission in a § 6
proceeding is consistent with "fair play and
substantial justice," and is not offensive to
the Due Process Clause.
Page 339 U. S. 650
Appellants also contend that § 6 as here
applied violates due process because the
Commission order attempts to "destroy or
impair" their right to make contracts in
Nebraska with Virginia residents. Insofar
as this contention can be raised in a
special appearance merely to contest
jurisdiction, it is essentially the same as
the due process issue discussed above.
For reasons just given, Virginia has power
to subject Travelers to the jurisdiction of its
Corporation Commission, and its cease
and desist provisions designed to
accomplish this purpose "cannot be
attacked merely because they affect
business activities which are carried on
outside the state." Hoopeston Canning Co.
v. Cullen, supra, at 318 U. S. 320-321. See
also Osborn v. Ozlin, 310 U. S. 53,310 U.
S. 62. These two opinions make clear
that Allgeyer v. Louisiana, 165 U. S. 578,
requires no different result.
Appellants concede that, in
the Osborn and Hoopeston cases, we
sustained state laws providing protective
standards for policyholders in those states,
even though compliance with those
standards by the insurance companies
could have repercussions on similar out-of-
state contracts. It is argued, however, that
those cases are distinguishable because
they both involved companies which were
"licensed to do business in the state of the
forum and were actually doing business
within the state. . . ." But, while Hoopeston
Canning Co. had done business in New
York under an old law, it brought the case
here to challenge certain provisions of a
new licensing law with which it had to
comply if it was to do business there in the
future. Thus, it was seeking the same kind
of relief that appellants seek here, and for
the same general purpose. What we there
said as to New York's power is equally
applicable to Virginia's power here.
It is also suggested that service of process
on appellants by registered mail does not
meet due process requirements.
Page 339 U. S. 651
What we have said answers this
contention insofar as it alleges a lack of
state jurisdiction because appellants were
served outside Virginia. If service by mail
is challenged as not providing adequate
and reasonable notice, the contention has
been answered by International Shoe Co.
v. Washington, supra, at 326 U. S. 320-
321. See also Mullane v. Central Hanover
Bank, 339 U. S. 306.
The due process questions we have
already discussed are the only alleged
errors relied on in appellants' brief,
[Footnote 4] and appellants' special
appearance only challenged state
jurisdiction and the service of process. We
therefore have no occasion to discuss the
scope of the Commission's order, or the
methods by which the state might attempt
to enforce it. [Footnote 5]
Affirmed.
[Footnote 1]
Acts of the General Assembly of Virginia,
1928, c. 529, p. 1373, as amended, Acts of
1932, c. 236, p. 434, Michie's 1942 Code
of Virginia, § 3848(47) et seq.
[Footnote 2]
Michie § 3848(51), (55).
[Footnote 3]
Pennsylvania Lumbermen's Mutual Fire
Ins. Co. v. Meyer, 197 U. S. 407, 197 U. S.
418-419; Connecticut Mutual Life Ins. Co.
v. Spratley, 172 U. S. 602, 172 U. S.
619; cf. International Shoe Co. v.
Washington, 326 U. S. 310, 326 U. S. 319.
[Footnote 4]
One federal question suggested in the
appellants' statement of jurisdiction was
that § 6, as interpreted by the state court,
infringed federal control of the mails
delegated to Congress by Art. I, § 8(7) of
the United States Constitution. But
appellants' brief on submission of the case
does not include this question in the
"specifications of errors relied upon," and
does not even mention that constitutional
clause.
[Footnote 5]
For examples of problems which might be
raised by attempts to impose punishment
for violation of the order, see Strassheim v.
Daily, 221 U. S. 280, 221 U. S. 284-
285; cf. Hyatt v. New York ex rel.
Corkran, 188 U. S. 691, 188 U. S.
712, 188 U. S. 719. Section 6 itself
provides no method for enforcement,
except insofar as such stature might be
attributed to its provision for giving a cease
and desist order
"publicity . . . to the public through the
press or otherwise as the commission
may, in its discretion, determine to be
advisable for the reasonable information
and protection of the public."
MR. JUSTICE DOUGLAS, concurring.
Since the formula adopted by the Court is
adequate to dispose of this case, I have
joined in the opinion. But I feel that the
type of problem presented requires a more
selective treatment. Hence, my separate
opinion.
Page 339 U. S. 652
Virginia's Blue Sky Law [Footnote 2/1] is a
comprehensive scheme for the protection
of the state's investors. Securities can be
offered for sale in the state only after the
issuer obtains a permit. [Footnote 2/2] To
get it, the applicant must supply detailed
information about its solvency, its earning
record, and the nature of the securities.
[Footnote 2/3] Promoters may be required
to supply a bond. [Footnote 2/4] Applicants
must appoint an agent, the Secretary of
the Commonwealth, to receive service of
process. [Footnote 2/5] Only after proof of
their good character and financial
responsibility are security salesmen
licensed. [Footnote 2/6] After issuance, the
state Corporation Commission is
authorized again to investigate the issuer
with an eye to possible revocation of its
permit. [Footnote 2/7] These are the high
points of the comprehensive regulation
which Virginia seeks to apply to appellants.
That the business of insurance is interstate
commerce is established by United States
v. South-Eastern Underwriters Assn., 322
U. S. 533. Any doubts about the power of
a state to exclude an interstate insurance
company which refuses to comply with its
regulatory laws were dispelled by the
passage of the McCarran Act. 59 Stat. 33,
15 U.S.C. §§ 1011-1015. See Robertson v.
California, 328 U. S. 440, 328 U. S. 461-
462.
The requirements of due process do not, in
my opinion, preclude the extension of
Virginia's regulatory scheme to appellant. I
put to one side the case where a
policyholder seeks to sue the out of state
company in Virginia.
Page 339 U. S. 653
His ability to sue is not necessarily the
measure of Virginia's power to regulate, as
the Court said in Old Wayne Mut. Life
Assn. v. McDonough, 204 U. S. 8, 204 U.
S. 21. It is the nature of the state's action
that determines the kind or degree of
activity in the state necessary for satisfying
the requirements of due process. What is
necessary to sustain a tax or to maintain a
suit by a creditor, see Old Wayne Life
Assn. v. McDonough, supra; Provident
Savings Life Assn. Society v.
Kentucky, 239 U. S. 103, 239 U. S. 114-
116; Issacs, An Analysis of Doing
Business, 25 Col.L.Rev. 1018, 1024, is
not, in my view, determinative when the
state seeks to regulate solicitation within
its borders.
Blue Sky Laws are a well recognized
exercise of the police power of the
states. See Hall v. Geiger-Jones Co.,242
U. S. 539, 242 U. S. 552. The wiles of the
salesman have been many; the devices to
avoid state regulation have been clever
and calculated. One of those who
contested the constitutionality of the
Michigan Blue Sky Law in Merrick v. N.W.
Halsey & Co., 242 U. S. 568, 242 U. S.
573, had no place of business in the state
and was not sending agents into it. The
history of the various methods used to
evade state regulation is too recent to
require extended comment.
Instrumentalities of interstate and foreign
commerce were extensively employed by
those beyond the reach of a state to sell
securities to its citizens. See H.R.Rep.
No.85, 73d Cong., 1st Sess. 10. The
Securities Act of 1933, 48 Stat. 74, 15
U.S.C. § 77a et seq., was passed to fill the
gap. [Footnote 2/8]
A state is helpless when the out of state
company operates beyond the borders,
establishes no office in the state, and has
no agents, salesmen, or solicitors to obtain
Page 339 U. S. 654
business for it within the state. Then it is
beyond the reach of process. In the
present case, however, that is only the
formal arrangement. The actual
arrangement shows a method of soliciting
business within Virginia as active,
continuous, and methodical as it would be
if regular agents or solicitors were
employed. Cf. Hoopeston Canning Co. v.
Cullen, 318 U. S. 313.
Practically all of appellants' business in
Virginia originates with and is the result of
the activities of its Virginia members. The
recommendation of a member relieves an
applicant of the duty of furnishing any
reference. Though the old members are
not designated as "agents," it "clearly
appears," as stated by the Supreme Court
of Appeals,
"that the association relies almost
exclusively on these activities of its Virginia
members to bring about an expansion of
its Virginia business."
Travelers Health Assn. v. Virginia, 188 Va.
877, 887, 51 S.E.2d 263, 267. This device
for soliciting business in Virginia may be
unconventional and unorthodox; but it
operates functionally precisely as though
appellants had formally designated the
Virginia members as their agents. Through
these people, appellants have realistically
entered the state, looking for and obtaining
business. Whether such solicitation is
isolated or continuous, it is activity which
Virginia can regulate. See Hooper v.
California, 155 U. S. 648, 155 U. S. 658.
The requirements of due process may
demand more or less [Footnote 2/9]
minimal contacts than are present here,
depending on what the pinch of the
decision is or what it requires of the foreign
corporation. See International Shoe Co. v.
Washington, 326 U. S. 310, 326 U. S. 316-
319. Where
Page 339 U. S. 655
the corporate project entails the use of one
or more people in the state for the
solicitation of business, in my view, it does
no violence to the traditional concept of
due process to allow the state to provide
protective measures governing that
solicitation. That is all that is done here.
I cannot agree that this appeal is
premature. Virginia has placed an
injunction on appellants, an injunction
which may have numerous
consequences, e.g., contempt
proceedings. There is an existing
controversy -- real and vital to appellants.
[Footnote 2/1]
Acts of the General Assembly of Virginia,
1928, c. 529, p. 1373, as amended, Acts of
1932, c. 236, p. 434, Michie's Code of
Virginia, § 3848(47) et seq.
[Footnote 2/2]
Michie § 3848(47).
[Footnote 2/3]
Michie § 3848(51).
[Footnote 2/4]
Michie § 3848(51)(r).
[Footnote 2/5]
Michie § 3848(55).
[Footnote 2/6]
Michie § 3848(50)(m).
[Footnote 2/7]
Michie § 3848(53).
[Footnote 2/8]
By § 3(a)(8), insurance policies issued by
a corporation subject to the supervision of
specified state agencies are exempt from
this federal regulation. Section 18 provides
that the Act does not affect the jurisdiction
of any state agency over a security or a
person.
[Footnote 2/9]
As Mr. Justice Rutledge said in Frene v.
Louisville Cement Co., 77 U.S.App.D.C.
129, 134 F.2d 511, 516,
". . . some casual or even single acts done
within the borders of the sovereignty may
confer power to acquire jurisdiction of the
person, provided there is also reasonable
provision for giving notice of the suit in
accordance with minimal due process
requirements."
MR. JUSTICE MINTON, with whom MR.
JUSTICE JACKSON joins, dissenting.
The State Corporation Commission of
Virginia instituted the proceedings leading
to the cease and desist order entered in
the instant case under § 6 of the Virginia
Securities Law. Michie's Va.Code 1942, §
3848(52). That section provides for service
by registered mail upon persons or
corporations offering securities through the
mails or by other means of communication.
After hearing, the Commission is
authorized to issue the order and to give it
such publicity as the Commission
considers desirable.
In this case, no action has been taken
under § 15 of the Law, which provides that
violation of the statute is a misdemeanor
and punishable by fine, or under § 17,
which provides for the imposition of a fine
upon failure to comply with a lawful order
of the Commission. Michie's Va.Code,
1942, § 3848(61)(63). The Commission
has in no way attempted to enforce the
order issued by the Commission against
appellants. Therefore, appellants have not
been hurt, and the question of due process
is not reached. In the scheme of the
statute, publicity appears to be the sole
sanction of § 6. I know of no reason why
Virginia may not go through this
Page 339 U. S. 656
shadow-boxing performance in order to
publicize the activities of appellants in
Virginia and notify its citizens that
appellants have not qualified under the
Securities Law. That is all the Commission
says that it is doing or has the power to do
under § 6. The Commission's view of the
nature of this proceeding -- a view
reiterated by Virginia in its brief on the
appeal to this Court -- was stated in its
opinion:
"Respondents rely on the fact that their
contacts with citizens of Virginia are by
mail, that they are not doing business in
Virginia, and that they do not enter Virginia
either personally or by agents. In setting
up this defense, they lose sight of the
nature of this action. They are not charged
with doing business in Virginia, but with
offering and advertising for sale and
promoting the sale of insurance contracts
in Virginia by mail, and the action is to
foreclose them from these activities.
Whether the action will suffice to actually
stop them is beside the point. It will suffice
to put them on notice of pertinent laws of
Virginia, to give them an opportunity to be
heard and the state an opportunity to
determine the facts, and, if, after hearing, a
cease and desist order is issued, the
Commission will then be authorized to give
such publicity to the order as it sees fit for
the 'information and protection of the
public.'"
"* * * *"
"No word found in or inference derived
from Section 6 aforesaid may properly, in
our judgment, be said to impose penalties
upon the respondents. . . ."
"* * * *"
"There is no element of compulsion except
such as may flow from a dread of the
publicity attending such an order. In such
cases, the only weapon available to the
Commonwealth is to publicly advise that
the
Page 339 U. S. 657
securities of the respondent do not bear
the stamp of the state's approval, and are
being presented to the public without
regard to the regulatory laws enacted to
protect them. Section 6, supra, imposes no
penalties, exacts no direct toll from those
against whom its orders proceed. . . ."
The question of substituted service on the
Secretary of the Commonwealth is not
here in any aspect. As far as appears,
service in this manner is not authorized by
the Virginia statutes except where the
nonresident has opened and is conducting
a place of business within the State.
Michie's Va.Code, 1942, § 3848(55)a. Up
to this date, Virginia has not claimed the
power to require appellants, who do
business in Virginia only by mail, to
appoint the Secretary of the
Commonwealth as their agent for service
of process, nor have the courts of Virginia
rendered judgment in a suit where service
was made in that manner. I do not
understand, therefore, what possible
application the Court's reference to
substituted service on the Secretary of the
Commonwealth could have in this case. I
would answer the question of due process
when Virginia has attempted to apply its
process to appellants in a proceeding that
has consequences of a nature which
entitle a person to the protection of the
Due Process Clause. See Parker v. Los
Angeles County, 338 U. S. 327. I would
therefore dismiss the appeal.
As stated, it seems to me that the majority
opinion is saying that Virginia has more
power than it claims in the instant
proceeding. While Virginia has not
attempted to do more than publicize the
activities of appellants in the State, I read
the majority opinion to intimate that, under
the service by registered letter, Virginia
might go further. The cease and desist
order issued cannot validly compel
appellants to designate the Secretary of
the Commonwealth as their agent for
service of process any more than
Page 339 U. S. 658
it can constitutionally be considered as
automatically accomplishing that result.
An in personam judgment cannot be based
upon service by registered letter on a
nonresident corporation or a natural
person neither of whom has ever been
within the Virginia. Pennoyer v. Neff, 95 U.
S. 714; Old Wayne Mutual Life Assn. v.
McDonough, 204 U. S. 8, 204 U. S. 22-23.
If that may not be done directly, it may not
be done indirectly. Certainly such service
cannot be justified where its purpose is to
make substituted service legal in the
future. These nonresidents cannot be
brought in through service by registered
mail and compelled to designate the
Secretary of the Commonwealth as their
agent for service of process so that
thereafter service may be effected upon
such nonresidents by serving the
Secretary. So to hold would allow the State
to pull itself up by its own bootstraps.
Service by registered mail is said by the
majority to be sufficient where the
corporation has "minimum contacts" with
the state of the forum. How many
"contacts" a corporation or person must
have before being subjected to suit we are
not informed. Here, all of appellants'
contacts with the residents of Virginia were
by mail. No agent of appellant corporation
has entered the State, nor has the
individual appellant. The contracts were
made wholly in Nebraska. Under these
circumstances, I would hold that appellants
were never "present" in Virginia.
"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."
International Shoe Co. v. Washington, 326
U. S. 310, 326 U. S. 316-317.
As I understand the International Shoe
Co. case, the minimum contacts which a
corporation has in the State
Page 339 U. S. 659
must be "activities of the corporation's
agent within the state." There were such
contacts by agents within the State in that
case. Service was made, in addition to
notice by registered letter, by personal
service within the State upon one of those
agents. Service on an agent within the
jurisdiction would seem to me
indispensable to a judgment against a
corporation. It would seem to be an a
fortiori proposition that judgment could not
be obtained against a natural person who
was not available for personal service.
We are not dealing here with the power of
Virginia to regulate the transaction of
insurance business with its citizens, as
was the case in Osborn v. Ozlin, 310 U. S.
53, and Hoopeston Canning Co. v.
Cullen, 318 U. S. 313. In the case at bar,
we are concerned only with how Virginia
may enforce such power as it has. No
question of the sufficiency of service was
involved in either the Osborn or
the Hoopeston cases, both of which were
brought against some officer of a state.
The question in those cases was whether
the State had power, and not whether,
having the power, it had also acquired
jurisdiction of a defendant against whom a
judgment could be rendered enforcing that
power.
I would not attempt to instruct Virginia as
to how to protect its citizens from these
intruders from Nebraska. But I do not
believe we should even intimate that
judgments in personam may be obtained,
by the simple process of sending a
registered letter, against a corporation
whose agents have never been in the
forum where suit is brought, or against a
natural person who is not personally
served within the State.
MR. JUSTICE REED and MR. JUSTICE
FRANKFURTER, agreeing with the Court
in reaching the merits, on the merits join
this dissent.