BASIC PRINCIPLES /JURISDICITON IN GENERAL/HOW ACQUIRED SAUDIA AIRLINES V.

CA BASIC PRINCIPLES

"conflicts" case A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain a "foreign element". FORM OF FOREIGN ELEMENT: The foreign element may simply consist in the
fact that one of the parties to a contract is an alien or has a foreign domicile, or that a contract between nationals of one State involves properties situated in another State. In other cases, the foreign element may assume a complex form. 42

In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events did transpire during her many occasions of travel across national borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to arise. JURISDICITON Over the SUBJECT MATTER: RTC has jurisdiction Regional Trial Court (RTC) of
Quezon City possesses jurisdiction over the subject matter of the suit. 48 Its authority to try and hear the case is provided for under Section 1 of Republic Act No. 7691, to wit:

Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary

Reorganization Act of 1980", is hereby amended to read as follows: Sec. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive jurisdiction: xxx xxx xxx (8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and cots or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours) xxx xxx xxx And following Section 2 (b), Rule 4 of the Revised Rules of Court the venue, Quezon City, is appropriate: Sec. 2 Venue in Courts of First Instance. [Now Regional Trial Court] (a) xxx xxx xxx (b) Personal actions. All other actions may be commenced and tried where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff. Pragmatic considerations, including the convenience of the parties, also weigh

heavily in favor of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice of forum should rarely be disturbed. 49 Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where she no longer maintains substantial connections. That would have caused a fundamental unfairness to her. Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by either of the parties. The choice of forum of the plaintiff (now private respondent) should be upheld. Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the court. The records show that petitioner SAUDIA has filed several motions
praying for the dismissal of Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial court's jurisdiction by praying for the dismissal of the
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Amended Complaint on grounds other than lack of jurisdiction.

As held by this Court in Republic vs. Ker and Company, Ltd.: 51 We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower court's jurisdiction over defendant's person, prayed for dismissal of the complaint on the ground that plaintiff's cause of action has prescribed. By interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve controversy in its favor. For the court to validly decide the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latter's person, who, being the proponent of the affirmative defense, should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of the court. Similarly, the case of De Midgely vs. Ferandos, held that; When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the court. A special appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person will be held to be a general appearance, if the party in said motion should, for example, ask for a dismissal of the action upon the further ground that the court had no jurisdiction over the subject matter. 52 Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial court has jurisdiction over the case and that

its exercise thereof, justified. As to the choice of applicable law, we note that choice-of-law problems seek to answer two important questions: (1) What legal system should control a given situation where some of the significant facts occurred in two or more states; and (2) to what extent should the chosen legal system regulate the situation. 53 Several theories have been propounded in order to identify the legal system that should ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both notions of justice and predictability, they do not always do so. The forum is then faced with the problem of deciding which of these two important values should be stressed. 54 Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules fall. This process is known as "characterization", or the "doctrine of qualification". It is the "process of deciding whether or not the facts relate to the kind of question specified in a conflicts rule." 55
The purpose of "characterization" is to enable the forum to select the proper law. 56

Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative fact. 57 An essential element of conflict rules is the indication of a "test" or
"connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual relationship (such as property right, contract claim) and a connecting factor or point of contact, such as the situs of the res, the place of celebration, the place of performance, or the place of wrongdoing. 58

Note that one or more circumstances may be present to serve as the possible test for

the determination of the applicable law.

These "test factors" or "points of contact" or "connecting factors" could be any of the following:

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(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin; (2) the seat of a legal or juridical person, such as a corporation; (3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is decisive when real rights are involved; (4) the place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts; (5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the place where a power of attorney is to be exercised; (6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis; (7) the place where judicial or administrative proceedings are instituted or done. The lex fori the law of the forum is particularly important because, as we have seen earlier, matters of "procedure" not going to the substance of the claim involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is excluded from application in a given case for the

reason that it falls under one of the exceptions to the applications of foreign law; and (8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as such. It also covers contractual relationships particularly contracts of affreightment. 60 (Emphasis ours.) After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed admitted for purposes of the motion to dismiss, we are convinced that there is reasonable basis for private respondent's assertion that although she was already working in Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation of the charges she made against the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out, she was the one made to face trial for very serious charges, including adultery and violation of Islamic laws and tradition. There is likewise logical basis on record for the claim that the "handing over" or "turning over" of the person of private respondent to Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioner's purported act contributed to and amplified or even proximately caused additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the arrest, detention and prosecution of private respondent under the guise of petitioner's authority as employer, taking advantage of the trust, confidence and faith she reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.

Considering that the complaint in the court a quo is one involving torts, the "connecting factor" or "point of contact" could be the place or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took place). This is because it is in the Philippines where petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her, she had honestly believed that petitioner would, in the exercise of its rights and in the performance of its duties, "act with justice, give her due and observe honesty and good faith." Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury allegedly occurred in another country is of no moment. For in our view what is important here is the place where the over-all harm or the totality of the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged, according to the plaintiff below (herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort. Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern theories and rules on tort liability 61 have been advanced to offer
fresh judicial approaches to arrive at just results. In keeping abreast with the modern theories on tort liability, we find here an occasion to apply the "State of the most significant relationship" rule, which in our view should be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the following contacts are to be taken into account and evaluated according to their relative importance with respect to the particular issue: (a) the place where the injury occurred; (b) the place where the conduct causing the injury

occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. 62 As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is likewise no question that private respondent is a resident Filipina national, working with petitioner, a resident foreign corporation engaged here in the business of international air carriage. Thus, the "relationship" between the parties was centered here, although it should be stressed that this suit is not based on mere labor law violations. From the record, the claim that the Philippines has the most significant contact with the matter in this dispute, 63 raised by
private respondent as plaintiff below against defendant (herein petitioner), in our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complained of and the place "having the most interest in the problem", we find, by way of recapitulation, that the Philippine law on tort liability should have paramount application to and control in the resolution of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply Philippine law. Moreover, we find untenable petitioner's insistence that "[s]ince private respondent instituted this suit, she has the burden of pleading and proving the applicable Saudi law on the matter." 64 As aptly
said by private respondent, she has "no obligation to plead and prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21" of the Civil Code of the Philippines. In her Amended Complaint and subsequent pleadings, she never alleged that Saudi law should govern this case. 65 And as correctly held by the

respondent appellate court, "considering that it was the petitioner who was invoking the applicability of the law of Saudi Arabia, then the burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia is". 66

Lastly, no error could be imputed to the respondent appellate court in upholding the trial court's denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal after trial was obviously available, and expeditious trial itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state intimately concerned with the ultimate outcome of the case below, not just for the benefit of all the litigants, but also for the vindication of the country's system of law and justice in a transnational setting. With these guidelines in mind, the trial court must proceed to try and adjudge the case in the light of relevant Philippine law, with due consideration of the foreign element or elements involved. Nothing said herein, of course, should be construed as prejudging the results of the case in any manner whatsoever. WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further proceedings. SO ORDERED.
JURISDICTION HASEGAWA V. In KITAMURA

the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not

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properly vested by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 000264 for specific performance and damages is one not capable of pecuniary estimation and is properly cognizable by the RTC of Lipa City.[62] What they rather raise as grounds to question subject matter jurisdiction are the principles of lex loci celebrationis and lex contractus, and the state of the most significant relationship rule. The Court finds the invocation of these grounds unsound. Lex loci celebrationis relates to the law of the place of the ceremony[63] or the law of the place where a contract is made.[64] The doctrine of lex contractus or lex loci contractus means the law of the place where a contract is executed or to be performed.[65] It controls the nature, construction,

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and validity of the contract[66] and it may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly.[67] Under the state of the most significant relationship rule, to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties. In a case involving a contract, the court should consider where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of the parties.[68] This rule takes into account several contacts and evaluates them according to their relative importance with respect to the particular issue to be resolved.[69] Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the second phase, the choice

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of law.[70] They determine which state's law is to be applied in resolving the substantive issues of a conflicts problem.[71] Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for. Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, first there should exist a conflict of laws situation requiring the application of the conflict of laws rules.[72] Also, when the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such law must be pleaded and proved.[73] It should be noted that when a conflicts case, one involving a foreign element, is brought before a

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court or administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or apply the law of some other State or States.[74] The courts power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign sovereigns.[75]

Neither can the other ground raised, forum non conveniens,[76] be used to deprive the trial court of

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its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a ground.[77] Second, whether a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court.[78] In this case, the RTC decided to assume jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter of defense.[79] Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly denied the petitioners motion to dismiss.

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HOW JURISDICITON ACQUIRED

Northwest Orient v. CA

It then concluded that the service of summons effected in Manila or beyond the territorial boundaries of Japan was null and did not confer jurisdiction upon the Tokyo District Court over the person of SHARP; hence, its decision was void. Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court contending that the respondent court erred in holding that SHARP was not a resident of Japan and that summons on SHARP could only be validly served within that country. A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein. 6 Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful

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exercise of jurisdiction and has regularly performed its official duty. Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity. 7 Being the
party challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment. In an attempt to discharge that burden, it contends that the extraterritorial service of summons effected at its home office in the Philippines was not only ineffectual but also void, and the Japanese Court did not, therefore acquire jurisdiction over it.

It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum. 8 In this case, it is the
procedural law of Japan where the judgment was rendered that determines the validity of the extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It may not be taken judicial notice of and must be pleaded and proved like any other fact. 9 Sections 24 and 25, Rule 132 of the Rules of Court provide that it may be evidenced by an official publication or by a duly attested or authenticated copy thereof. It was then incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to show that under it, the assailed extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand.

Alternatively in the light of the absence of proof regarding

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Japanese law, the presumption of identity or similarity or the socalled processual presumption 10 may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the Philippine law on service of summons on a private foreign corporation doing business in the Philippines. Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing business in the Philippines, service may be made: (1) on its resident agent designated in accordance with law for that purpose, or, (2) if there is no such resident agent, on the government official designated by law to that effect; or (3) on any of its officers or agents within the Philippines.

If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is without force and gives the court no jurisdiction unless made upon him. 11 Where the corporation has no such agent, service shall be made on the government official designated by law, to wit: (a) the Insurance Commissioner in the case of a foreign insurance company; (b) the Superintendent of Banks, in the case of a foreign banking corporation; and (c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in the Philippines. Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the summons or other legal proccess to the corporation at its home or principal office. The sending of such

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copy is a necessary part of the service.

12

SHARP contends that the laws authorizing service of process upon the Securities and Exchange Commission, the Superintendent of Banks, and the Insurance Commissioner, as the case may be, presuppose a situation wherein the foreign corporation doing business in the country no longer has any branches or offices within the Philippines. Such contention is belied by the pertinent provisions of the said laws. Thus, Section 128 of the Corporation Code 13 and Section 190 of the Insurance
Code 14 clearly contemplate two situations: (1) if the corporation had left the Philippines or had ceased to transact business therein, and (2) if the corporation has no designated agent. Section 17 of the General Banking Act 15 does not even speak a corporation which had ceased to transact business in the Philippines.

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in Japan. This silence could only mean, or least create an impression, that it had none. Hence, service on the designated government official or on any of SHARP's officers or agents in Japan could be availed of. The respondent, however, insists that only service of any of its officers or employees in its branches in Japan could be resorted to. We do not agree. As found by the respondent court, two attempts at service were made at SHARP's Yokohama branch. Both were unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be the person authorized to accept court process, was

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in Manila. On the second, Mr. Dinozo was present, but to accept the summons because, according to him, he was no longer an employee of SHARP. While it may be true that service could have been made upon any of the officers or agents of SHARP at its three other branches in Japan, the availability of such a recourse would not preclude service upon the proper government official, as stated above. As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for SHARP be served at its head office in the Philippine's after the two attempts of service had failed. 16 The Tokyo District Court requested the Supreme Court of
Japan to cause the delivery of the summons and other legal documents to the Philippines. Acting on that request, the Supreme Court of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to the Japanese Embassy in Manila . Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign Affairs of the Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code. Hence, SHARP's contention that such manner of service is not valid under Philippine laws holds no water. 17

In deciding against the petitioner, the respondent court sustained

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the trial court's reliance on Boudard vs. Tait 18 where this Court held: The fundamental rule is that jurisdiction in personam over nonresidents, so as to sustain a money judgment, must be based upon personal service within the state which renders the judgment. xxx xxx xxx The process of a court, has no extraterritorial effect, and no jurisdiction is acquired over the person of the defendant by serving him beyond the boundaries of the state. Nor has a judgment of a court of a foreign country against a resident of this country having no property in such foreign country based on process served here, any effect here against either the defendant personally or his property situated here. Process issuing from the courts of one state or country cannot run into another, and although a nonresident defendant may have been personally served with such process in the state or country of his domicile, it will not give such jurisdiction as to authorize a personal judgment against him. It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19
and Dial Corp. vs. Soriano, 20 as well as the principle laid down by the Iowa Supreme Court in the 1911 case of Raher vs. Raher. 21

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The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of the civil division of the Court of First Instance of Hanoi, French Indo-China. The trial court dismissed the case because the Hanoi court never acquired jurisdiction over the person of the defendant considering that "[t]he, evidence adduced at the trial conclusively proves that neither the appellee [the defendant] nor his agent or employees were ever in Hanoi, French Indo-China; and that the deceased Marie Theodore Jerome Boudard had never, at any time, been his employee." In Magdalena Estate, what was declared invalid resulting in the failure of the court to acquire jurisdiction over the person of the defendants in an action in personam was the service of summons through publication against non-appearing resident defendants. It was claimed that the latter concealed themselves to avoid personal service of summons upon them. In Dial, the defendants were foreign corporations which were not, domiciled and licensed to engage in business in the Philippines and which did not have officers or agents, places of business, or properties here. On the other hand, in the instant case, SHARP was doing business in Japan and was maintaining four branches therein. Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a divided Supreme Court of Iowa declared that the principle that there can be no jurisdiction in a court of a territory to render a personal judgment against anyone upon service made outside its limits was applicable alike to cases of

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residents and non-residents. The principle was put at rest by the United States Supreme Court when it ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in the state is alone sufficient to
bring an absent defendant within the reach of the state's jurisdiction for purposes of a personal judgment by means of appropriate substituted service or personal service without the state. This principle is embodied in section 18, Rule 14 of the Rules of Court which allows service of summons on residents temporarily out of the Philippines to be made out of the country. The rationale for this rule was explained in Milliken as follows:

[T]he authority of a state over one of its citizens is not terminated by the mere fact of his absence from the state. The state which accords him privileges and affords protection to him and his property by virtue of his domicile may also exact reciprocal duties. "Enjoyment of the privileges of residence within the state, and the attendant right to invoke the protection of its laws, are inseparable" from the various incidences of state citizenship. The responsibilities of that citizenship arise out of the relationship to the state which domicile creates. That relationship is not dissolved by mere absence from the state. The attendant duties, like the rights and privileges incident to domicile, are not dependent on continuous presence in the state. One such incident of domicile is amenability to suit within the state even during sojourns without the state, where the state has provided and employed a reasonable method for apprising such an absent party of the

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proceedings against him. 23 The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can have only one domicile which is the state of its creation. 25

Nonetheless, a corporation formed in one-state may, for certain purposes, be regarded a resident in another state in which it has offices and transacts business. This is the rule in our jurisdiction and apropos thereto, it may be necessery to quote what we stated in State Investment House, Inc, vs. Citibank, N.A., 26 to wit: The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in Section 20 of the Insolvency Law . . . or residents of the state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be derived. The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign corporation engaged in trade or business within the Philippines," as distinguished from a "'non-resident foreign corporation' . . . (which

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is one) not engaged in trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)]. The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered residents of the Philippines. [Sec. 1(e)]. The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . . . (which are) called Philippine branches," in the same category as "commercial banks, savings associations, mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed and organized under Philippine laws), making no distinction between the former and the latter in so far as the terms "banking institutions" and "bank" are used in the Act [Sec. 2], declaring on the contrary that in "all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties of members,

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stockholders or officers of corporation. [Sec. 18]. This court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a nonresident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands; [Sec. 424, in relation to Sec. 412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines and is consequently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country. Be this as it may, this Court pointed out that: . . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this policy should we make a discrimination

26

against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of foreign corporations, but in addition with every requirement of law made of domestic corporations. . . . Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of domestic corporations, subsumes their being found and operating as corporations, hence, residing, in the country. The same principle is recognized in American law: that the residence of a corporation, if it can be said to have a residence, is necessarily where it exercises corporate functions . . .;" that it is considered as dwelling "in the place where its business is done . . .," as being "located where its franchises are exercised . . .," and as being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality of existence." [Words and Phrases, Permanent Ed., vol. 37, pp. 394, 412, 493]. In as much as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit against it was filed, then in the light of the processual

27

presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving process. 27 Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under the processual presumption but also because of the presumption of regularity of performance of official duty. We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be without merit. We find no evidence that would justify an award for attorney's fees and litigation expenses under Article 2208 of the Civil Code of the Philippines. Nor is an award for exemplary damages warranted. Under Article 2234 of the Civil Code, before the court may consider the question of whether or not exemplary damages should be awarded, the plaintiff must show that he is entitled to moral, temperate, or compensatory damaged. There being no such proof presented by NORTHWEST, no exemplary damages may be adjudged in its favor. WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST's claims for attorneys fees, litigation expenses, and exemplary damages but REVERSED insofar as in sustained the trial court's dismissal of NORTHWEST's complaint in Civil Case

28

No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent C.F. SHARP L COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully satisfied.
Valmonte v. CA

Costs against the private respondent. We hold that there was no valid service of process on Lourdes A. Valmonte. To provide perspective, it will be helpful to determine first the nature of the action filed against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private respondent, whether it is an action in personam, in rem or quasi in rem. This is because the rules on service of summons embodied in Rule 14 apply according to whether an action is one or the other of these actions. In an action in personam, personal service of summons or, if this is not possible and he cannot be personally served, substituted service, as provided in Rule 14, 7-82 is essential for the acquisition by the court of jurisdiction over the person of a defendant who does not voluntarily submit himself to the authority of the court.3 If defendant cannot be served with summons because he is temporarily abroad, but otherwise he is a Philippine resident, service of summons may, by leave of court, be made by

29

publication.4 Otherwise stated, a resident defendant in an action in personam, who cannot be personally served with summons, may be summoned either by means of substituted service in accordance with Rule 14, 8 or by publication as provided in 17 and 18 of the same Rule.5 In all of these cases, it should be noted, defendant must be a resident of the Philippines, otherwise an action in personam cannot be brought because jurisdiction over his person is essential to make a binding decision. On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the defendant is not essential for giving the court jurisdiction so long as the court acquires jurisdiction over the res. If the defendant is a nonresident and he is not found in the country, summons may be served exterritorially in accordance with Rule 14, 17, which provides: 17. Extraterritorial service. - When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as

30

under section 7; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.. In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has jurisdiction over the res, i.e. the personal status of the plaintiff who is domiciled in the Philippines or the property litigated or attached. Service of summons in the manner provided in 17 is not for the purpose of vesting it with jurisdiction but for complying with the requirements of fair play or due process, so that he will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff and he can thereby take steps to protect his interest if he is so minded.6 Applying the foregoing rules to the case at bar, private respondent's action, which is for partition and accounting under Rule 69, is in the nature of an action quasi in rem. Such an action is essentially for the purpose of affecting the defendant's interest

31

in a specific property and not to render a judgment against him. As explained in the leading case of Banco Espaol Filipino v. Palanca :7 [An action quasi in rem is] an action which while not strictly speaking an action in rem partakes of that nature and is substantially such. . . . The action quasi in 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. As petitioner Lourdes A. Valmonte is a nonresident who is not found in the Philippines, service of summons on her must be in accordance with Rule 14, 17. Such service, to be effective outside the Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court should be sent by registered mail to the last known address of the defendant; or (3) in any other manner which the court may deem sufficient. Since in the case at bar, the service of summons upon petitioner

32

Lourdes A. Valmonte was not done by means of any of the first two modes, the question is whether the service on her attorney, petitioner Alfredo D. Valmonte, can be justified under the third mode, namely, "in any . . . manner the court may deem sufficient." We hold it cannot. This mode of service, like the first two, must be made outside the Philippines, such as through the Philippine Embassy in the foreign country where the defendant resides.8 Moreover, there are several reasons why the service of summons on Atty. Alfredo D. Valmonte cannot be considered a valid service of summons on petitioner Lourdes A. Valmonte. In the first place, service of summons on petitioner Alfredo D. Valmonte was not made upon the order of the court as required by Rule 14, 17 and certainly was not a mode deemed sufficient by the court which in fact refused to consider the service to be valid and on that basis declare petitioner Lourdes A. Valmonte in default for her failure to file an answer. In the second place, service in the attempted manner on petitioner was not made upon prior leave of the trial court as required also in Rule 14, 17. As provided in 19, such leave must be applied for by motion in writing, supported by affidavit of the plaintiff or some person on his behalf and setting forth the grounds for the application. Finally, and most importantly, because there was no order granting such leave, petitioner Lourdes A. Valmonte was not given

33

ample time to file her Answer which, according to the rules, shall be not less than sixty (60) days after notice. It must be noted that the period to file an Answer in an action against a resident defendant differs from the period given in an action filed against a nonresident defendant who is not found in the Philippines. In the former, the period is fifteen (15) days from service of summons, while in the latter, it is at least sixty (60) days from notice. Strict compliance with these requirements alone can assure observance of due process. That is why in one case,9 although the Court considered publication in the Philippines of the summons (against the contention that it should be made in the foreign state where defendant was residing) sufficient, nonetheless the service was considered insufficient because no copy of the summons was sent to the last known correct address in the Philippines.. Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-463 (1975), in which it was held that service of summons upon the defendant's husband was binding on her. But the ruling in that case is justified because summons were served upon defendant's husband in their conjugal home in Cebu City and the wife was only temporarily absent, having gone to Dumaguete City for a vacation. The action was for collection of a sum of money. In accordance with Rule 14, 8, substituted service could be made on any person of sufficient discretion in the dwelling place of the defendant, and certainly defendant's husband, who was there, was competent to receive the summons

34

on her behalf. In any event, it appears that defendant in that case submitted to the jurisdiction of the court by instructing her husband to move for the dissolution of the writ of attachment issued in that case. On the other hand, in the case of Gemperle v. Schenker, 10 it was held that service on the wife of a nonresident defendant was found sufficient because the defendant had appointed his wife as his attorney-in-fact. It was held that although defendant Paul Schenker was a Swiss citizen and resident of Switzerland, service of summons upon his wife Helen Schenker who was in the Philippines was sufficient because she was her husband's representative and attorney-in-fact in a civil case, which he had earlier filed against William Gemperle. In fact Gemperle's action was for damages arising from allegedly derogatory statements contained in the complaint filed in the first case. As this Court said, "[i]n other words, Mrs. Schenker had authority to sue, and had actually sued, on behalf of her husband, so that she was, also, empowered to represent him in suits filed against him, particularly in a case, like the one at bar, which is a consequence of the action brought by her on his behalf" 11 Indeed, if instead of filing an independent action Gemperle filed a counterclaim in the action brought by Mr. Schenker against him, there would have been no doubt that the trial court could have acquired jurisdiction over Mr. Schenker through his agent and attorney-in-fact, Mrs. Schenker. In contrast, in the case at bar, petitioner Lourdes A. Valmonte did

35

not appoint her husband as her attorney-in-fact. Although she wrote private res- pondent's attorney that "all communications" intended for her should be addressed to her husband who is also her lawyer at the latter's address in Manila, no power of attorney to receive summons for her can be inferred therefrom. In fact the letter was written seven months before the filing of this case below, and it appears that it was written in connection with the negotiations between her and her sister, respondent Rosita Dimalanta, concerning the partition of the property in question. As is usual in negotiations of this kind, the exchange of correspondence was carried on by counsel for the parties. But the authority given to petitioner's husband in these negotiations certainly cannot be construed as also including an authority to represent her in any litigation. For the foregoing reasons, we hold that there was no valid service on petitioner Lourdes A. Valmonte in this case. WHEREFORE, the decision appealed from is REVERSED and the orders dated July 3, 1992 and September 23, 1992 of the Regional Trial Court of Manila, Branch 48 are REINSTATED. Being interrelated, we shall take up together the assigned errors. Under paragraph (b) of Section 50, Rule 39 of the Rules of Court, 5
which was the governing law at the time this case was decided by the trial court and respondent Court of Appeals, a foreign judgment against a person rendered by a court having jurisdiction to pronounce the

Asiavest v. CA

36

judgment is presumptive evidence of a right as between the parties and their successors in interest by the subsequent title. However, the judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence of proof to the contrary, a court, or judge acting as such, whether in the Philippines or elsewhere, is presumed to have acted in the lawful exercise of jurisdiction. Hence, once the authenticity of the foreign judgment is proved, the burden to repel it on grounds provided for in paragraph (b) of Section 50, Rule 39 of the Rules of Court is on the party challenging the foreign judgment HERAS in this case. At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the other hand, ASIAVEST presented evidence to prove rendition, existence, and authentication of the judgment by the proper officials. The judgment is thus presumed to be valid and binding in the country from which it comes, until the contrary is shown. 6 Consequently, the first ground relied upon by
ASIAVEST has merit. The presumption of validity accorded foreign judgment would be rendered meaningless were the party seeking to enforce it be required to first establish its validity.

The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did not acquire jurisdiction over the

37

person of HERAS. This involves the issue of whether summons was properly and validly served on HERAS. It is settled that matters of remedy and procedure such as those relating to the service of process upon the defendant are governed by the lex fori or the law of the forum, 7 i.e., the law of Hong Kong in this case.
HERAS insisted that according to his witness Mr. Lousich, who was presented as an expert on Hong Kong laws, there was no valid service of summons on him.

In his counter-affidavit,

which served as his direct testimony per agreement of the parties, Lousich declared that the record of the Hong Kong case failed to show that a writ of summons was served upon HERAS in Hong Kong or that any such attempt was made. Neither did the record show that a copy of the judgment of the court was served on HERAS. He stated further that under Hong Kong laws (a) a writ of summons could be served by the solicitor of the claimant or plaintiff; and (b) where the said writ or claim was not contested, the claimant or plaintiff was not required to present proof under oath in order to obtain judgment.
9

On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong Kong court authorized service of summons on HERAS outside of its jurisdiction, particularly in the Philippines. He admitted also the existence of an affidavit of one Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law firm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St., Quezon City, by leaving a copy

38

with HERAS's son-in-law Dionisio Lopez. 10 On redirect examination,

Lousich declared that such service of summons would be valid under Hong Kong laws provided that it was in accordance with Philippine laws. 11 We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as an expert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, the record of public documents of a sovereign authority, tribunal, official body, or public officer may be proved by (1) an official publication thereof or (2) a copy attested by the officer having the legal custody thereof, which must be accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. The certificate may be issued by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent, or any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. The attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be, and must be under the official seal of the attesting officer.

Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law. An authority 12 on private international law
thus noted:

Although it is desirable that foreign law be proved in accordance with the above rule, however, the Supreme Court held in the case of Willamette Iron and Steel Works v. Muzzal, 13 that Section 41, Rule 123

39

(Section 25, Rule 132 of the Revised Rules of Court) does not exclude the presentation of other competent evidence to prove the existence of a foreign law. In that case, the Supreme Court considered the testimony under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a section of California Civil Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish the existence of said law. Accordingly, in line with this view, the Supreme Court in the Collector 14 of Internal Revenue v. Fisher et al., upheld the Tax Court in considering the pertinent law of California as proved by the respondents' witness. In that case, the counsel for respondent "testified that as an active member of the California Bar since 1951, he is familiar with the revenue and taxation laws of the State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue Code as published in Derring's California Code, a publication of Bancroft-Whitney Co., Inc. And as part of his testimony, a full quotation of the cited section was offered in evidence by respondents." Likewise, in several naturalization cases, it was held by the Court that evidence of the law of a foreign country on reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is "satisfied of the 15 authenticity of the written proof offered." Thus, in, a number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese Consulate General of 16 Manila was held to be competent proof of that law.

There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong Kong in respect of service of summons either in actions in rem or in personam, and where the defendant is either a resident or nonresident of Hong Kong. In view of the absence of proof of the Hong Kong law on this particular issue, the presumption of identity or similarity or the so-called processual presumption shall come into play. It will thus be presumed that the Hong Kong law on the matter is similar to the Philippine law. 17 As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to determine first whether the action is in personam, in rem, or quasi in

40

rem because the rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according to the nature of the action.

An action in personam is an action against a person on the basis of his personal liability. An action in rem is an action against the thing itself instead of against the person. 19 An action quasi in rem is
one wherein 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. 20 In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. Jurisdiction over the person of a resident defendant who does not voluntarily appear in court can be acquired by personal service of summons as provided under Section 7, Rule 14 of the Rules of Court. If he cannot be personally served with summons within a reasonable time, substituted service may be made in accordance with Section 8 of said Rule. If he is temporarily out of the country, any of the following modes of service may be resorted to: (1) substituted service set forth in Section 8; 21 (2) personal service outside the country, with leave of court; (3) service by publication, also with leave of court; 22 or (4) any other manner the court may deem sufficient. 23 However, in an action in personam wherein the defendant is a nonresident who does not voluntarily submit himself to the authority of the court, personal service of summons within the state is essential to the acquisition of jurisdiction over her person. 24 This method of service is

41

possible if such defendant is physically present in the country. If he is not found therein, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him. 25 An exception was laid down in Gemperle v. Schenker 26 wherein a nonresident was served with summons through his wife, who was a resident of the Philippines and who was his representatives and attorney-in-fact in a prior civil case filed by him; moreover, the second case was a mere offshoot of the first case.

On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res. Nonetheless summons must be served upon the defendant not for the purpose of vesting the court with jurisdiction but merely for satisfying the due process requirements.
27

Thus, where the defendant is a non-resident who is not found in the Philippines and (1) the action affects the personal status of the plaintiff; (2) the action relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the Philippines; or (4) the property of the defendant has been attached in the Philippines service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court, or (c) any other manner the court may deem sufficient. 28 In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based on his personal guarantee of the

42

obligation of the principal debtor. Before we can apply the foregoing rules, we must determine first whether HERAS was a resident of Hong Kong.

Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until 1985, 29 testified that HERAS was the President and
part owner of a shipping company in Hong Kong during all those times that she served as his secretary. He had in his employ a staff of twelve. 30 He had "business commitments, undertakings, conferences, and appointments until October 1984 when [he] left Hong Kong for good," 31 HERAS's other witness, Russel Warren Lousich, testified that he had acted as counsel for HERAS "for a number of commercial matters." 32 ASIAVEST then infers that HERAS was a resident of Hong Kong because he maintained a business there.

It must be noted that in his Motion to Dismiss,

as well as in his Answer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court judgment, HERAS maintained that the Hong Kong court did not have jurisdiction over him because the fundamental rule is that jurisdiction in personam over non-resident defendants, so as to sustain a money judgment, must be based upon personal service of summons within the state which renders the judgment. 35 For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36 contended: "The question of Hong Kong court's 'want of jurisdiction' is therefore a triable issue if it is to be pleaded by the defendant to 'repel' the foreign judgment. Facts showing jurisdictional lack (e.g. that the Hong Kong suit was in personam, that defendant was not a resident of

33

43

Hong Kong when the suit was filed or that he did not voluntarily submit to the Hong Kong court's jurisdiction) should be alleged and proved by the defendant." 37 In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS argued that the lack of jurisdiction over his person was corroborated by ASIAVEST's allegation in the complaint that he "has his residence at No. 6, 1st St., New Manila, Quezon City, Philippines." He then concluded that such judicial admission amounted to evidence that he was and is not a resident of Hong Kong.

Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which was that "the residence of defendant, Antonio Heras, is New Manila, Quezon City." 39
We note that the residence of HERAS insofar as the action for the enforcement of the Hong Kong court judgment is concerned, was never in issue. He never challenged the service of summons on him through a security guard in his Quezon City residence and through a lawyer in his office in that city. In his Motion to Dismiss, he did not question the jurisdiction of the Philippine court over his person on the ground of invalid service of summons. What was in issue was his residence as far as the Hong Kong suit was concerned. We therefore conclude that the stipulated fact that HERAS "is a resident of New Manila, Quezon City, Philippines" refers to his residence at the time jurisdiction over his person was being sought by the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that HERAS was a resident of

44

Hong Kong at the time.

Accordingly, since HERAS was not a resident of Hong Kong and the action against him was, indisputably, one in personam, summons should have been personally served on him in Hong Kong. The extraterritorial service in the Philippines was therefore invalid and did not confer on the Hong Kong court jurisdiction over his person. It follows that the Hong Kong court judgment cannot be given force and effect here in the Philippines for having been rendered without jurisdiction. Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in November 1984 when the extraterritorial service of summons was attempted to be made on him. As declared by his secretary, which statement was not disputed by ASIAVEST, HERAS left Hong Kong in October 1984 "for good." 40 His absence in Hong Kong must have been the reason
why summons was not served on him therein; thus, ASIAVEST was constrained to apply for leave to effect service in the Philippines, and upon obtaining a favorable action on the matter, it commissioned the Sycip Salazar Hernandez & Gatmaitan law firm to serve the summons here in the Philippines.

In Brown v. Brown,

the defendant was previously a resident of the Philippines. Several days after a criminal action for concubinage was filed against him, he abandoned the Philippines. Later, a proceeding quasi in rem was instituted against him. Summons in the latter case

41

45

was served on the defendant's attorney-in-fact at the latter's address. The Court held that under the facts of the case, it could not be said that the defendant was "still a resident of the Philippines because he ha[d] escaped to his country and [was] therefore an absentee in the Philippines." As such, he should have been "summoned in the same manner as one who does not reside and is not found in the Philippines."

Similarly, HERAS, who was also an absentee, should have been served with summons in the same manner as a non-resident not found in Hong Kong. Section 17, Rule 14 of the Rules of Court providing for extraterritorial service will not apply because the suit against him was in personam. Neither can we apply Section 18, which allows extraterritorial service on a resident defendant who is temporarily absent from the country, because even if HERAS be considered as a resident of Hong Kong, the undisputed fact remains that he left Hong Kong not only "temporarily" but "for good." IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the petition in this case and AFFIRMING the assailed judgment of the Court of Appeals in CA-G.R. CV No. 29513. No costs. SO ORDERED.

46

Banco du Brazil v. CA

Petitioner Banco do Brasil takes exception to the appellate courts declaration that the suit below is in rem, not in personam,[51] thus, service of summons by publication was sufficient for the court to acquire jurisdiction over the person of petitioner Banco do Brasil, and thereby liable to private respondent Cesar Urbino for damages claimed, amounting to $300,000.00. Petitioner further challenges the finding that the February 18, 1991 decision of the trial court was already final and thus, cannot be modified or assailed.[52] Petitioner avers that the action filed against it is an action for damages, as such it is an action in personam which requires personal service of summons be made upon it for the court to acquire jurisdiction over it. However, inasmuch as petitioner Banco do Brasil is a non-resident foreign corporation, not engaged in business in the Philippines, unless it has property located in the Philippines which may be attached to convert the action into an action in rem, the court cannot acquire jurisdiction over it in respect of an action in personam. The petition bears merit, thus the same should be as it is

47

hereby granted. First. When the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in accordance with Rule 14, Section 17[53] of the Rules of Court. Under this provision, there are only four (4) instances when extraterritorial service of summons is proper, namely: "(1) when the action affects the personal status of the plaintiffs; (2) when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant non-residents property has been attached within the Philippines."[54] In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.[55] Clear from the foregoing, extrajudicial service of

48

summons apply only where the action is in rem, an action against the thing itself instead of against the person, or in an action quasi in rem, where an individual is named as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or loan burdening the property. This is so inasmuch as, in in rem and quasi in rem actions, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res.[56] However, where the action is in personam, one brought against a person on the basis of his personal liability, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. When the defendant is a non-resident, personal service of summons within the state is essential to the acquisition of jurisdiction over the person.[57] This cannot be done, however, if the defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him.[58]

49

In the instant case, private respondents suit against petitioner is premised on petitioners being one of the claimants of the subject vessel M/V Star Ace.[59] Thus, it can be said that private respondent initially sought only to exclude petitioner from claiming interest over the subject vessel M/V Star Ace. However, private respondent testified during the presentation of evidence that, for being a nuisance defendant, petitioner caused irreparable damage to private respondent in the amount of $300,000.00.[60] Therefore, while the action is in rem, by claiming damages, the relief demanded went beyond the res and sought a relief totally alien to the action. It must be stressed that any relief granted in rem or quasi in rem actions must be confined to the res, and the court cannot lawfully render a personal judgment against the defendant.[61] Clearly, the publication of summons effected by private respondent is invalid and ineffective for the trial court to acquire jurisdiction over the person of petitioner, since by seeking to recover damages from petitioner for the alleged commission of an injury to his person or property[62] caused by petitioners being a nuisance defendant, private respondents action became in

50

personam. Bearing in mind the in personam nature of the action, personal or, if not possible, substituted service of summons on petitioner, and not extraterritorial service, is necessary to confer jurisdiction over the person of petitioner and validly hold it liable to private respondent for damages. Thus, the trial court had no jurisdiction to award damages amounting to $300,000.00 in favor of private respondent and as against herein petitioner. Second. We settled the issue of finality of the trial courts decision dated February 18, 1991 in the Vlason case, wherein we stated that, considering the admiralty case involved multiple defendants, "each defendant had a different period within which to appeal, depending on the date of receipt of decision."[63] Only upon the lapse of the reglementary period to appeal, with no appeal perfected within such period, does the decision become final and executory.[64] In the case of petitioner, its Motion to Vacate Judgment and to Dismiss Case was filed on April 10, 1991, only six (6) days after it learned of the existence of the case upon being informed by the Embassy of the Federative

51

Republic of Brazil in the Philippines, on April 4, 1991, of the February 18, 1991 decision.[65] Thus, in the absence of any evidence on the date of receipt of decision, other than the alleged April 4, 1991 date when petitioner learned of the decision, the February 18, 1991 decision of the trial court cannot be said to have attained finality as regards the petitioner.
The Courts Ruling The petition is bereft of merit. First Issue: Validity of the Service of Summons on Margarita Margarita insists that the trial court never acquired jurisdiction over her person in the petition for declaration of nullity of marriage since she was never validly served with summons. Neither did she appear in court to submit voluntarily to its jurisdiction. On the other hand, Abelardo argues that jurisdiction over the person of a non-resident defendant in an action in rem or quasi in rem is not necessary. The trial and appellate courts made a clear factual finding that there was proper summons by publication effected through the Department of Foreign Affairs as directed by

Romualdes v. Licaros

52

the trial court. Thus, the trial court acquired jurisdiction to render the decision declaring the marriage a nullity. Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means by which the court acquires jurisdiction over his person.9 As a rule, when the defendant does not reside and is not found in the Philippines, Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court. But when the case is one of actions in rem or quasi in rem enumerated in Section 15,10 Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and decide the case. In such instances, Philippine courts have jurisdiction over the res, and jurisdiction over the person of the non-resident defendant is not essential.11 Actions in personam12 and actions in rem or quasi in rem differ in that actions in personam are directed against specific persons and seek personal judgments. On the other hand, actions in rem or quasi in rem are directed against the thing or property or status of a person and seek judgments with respect thereto as against the whole world.13 At the time Abelardo filed the petition for nullity of the marriage in 1991, Margarita was residing in the United States. She left the Philippines in 1982 together with her two children. The trial court

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considered Margarita a non-resident defendant who is not found in the Philippines. Since the petition affects the personal status of the plaintiff, the trial court authorized extraterritorial service of summons under Section 15, Rule 14 of the Rules of Court. The term "personal status" includes family relations, particularly the relations between husband and wife.14 Under Section 15 of Rule 14, a defendant who is a non-resident and is not found in the country may be served with summons by extraterritorial service in four instances: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent; (3) when the relief demanded consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; or (4) when the property of the defendant has been attached within the Philippines. In these instances, extraterritorial service of summons may be effected under any of three modes: (1) by personal service out of the country, with leave of court; (2) by publication and sending a copy of the summons and order of the court by registered mail to the defendants last known address, also with leave of court; or (3) by any other means the judge may consider sufficient. Applying the foregoing rule, the trial court required extraterritorial service of summons to be effected on Margarita in the following

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manner: x x x, service of Summons by way of publication in a newspaper of general circulation once a week for three (3) consecutive weeks, at the same time, furnishing respondent copy of this Order as well as the corresponding Summons and copy of the petition at her given address at No. 96 Mulberry Lane, Atherton, California, U.S.A., thru the Department of Foreign Affairs, all at the expense of petitioner.15 (Emphasis ours) The trial courts prescribed mode of extraterritorial service does not fall under the first or second mode specified in Section 15 of Rule 14, but under the third mode. This refers to "any other means that the judge may consider sufficient." The Process Servers Return of 15 July 1991 shows that the summons addressed to Margarita together with the complaint and its annexes were sent by mail to the Department of Foreign Affairs with acknowledgment of receipt. The Process Servers certificate of service of summons is prima facie evidence of the facts as set out in the certificate.16 Before proceeding to declare the marriage between Margarita and Abelardo null and void, the trial court stated in its Decision dated 8 November 1991 that "compliance with the jurisdictional requirements hav(e) (sic) been duly established." We hold that delivery to the Department of Foreign Affairs was sufficient compliance with the rule. After all, this is exactly what the trial court required and considered as sufficient to

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effect service of summons under the third mode of extraterritorial service pursuant to Section 15 of Rule 14. Second Issue: Validity of the Judgment Dissolving the Conjugal Partnership of Gains Margarita claims that Abelardo coerced her into signing the Petition for Dissolution of the Conjugal Partnership of Gains ("Petition") and its annex, the Agreement of Separation of Properties ("Agreement"). Abelardo allegedly threatened to cut off all financial and material support to their children if Margarita did not sign the documents. The trial court did not find anything amiss in the Petition and Agreement that Abelardo filed, and thus the trial court approved the same. The Court of Appeals noted that a meticulous perusal of the Petition and Agreement readily shows that Margarita signed the same on the proper space after the prayer and on the portion for the verification of the petition. The Court of Appeals observed further that on 6 August 1990, Margarita appeared before Consul Amado Cortez in the Philippine Consulate Office in San Francisco, California, to affirm that she executed the Agreement of her own free will. There was no showing that Abelardo was at that time with her at the Philippine Consulate Office. Abelardo secured judicial approval of the Agreement as specifically required in the Agreement.

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The Court is bound by the factual findings of the trial and appellate courts that the parties freely and voluntarily executed the documents and that there is no showing of coercion or fraud. As a rule, in an appeal by certiorari under Rule 45, the Court does not pass upon questions of fact as the factual findings of the trial and appellate courts are binding on the Court. The Court is not a trier of facts. The Court will not examine the evidence introduced by the parties below to determine if the trial and appellate courts correctly assessed and evaluated the evidence on record.17 The due and regular execution of an instrument acknowledged before an officer authorized to administer oaths cannot be overthrown by bare allegations of coercion but only by clear and convincing proof.18 A person acknowledging an instrument before an officer authorized to administer oaths acknowledges that he freely and voluntarily executed the instrument, giving rise to a prima facie presumption of such fact. In the instant case, Margarita acknowledged the Agreement before Consul Cortez. The certificate of acknowledgment signed by Consul Cortez states that Margarita personally appeared before him and "acknowledged before me that SHE executed the same of her own free will and deed."19 Thus, there is a prima facie presumption that Margarita freely and voluntarily executed the Agreement. Margarita has failed to rebut this prima facie presumption with clear and convincing proof of coercion on the

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part of Abelardo. A document acknowledged before a notary public is prima facie evidence of the due and regular execution of the document.20 A notarized document has in its favor the presumption of regularity in its execution, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant.21 WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 58487 dismissing the petition to annul judgment is AFFIRMED.
Gomez v. CA

SO ORDERED. Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means by which the court acquires jurisdiction over his person.11 Any judgment without such service in the absence of a valid waiver is null and void.12 The resolution of the present petition hinges on the issue of whether or not summons was effectively served on respondents. If in the affirmative, the trial court had validly acquired jurisdiction over their persons and therefore its judgment is valid. To resolve whether there was valid service of summons on respondents, the nature of the action filed against them must first

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be determined. As the Court explained in Asiavest Limited vs. Court of Appeals, it will be helpful to determine first whether the action is in personam, in rem, or quasi in rem because the rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according to the nature of the action.13 In actions in personam, summons on the defendant must be served by handing a copy thereof to the defendant in person, or, if he refuses to receive it, by tendering it to him. This is specifically provided in Section 7, Rule 14 of the Rules of Court,14 which states: SEC. 7. Personal service of summons.-- The summons shall be served by handing a copy thereof to the defendant in person or, if he refuses to receive it, by tendering it to him. If efforts to find defendant personally makes prompt service impossible, substituted service may be effected by leaving copies of the summons at the defendant's dwelling house or residence with some person of suitable age and discretion then residing therein, or by leaving the copies at the defendant's office or regular place of business with some competent person in charge thereof.15 In substituted service, it is mandated that the fact of impossibility of personal service should be explained in the proof of service.16 When the defendant in an action in personam is a non-resident

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who does not voluntarily submit himself to the authority of the court, personal service of summons within the State is essential to the acquisition of jurisdiction over his person. This cannot be done if the defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him.17 An exception was accorded in Gemperle vs. Schenker wherein service of summons through the non-residents wife, who was a resident of the Philippines, was held valid, as the latter was his representative and attorney-in-fact in a prior civil case filed by the non-resident, and the second case was merely an offshoot of the first case.18 Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res, although summons must be served upon the defendant in order to satisfy the due process requirements.19 Thus, where the defendant is a non-resident who is not found in the Philippines, and (1) the action affects the personal status of the plaintiff; (2) the action relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the Philippines; or (4) the property of the defendant has been attached in the Philippines, summons may be served extraterritorially by (a) personal service out of the country, with leave of court; (b) publication, also with

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leave of court; or (c) any other manner the court may deem sufficient.20 In the present case, petitioners cause of action in Civil Case No. CEB-11103 is anchored on the claim that the spouses Jesus and Caridad Trocino reneged on their obligation to convey ownership of the two parcels of land subject of their sale. Thus, petitioners pray in their complaint that the spouses Trocino be ordered to execute the appropriate deed of sale and that the titles be delivered to them (petitioners); or in the alternative, that the sale be revoked and rescinded; and spouses Trocino ordered to return to petitioners their down payment in the amount of P500,000.00 plus interests. The action instituted by petitioners affect the parties alone, not the whole world. Hence, it is an action in personam, i.e., any judgment therein is binding only upon the parties properly impleaded.21 Contrary to petitioners belief, the complaint they filed for specific performance and/or rescission is not an action in rem. While it is a real action because it affects title to or possession of the two parcels of land covered by TCT Nos. 10616 and 31856, it does not automatically follow that the action is already one in rem. In Hernandez vs. Rural Bank of Lucena, Inc., the Court made the following distinction: In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of

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damages. In a real action, the plaintiff seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of a mortgage on, real property. An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself, instead of against the person. Hence, a real action may at the same time be an action in personam and not necessarily an action in rem.22 The objective sought in petitioners complaint was to establish a claim against respondents for their alleged refusal to convey to them the title to the two parcels of land that they inherited from their father, Jesus Trocino, who was one of the sellers of the properties to petitioners. Hence, to repeat, Civil Case No. CEB11103 is an action in personam because it is an action against persons, namely, herein respondents, on the basis of their personal liability. As such, personal service of summons upon the defendants is essential in order for the court to acquire of jurisdiction over their persons.23 A distinction, however, must be made with regard to service of summons on respondents Adolfo Trocino and Mariano Trocino. Adolfo Trocino, as records show, is already a resident of Ohio, U.S.A. for 25 years. Being a non-resident, the court cannot

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acquire jurisdiction over his person and validly try and decide the case against him. On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire jurisdiction over his person, summons must be served on him personally, or through substituted service, upon showing of impossibility of personal service. Such impossibility, and why efforts exerted towards personal service failed, should be explained in the proof of service. The pertinent facts and circumstances attendant to the service of summons must be stated in the proof of service or Officers Return. Failure to do so would invalidate all subsequent proceedings on jurisdictional grounds.24 In the present case, the process server served the summons and copies of the complaint on respondents Jacob, Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and Racheal,25 through their mother, Caridad Trocino.26 The return did not contain any particulars as to the impossibility of personal service on Mariano Trocino within a reasonable time. Such improper service renders the same ineffective. Due process of law requires personal service to support a personal judgment, and, when the proceeding is strictly in personam brought to determine the personal rights and obligations of the parties, personal service within the state or a voluntary appearance in the case is essential to the acquisition of

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jurisdiction so as to constitute compliance with the constitutional requirement of due process.27 Moreover, inasmuch as the sheriffs return failed to state the facts and circumstances showing the impossibility of personal service of summons upon respondents within a reasonable time, petitioners should have sought the issuance of an alias summons. Under Section 5, Rule 14 of the Rules of Court, alias summons may be issued when the original summons is returned without being served on any or all of the defendants.28 Petitioners, however, did not do so, and they should now bear the consequences of their lack of diligence. The fact that Atty. Expedito Bugarin represented all the respondents without any exception does not transform the ineffective service of summons into a valid one. It does not constitute a valid waiver or even a voluntary submission to the trial courts jurisdiction. There was not even the slightest proof showing that respondents authorized Atty. Bugarins appearance for and in their behalf. As found by the Court of Appeals: While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not necessarily mean that Atty. Bugarin also had the authority to represent the defendant heirs. The records show that in all the pleadings which required verification, only Caridad Trocino signed the same. There was never a single instance where defendant heirs signed the pleading. The fact that a

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pleading is signed by one defendant does not necessarily mean that it is binding on a co-defendant. Furthermore, Caridad Trocino represented herself as the principal defendant in her Motion to Withdraw Appeal. (Rollo, p. 80) Since the defendant heirs are co-defendants, the trial court should have verified the extent of Atty. Bugarins authority when petitioners failed to appear as early as the pre-trial stage, where the parties are required to appear. The absence of the defendant heirs should have prompted the trial court to inquire from the lawyer whether he was also representing the other petitioners. As co-defendant and co-heirs over the disputed properties, the defendant heirs had every right to be present during the trial. Only Caridad Trocino appeared and testified on her own behalf. All the defenses raised were her own, not the defendant heirs.29 Consequently, the judgment sought to be executed against respondents were rendered without jurisdiction as there was neither a proper service of summons nor was there any waiver or voluntary submission to the trial courts jurisdiction. Hence, the same is void, with regard to private respondents except Caridad Trocino. It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the properties to petitioners, their right to proceed against Jesus Trocino when he died was passed on to his heirs, which includes respondents and Caridad Trocino. Such

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transmission of right occurred by operation of law, more particularly by succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance of a person are transmitted.30 When the process server personally served the summons on Caridad Trocino, the trial court validly acquired jurisdiction over her person alone. Hence, the trial courts decision is valid and binding with regard to her, but only in proportion to Caridad Trocinos share. As aptly stated by the Court of Appeals: This Courts decision is therefore applicable to all the defendant heirs with the exception of defendant Caridad Trocino considering that it was the latter who entered into the alleged sale without the consent of her husband. She is therefore estopped from questioning her own authority to enter into the questioned sale. Moreover, Caridad Trocino was validly served with summons and was accorded due process.31
St. Aviation v. Grand Air

The issues to be resolved are: (1) whether the Singapore High Court has acquired jurisdiction over the person of respondent by the service of summons upon its office in the Philippines; and (2) whether the judgment by default in Suit No. 2101 by the Singapore High Court is enforceable in the

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Philippines. Generally, in the absence of a special contract, no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of another country; however, under the rules of comity, utility and convenience, nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.[1] Certainly, the Philippine legal system has long ago accepted into its jurisprudence and procedural rules the viability of an action for enforcement of foreign judgment, as well as the requisites for such valid enforcement, as derived from internationally accepted doctrines.[2]

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The conditions for the recognition and enforcement of a foreign judgment in our legal system are contained in Section 48, Rule 39 of the 1997 Rules of Civil Procedure, as amended, thus:
SEC. 48. Effect of foreign judgments. The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: (a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing; and In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a

(b)

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subsequent title; In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

Under the above Rule, a foreign judgment or order against a person is merely presumptive evidence of a right as between the parties. It may be repelled, among others, by want of jurisdiction of the issuing authority or by want of notice to the party against whom it is enforced. The party attacking a foreign judgment has the burden of overcoming the presumption of its validity.[3] Respondent, in assailing the validity of the judgment sought to be enforced, contends that the

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service of summons is void and that the Singapore court did not acquire jurisdiction over it. Generally, matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum,[4] which in this case is the law of Singapore. Here, petitioner moved for leave of court to serve a copy of the Writ of Summons outside Singapore. In an Order dated December 24, 1997, the Singapore High Court granted leave to serve a copy of the Writ of Summons on the Defendant by a method of service authorized by the law of the Philippines for service of any originating process issued by the Philippines at ground floor, APMC Building, 136 Amorsolo corner Gamboa Street, 1229 Makati City, or elsewhere in the Philippines.[5] This service of summons outside

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Singapore is in accordance with Order 11, r. 4(2) of the Rules of Court 1996[6] of Singapore, which provides.
(2) Where in accordance with these Rules, an originating process is to be served on a defendant in any country with respect to which there does not subsist a Civil Procedure Convention providing for service in that country of process of the High Court, the originating process may be served a) through the government of that country, where that government is willing to effect service; b) through a Singapore Consular authority in that country, except where service through such an authority is contrary to the law of the country; or c) by a method of service authorized by the law of that country for service of any originating process issued by that country.

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In the Philippines, jurisdiction over a party is acquired by service of summons by the sheriff,[7] his deputy or other proper court officer either personally by handing a copy thereof to the defendant[8] or by substituted service.[9] In this case, the Writ of Summons issued by the Singapore High Court was served upon respondent at its office located at Mercure Hotel (formerly Village Hotel), MIA Road, Pasay City. The Sheriffs Return shows that it was received on May 2, 1998 by Joyce T. Austria, Secretary of the General Manager of respondent company.[10] But respondent completely ignored the summons, hence, it was declared in default. Considering that the Writ of Summons was served upon respondent in accordance with our Rules,

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jurisdiction was acquired by the Singapore High Court over its person. Clearly, the judgment of default rendered by that court against respondent is valid.
Pioneer v. Guadiz

The Ruling of the Court The petition has partial merit. We affirm with modification the rulings of the trial and appellate courts. Apart from the issue on service of summons, the rulings of the trial and appellate courts on the issues raised by PIL are correct. Cause of Action Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a cause of action is the act or omission by which a party violates a right of another. The general rule is that the allegations in a complaint are sufficient to constitute a cause of action against the defendants if, admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer therein. A cause of action exists if the following elements are present, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or

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omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages.23 In the present case, the summary of Todaros allegations states that PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their contractual obligation to employ Todaro on a permanent basis in PILs Philippine office. Todaros allegations are thus sufficient to establish a cause of action. We quote with approval the trial courts ruling on this matter: On the issue of lack of cause of action It is well-settled that the merits of a motion to dismiss a complaint for lack of cause of action is tested on the strength of the allegations of fact contained in the complaint and no other (De Jesus, et al. vs. Belarmino, et al., 95 Phil. 366 [1954]). This Court finds that the allegations of the complaint, specifically paragraphs 13-33 thereof, paragraphs 3033 alleging as follows: "30. All of the acts set forth in the foregoing have been done with the knowledge, consent and/or approval of the defendants who acted in concert and/or in conspiracy with one another. 31. Under the circumstances, there is a valid contract entered into between [Todaro] and the Pioneer Group, whereby, among others, the Pioneer Group would employ [Todaro], on a permanent basis,

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to manage and operate the ready-mix concrete operations, if the Pioneer Group decides to invest in the Philippines. 32. The Pioneer Group has decided to invest in the Philippines. The refusal of the defendants to comply with the Pioneer Groups undertaking to employ [Todaro] to manage their Philippine readymix operations, on a permanent basis, is a direct breach of an obligation under a valid and perfected contract. 33. Alternatively, assuming without conceding, that there was no contractual obligation on the part of the Pioneer Group to employ [Todaro] on a permanent basis, in their Philippine operations, the Pioneer Group and the other defendants did not act with justice, give [Todaro] his due and observe honesty and good faith and/or they have willfully caused injury to [Todaro] in a manner that is contrary to morals, good customs, and public policy, as mandated under Arts. 19 and 21 of the New Civil Code." sufficiently establish a cause of action for breach of contract and/or violation of Articles 19 and 21 of the New Civil Code. Whether or not these allegations are true is immaterial for the court cannot inquire into the truth thereof, the test being whether, given the allegations of fact in the complaint, a valid judgment could be rendered in accordance with the prayer in the complaint.24 It should be emphasized that the presence of a cause of action

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rests on the sufficiency, and not on the veracity, of the allegations in the complaint. The veracity of the allegations will have to be examined during the trial on the merits. In resolving a motion to dismiss based on lack of cause of action, the trial court is limited to the four corners of the complaint and its annexes. It is not yet necessary for the trial court to examine the truthfulness of the allegations in the complaint. Such examination is proper during the trial on the merits. Forum Non-Conveniens The doctrine of forum non-conveniens requires an examination of the truthfulness of the allegations in the complaint. Section 1, Rule 16 of the 1997 Rules of Civil Procedure does not mention forum non-conveniens as a ground for filing a motion to dismiss. The propriety of dismissing a case based on forum non-conveniens requires a factual determination; hence, it is more properly considered a matter of defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, the trial court should do so only after vital facts are established to determine whether special circumstances require the courts desistance.25 Jurisdiction over PIL PIL questions the trial courts exercise of jurisdiction over it on two levels. First, that PIL is a foreign corporation not doing business in

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the Philippines and because of this, the service of summons on PIL did not follow the mandated procedure. Second, that Todaros claims are based on an alleged breach of an employment contract so Todaro should have filed his complaint before the NLRC and not before the trial court. Transacting Business in the Philippines and Service of Summons The first level has two sub-issues: PILs transaction of business in the Philippines and the service of summons on PIL. Section 12, Rule 14 of the 1997 Rules of Civil Procedure provides the manner by which summons may be served upon a foreign juridical entity which has transacted business in the Philippines. Thus: Service upon foreign private juridical entity. When the defendant is a foreign juridical entity which has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or any of its officers or agents within the Philippines. As to the first sub-issue, PIL insists that its sole act of "transacting" or "doing business" in the Philippines consisted of its investment in PPHI. Under Philippine law, PILs mere investment in PPHI does not constitute "doing business." However, we affirm the lower courts ruling and declare that, based on the allegations in

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Todaros complaint, PIL was doing business in the Philippines when it negotiated Todaros employment with PPHI. Section 3(d) of Republic Act No. 7042, Foreign Investments Act of 1991, states: The phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty [180] days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account; (Emphases added)

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PILs alleged acts in actively negotiating to employ Todaro to run its pre-mixed concrete operations in the Philippines, which acts are hypothetically admitted in PILs motion to dismiss, are not mere acts of a passive investor in a domestic corporation. Such are managerial and operational acts in directing and establishing commercial operations in the Philippines. The annexes that Todaro attached to his complaint give us an idea on the extent of PILs involvement in the negotiations regarding Todaros employment. In Annex "E," McDonald of Pioneer Concrete Group HK confirmed his offer to engage Todaro as a consultant of PIL. In Annex "F," Todaro accepted the consultancy. In Annex "H," Klepzig of PPHI stated that PIL authorized him to tell Todaro about the cessation of his consultancy. Finally, in Annex "I," Folwell of PIL wrote to Todaro to confirm that "Pioneer" no longer wishes to be associated with Todaro and that Klepzig is authorized to terminate this association. Folwell further referred to a Dr. Schubert and to Pioneer Hong Kong. These confirmations and references tell us that, in this instance, the various officers and companies under the Pioneer brand name do not work independently of each other. It cannot be denied that PIL had knowledge of and even authorized the non-implementation of Todaros alleged permanent employment. In fact, in the letters to Todaro, the word "Pioneer" was used to refer not just to PIL alone but also to all corporations negotiating with Todaro under the Pioneer name.

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As further proof of the interconnection of the various Pioneer corporations with regard to their negotiations with Todaro, McDonald of Pioneer Concrete Group HK confirmed Todaros engagement as consultant of PIL (Annex "E") while Folwell of PIL stated that Todaro rendered consultancy services to Pioneer HK (Annex "I"). In this sense, the various Pioneer corporations were not acting as separate corporations. The behavior of the various Pioneer corporations shoots down their defense that the corporations have separate and distinct personalities, managements, and operations. The various Pioneer corporations were all working in concert to negotiate an employment contract between Todaro and PPHI, a domestic corporation. Finally, the phrase "doing business in the Philippines" in the former version of Section 12, Rule 14 now reads "has transacted business in the Philippines." The scope is thus broader in that it is enough for the application of the Rule that the foreign private juridical entity "has transacted business in the Philippines."26 As to the second sub-issue, the purpose of summons is not only to acquire jurisdiction over the person of the defendant, but also to give notice to the defendant that an action has been commenced against it and to afford it an opportunity to be heard on the claim made against it. The requirements of the rule on summons must be strictly followed; otherwise, the trial court will not acquire jurisdiction over the defendant.

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When summons is to be served on a natural person, service of summons should be made in person on the defendant.27 Substituted service is resorted to only upon the concurrence of two requisites: (1) when the defendant cannot be served personally within a reasonable time and (2) when there is impossibility of prompt service as shown by the statement in the proof of service in the efforts made to find the defendant personally and that such efforts failed.28 The statutory requirements of substituted service must be followed strictly, faithfully, and fully, and any substituted service other than by the statute is considered ineffective. Substituted service is in derogation of the usual method of service. It is a method extraordinary in character and may be used only as prescribed and in the circumstances authorized by the statute.29 The need for strict compliance with the requirements of the rule on summons is also exemplified in the exclusive enumeration of the agents of a domestic private juridical entity who are authorized to receive summons. At present, Section 11 of Rule 14 provides that when the defendant is a domestic private juridical entity, service may be made on the "president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel." The previous version of Section 11 allowed for the service of summons on the "president, manager, secretary, cashier, agent, or any of its directors." The present Section 11 qualified "manager" to "general

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manager" and "secretary" to "corporate secretary." The present Section 11 also removed "cashier, agent, or any of its directors" from the exclusive enumeration. When summons is served on a foreign juridical entity, there are three prescribed ways: (1) service on its resident agent designated in accordance with law for that purpose, (2) service on the government official designated by law to receive summons if the corporation does not have a resident agent, and (3) service on any of the corporations officers or agents within the Philippines.30 In the present case, service of summons on PIL failed to follow any of the prescribed processes. PIL had no resident agent in the Philippines. Summons was not served on the Securities and Exchange Commission (SEC), the designated government agency,31 since PIL is not registered with the SEC. Summons for PIL was served on De Leon, Klepzigs Executive Assistant. Klepzig is PILs "agent within the Philippines" because PIL authorized Klepzig to notify Todaro of the cessation of his consultancy (Annexes "H" and "I").32 The authority given by PIL to Klepzig to notify Todaro implies that Klepzig was likewise authorized to receive Todaros response to PILs notice. Todaro responded to PILs notice by filing a complaint before the trial court. However, summons was not served personally on Klepzig as agent of PIL. Instead, summons was served on De Leon, Klepzigs

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Executive Assistant. In this instance, De Leon was not PILs agent but a mere employee of Klepzig. In effect, the sheriff33 resorted to substituted service. For symmetry, we apply the rule on substituted service of summons on a natural person and we find that no reason was given to justify the service of PILs summons on De Leon. Thus, we rule that PIL transacted business in the Philippines and Klepzig was its agent within the Philippines. However, there was improper service of summons on PIL since summons was not served personally on Klepzig. NLRC Jurisdiction As to the second level, Todaro prays for payment of damages due him because of PILs non-implementation of Todaros alleged employment agreement with PPHI. The appellate court stated its ruling on this matter, thus: It could not be denied that there was no existing contract yet to speak of between PIONEER INTL. and [Todaro]. Since there was an absence of an employment contract between the two parties, this Court is of the opinion and so holds that no employeremployee relationship actually exists. Record reveals that all that was agreed upon by [Todaro] and the Pioneer Concrete, acting in behalf of PIONEER INTL., was the confirmation of the offer to engage the services of the former as consultant of PIONEER

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INTL. (Rollo, p. 132). The failure on the part of PIONEER INTL. to abide by the said agreement, which was duly confirmed by PIONEER INTL., brought about a breach of an obligation on a valid and perfected agreement. There being no employeremployee relationship established between [PIL] and [Todaro], it could be said that the instant case falls within the jurisdiction of the regular courts of justice as the money claim of [Todaro] did not arise out of or in connection with [an] employer-employee relationship.34 Todaros employment in the Philippines would not be with PIL but with PPHI as stated in the 20 October 1997 letter of Folwell. Assuming the existence of the employment agreement, the employer-employee relationship would be between PPHI and Todaro, not between PIL and Todaro. PILs liability for the nonimplementation of the alleged employment agreement is a civil dispute properly belonging to the regular courts. Todaros causes of action as stated in his complaint are, in addition to breach of contract, based on "violation of Articles 19 and 21 of the New Civil Code" for the "clear and evident bad faith and malice"35 on the part of defendants. The NLRCs jurisdiction is limited to those enumerated under Article 217 of the Labor Code.36 WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated 27 September 2001 and the Resolution dated 14 January 2003 of the appellate court are AFFIRMED with the MODIFICATION that there was improper service of summons on

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Pioneer International, Ltd. The case is remanded to the trial court for proper service of summons and trial. No costs.
Regner v. Logarta

From the foregoing, this Court identifies the issues to be resolved in this petition as: (1) Whether a co-donee is an indispensable party in an action to declare the nullity of the deed of donation, and (2) whether delay in the service of summons upon one of the defendants constitutes failure to prosecute that would warrant dismissal of the complaint. A Court must acquire jurisdiction over the persons of indispensable parties before it can validly pronounce judgments personal to the parties. Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint. On the other hand, jurisdiction over the person of a party defendant is assured upon the service of summons in the manner required by law or otherwise by his voluntary appearance. As a rule, if a defendant has not been summoned, the court acquires no jurisdiction over his
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person, and a personal judgment rendered against such defendant is null and void.[10] A decision that is null and void for want of jurisdiction on the part of the trial court is not a decision in the contemplation of law and, hence, it can never become final and executory.[11] Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-interest without whom there can be no final determination of an action. As such, they must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of judicial power.[12] It is precisely when an indispensable party is not before the court [that] the action should

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be dismissed.[13] The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present.[14] As we ruled in Alberto v. Mananghala[15]:
In an action for recovery of property against a person who purchased it from another who in turn acquired it from others by the same means or by donation or otherwise, the predecessors of defendants are indispensable parties if the transfers, if not voided, may bind plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In the latter case, this Court held: In order to bring this suit duly to a close, it is imperative to determine the only question raised in connection with the pending appeal, to wit, whether all the persons who intervened in the matter of the transfers and donation herein referred to, are or are not necessary parties to this suit, since it is asked in the complaint that the said transfers and donation be declared null and void

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 an indispensable declaration for the purpose, in a proper case, of concluding the plaintiff to be the sole owner of the house in dispute. If such a declaration of annulment can directly affect the persons who made and who were concerned in the said transfers, nothing could be more proper and just than to hear them in the litigation, as parties interested in maintaining the validity of those transactions, and therefore, whatever be the nature of the judgment rendered, Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente Miranda, and Rafael Sierra, besides the said minors, must be included in the case as defendants. (Garcia vs. Reyes, 17 Phil., 130-131.)

It takes no great degree of legal sophistication to realize that Cynthia and Teresa are indispensable parties to Civil Case No. CEB 23927. Cynthia and Teresa allegedly derived their rights to the subject property by way of donation from their father Luis. The central thrust of the petitioners complaint

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in Civil Case No. CEB 23927 was that Luis could not have donated Proprietary Ownership Certificate No. 0272 to his daughters Cynthia and Teresa, as Luis was already very ill and no longer of sound and disposing mind at the time of donation on 15 May 1997. Accordingly, the prayer in petitioners complaint was for the trial court to declare null and void the Deed of Donation and to restrain the Cebu Country Club, Inc. from transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa. Thus, based on the Deed of Donation, Teresa and Cynthia are co-owners of Proprietary Membership Certificate No. 0272 of Cebu Country Club, Inc. The country club membership certificate is undivided and it is impossible to pinpoint which specific portion of the property belongs to either Teresa or Cynthia. Indeed, both Teresa and Cynthia

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are indispensable parties in Civil Case No. CEB 23927. An indispensable party has been defined as follows:
An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action before it may properly go forward.

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A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them. Also, a person is not an indispensable party if his presence would merely permit complete relief between him and those already parties to the action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare a person to be an indispensable party that his presence will avoid multiple litigation.[16]

In Servicewide Specialists, Incorporated v. Court of Appeals,[17] this Court held that no final determination of a case could be made if an indispensable party is not legally present therein:
An indispensable party is one whose interest will be

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affected by the courts action in the litigation, and without whom no final determination of the case can be had. The partys interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable.

The rationale for treating all the co-owners of a property as indispensable parties in a suit involving the co-owned property is explained in Arcelona v. Court of Appeals[18]:
As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by a person having merely an undivided interest in any given tract of land, a judgment in favor of the defendants would not be conclusive as against the other co-owners not parties to the suit, and thus the defendant in possession of the

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property might be harassed by as many succeeding actions of ejectment, as there might be co-owners of the title asserted against him. The purpose of this provision was to prevent multiplicity of suits by requiring the person asserting a right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole matter in dispute may be determined once and for all in one litigation.

Applying the foregoing definitions and principles to the present case, this Court finds that any decision in Civil Case No. CEB 23927 cannot bind Cynthia, and the Court cannot nullify the donation of the property she now co-owns with Teresa, even if limited only to the portion belonging to Teresa, to whom summons was properly served, since ownership of the property is still pro indiviso. Obviously, Cynthia is an indispensable party in Civil Case No. CEB 23927 without whom

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the lower court is barred from making a final adjudication as to the validity of the entire donation. Without the presence of indispensable parties to a suit or proceeding, a judgment therein cannot attain finality.[19] Being an indispensable party in Civil Case No. CEB 23927, the trial court must also acquire jurisdiction over Cynthias person through the proper service of summons. Based on the foregoing disquisitions, the issue of whether the answer filed by Teresa should benefit Cynthia who was not served summons need not be discussed. As to determine whether Cynthia was properly served a summons, it will be helpful to determine first the nature of the action filed against Cynthia and

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Teresa by petitioner Victoria, whether it is an action in personam, in rem or quasi in rem. This is because the rules on service of summons embodied in Rule 14 apply according to whether an action is one or the other of these actions. In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of damages.[20] In contrast, in a real action, the plaintiff seeks the recovery of real property; or, as indicated in Section 2(a), Rule 4 of the then Rules of Court, a real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of mortgage on, real property. An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself, instead of against the person.[21]

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In an action in personam, personal service of summons or, if this is not possible and he cannot be personally served, substituted service, as provided in Section 7, Rule 14 of the Rules of Court,[22] is essential for the acquisition by the court of jurisdiction over the person of a defendant who does not voluntarily submit himself to the authority of the court.[23] If defendant cannot be served a summons because he is temporarily abroad, but is otherwise a Philippine resident, service of summons may, by leave of court, be made by publication.[24] Otherwise stated, a resident defendant in an action in personam, who cannot be personally served a summons, may be summoned either by means of substituted service in accordance with Section 7, Rule 14 of the Rules of Court, or by publication as provided in Sections 15 and 16 of the same Rule.

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In all of these cases, it should be noted, defendant must be a resident of the Philippines; otherwise an action in personam cannot be brought because jurisdiction over his person is essential to make a binding decision. On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the defendant is not essential for giving the court jurisdiction so long as the court acquires jurisdiction over the res. If the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in accordance with Section 15, Rule 14 of the Rules of Court, which provides:
Section 15. Extraterritorial service. - When the defendant does not reside and is not found in the Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which is,

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property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under Section 6; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.

As stated above, there are only four instances wherein a defendant who is a non-resident and is not found in the country may be served a summons by

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extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is property within the Philippines, on which the defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant nonresidents property has been attached within the Philippines. In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient.[25] In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has jurisdiction over the res, i.e., the personal status of the

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plaintiff who is domiciled in the Philippines or the property litigated or attached. Service of summons in the manner provided in Section 15, Rule 14 of the Rules of Court is not for the purpose of vesting the court with jurisdiction, but for complying with the requirements of fair play or due process, so that the defendant will be informed of the pendency of the action against him; and the possibility that property in the Philippines belonging to him, or in which he has an interest, might be subjected to a judgment in favor of the plaintiff and he can thereby take steps to protect his interest if he is so minded.[26] In petitioners Complaint in Civil Case No. CEB No. 23427, she alleged that Cynthia is residing at 462 West Vine No. 201, Glendale, California, 912041, U.S.A.; while Teresa is residing at 2408 South Hacienda Boulevard, Hacienda Heights, California, but they usually visit here in the

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Philippines and can be served summonses and other processes at the Borja Family Clinic, Bohol. Pertinent portions of the Complaint read:
2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married to Ramon Logarta, resident (sic) 463 West Vine No.201, Glendale, California, 912041, USA. She however usually visits in the Philippines and can be served with summons and other processes of this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol; Defendant Teresa R. Tormis is likewise a Filipino, of legal age, married to Antonio Tormis, and a resident of 2408 South Hacienda Heights, California, 19745, U.S.A. She however usually visits in the Philippines and can be served with summons and other processes of this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol.[27]

3.

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Petitioner prayed for a declaration of nullity of the deed of donation, to restrain Cebu Country Club, Inc. from transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa, and for moral and exemplary damages. Civil Case No. CEB 23927 is evidently an action against Cynthia and Teresa on the basis of their personal liability for the alleged fraudulent transfer of the subject Country Club membership from Luis to their name. In this sense, petitioner questions the participation and shares of Cynthia and Teresa in the transferred Country Club membership. Moreover, the membership certificate from the Cebu Country Club, Inc. is a personal property. Thus, the action instituted by petitioner before the RTC is in personam. Being an action in personam, the general rule requires the personal service of summons on Cynthia within the Philippines, but this is not possible in the

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present case because Cynthia is a non-resident and is not found within the Philippines. As Cynthia is a nonresident who is not found in the Philippines, service of summons on her must be in accordance with Section 15, Rule 14 of the Rules of Court. Such service, to be effective outside the Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court should be sent by registered mail to the last known address of the defendant; or (3) in any other manner which the court may deem sufficient. The third mode, like the first two, must be made outside the Philippines, such as through the Philippine Embassy in the foreign country where Cynthia resides.

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Since in the case at bar, the service of summons upon Cynthia was not done by any of the authorized modes, the trial court was correct in dismissing petitioners complaint. Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states
SEC. 3. Dismissal due to fault of plaintiff. If, for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion, without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise declared by the court.

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As can be gleaned from the rule, there are three instances when the complaint may be dismissed due to the plaintiff's fault: (1) if he fails to appear during a scheduled trial, especially on the date for the presentation of his evidence in chief; (2) if he fails to prosecute his action for an unreasonable length of time; and (3) if he fails to comply with the rules or any order of the court.[28] Considering the circumstances of the case, it can be concluded that the petitioner failed to prosecute the case for an unreasonable length of time. There is failure to prosecute when the plaintiff, being present, is not ready or is unwilling to proceed with the scheduled trial or when postponements in the past were due to the plaintiff's own making, intended to be dilatory or caused substantial prejudice on the part of the defendant.[29]

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While a court can dismiss a case on the ground of failure to prosecute, the true test for the exercise of such power is whether, under the prevailing circumstances, the plaintiff is culpable for want of due diligence in failing to proceed with reasonable promptitude.[30] As to what constitutes an unreasonable length of time, within the purview of the above-quoted provision, the Court has ruled that it depends upon the circumstances of each particular case, and that the sound discretion of the court in the determination of said question will not be disturbed, in the absence of patent abuse; and that the burden of showing abuse of judicial discretion is upon the appellant since every presumption is in favor of the correctness of the court's action.[31] Likewise, the concept of promptness is a relative term and must not unnecessarily be an inflexible one. It connotes an action without hesitation and loss of time. As to what constitutes the

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term is addressed to the consideration of the trial court, bearing in mind that while actions must be disposed of with dispatch, the essential ingredient is the administration of justice and not mere speed.[32] It is well to quote the doctrine laid in Padua v. Ericta,[33] as accentuated in the subsequent case Marahay v. Melicor[34]:
Courts should not brook undue delays in the ventilation and determination of causes. It should be their constant effort to assure that litigations are prosecuted and resolved with dispatch. Postponements of trials and hearings should not be allowed except on meritorious grounds; and the grant or refusal thereof rests entirely in the sound discretion of the Judge. It goes without saying, however, that discretion must be reasonably and wisely exercised, in the light of the attendant circumstances. Some reasonable deferment of the proceedings may be allowed or tolerated to the end that cases may be adjudged only after full and free

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presentation of evidence by all the parties, especially where the deferment would cause no substantial prejudice to any part. The desideratum of a speedy disposition of cases should not, if at all possible, result in the precipitate loss of a partys right to present evidence and either in plaintiff's being non-suited or the defendant's being pronounced liable under an ex parte judgment. [T]rial courts have x x x the duty to dispose of controversies after trial on the merits whenever possible. It is deemed an abuse of discretion for them, on their own motion, to enter a dismissal which is not warranted by the circumstances of the case (Municipality of Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While it is true that the dismissal of an action on grounds specified under Section 3, Rule 17 of the Revised Rules of Court is addressed to their discretion (Flores v. Phil. Alien Property Administrator, 107 Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna, L-17631, October 19, 1966, 18 SCRA 390), such discretion must

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be exercised soundly with a view to the circumstances surrounding each particular case (Vernus-Sanciangco v. Sanciangco, L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that serve as mitigating circumstances for the delay, the same should be considered and dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672; Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]), especially where the suit appears to be meritorious and the plaintiff was not culpably negligent and no injury results to defendant (27 C.J.S. 235-36; 15 ALR 3rd 680). (Abinales vs. Court of First Instance of Zamboanga City, Br. I, 70 SCRA 590, 595). It is true that the allowance or denial of petitions for postponement and the setting aside of orders previously issued, rest principally upon the sound discretion of the judge to whom they are addressed, but always predicated on the consideration that more than the mere convenience of the courts or of the parties of the case, the ends of justice and fairness would be served thereby (Camara Vda. de Zubiri v. Zubiri, et al., L-16745, December 17, 1966). When no substantial rights are affected and the intention to delay is not

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manifest, the corresponding motion to transfer the hearing having been filed accordingly, it is sound judicial discretion to allow them (Rexwell Corp. v. Canlas, L-16746, December 30, 1961). x x x.

This Court recalls that the complaint herein was filed on 15 June 1999. The summonses for Cynthia and Teresa were served on their sister Melinda at the Borja Family Clinic in Tagbilaran City, but the latter refused to receive the same. It was only on 1 June 2000 that summons was served on Teresa at Room 304, Regency Crest Condominium, Banilad, Cebu City, when she was in the Philippines for a visit. However, the summons for Cynthia was never served upon her. Although Section 1, Rule 14 of the Rules, imposes upon the clerk of court the duty to serve summons, this does not relieve the petitioner of her

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own duty as the plaintiff in a civil case to prosecute the case diligently. If the clerk had been negligent, it was petitioners duty to call the courts attention to that fact. It must be noted that it was not even petitioner who called the courts attention that summons had not been served on Cynthia, but Teresa. This despite the fact that petitioner was aware, as early as 15 June 1999, when she filed her complaint, that the summonses could not be served on Teresa and Cynthia, as she admitted therein that Teresa and Cynthia were residing abroad. Petitioner as plaintiff should have asked that Cynthia and Teresa be summoned by publication at the earliest possible time. She cannot idly sit by and wait till this is done. She cannot afterwards wash her hands and say that the delay was not her fault. She cannot simply "fold [her] hands" and say that it is the duty of the clerk of court to have the summonses served on Cynthia and Teresa for the prompt disposition of her

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case. If there were no means of summoning any of the defendants, petitioner should have so informed the court within a reasonable period of time, so that the case could be disposed of one way or another and the administration of justice would not suffer delay. The non-performance of that duty by petitioner as plaintiff is an express ground for dismissing an action. For, indeed, this duty imposed upon her was precisely to spur on the slothful. For failure to diligently pursue the complaint, petitioner trifled with the right of the respondents to speedy trial. It also sorely tried the patience of the court and wasted its precious time and attention. To allow petitioner to wait until such time that summonses were served on respondents would frustrate the protection against unreasonable delay in the prosecution of cases and violate the constitutional mandate of speedy dispensation of justice which

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would in time erode the peoples confidence in the judiciary. We take a dim view of petitioners complacent attitude. Ex nihilo nihil fit.[35] Likewise, petitioners counsel inexplicably failed to diligently pursue the service of summonses on respondents. These were acts of negligence, laxity and truancy which the court could have very easily avoided or timely remedied. Petitioner and her counsel could not avail themselves of this Courts sympathy, considering their apparent complacency, if not delinquency, in the conduct of their litigation. Considering the foregoing, we sustain the dismissal by the trial court of the petitioners complaint for failure to prosecute for a period of more than one year (from the time of filing thereof on 15 June 1997 until Teresas filing of a motion to dismiss).
FOREIGN CORPORATIONS

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MR Holdings v. Bajar

In its petition, petitioner alleges that it is not "doing business" in the Philippines and characterizes its participation in the assignment contracts (whereby Marcoppers assets where transferred to it) as mere isolated acts that cannot foreclose its right to sue in local courts. Petitioner likewise maintains that the two assignment contracts, although executed during the pendency of Civil Case No. 96-80083 in the RTC of Manila, are not fraudulent conveyances as they were supported by valuable considerations. Moreover, they were executed in connection with prior transactions that took place as early as 1992 which involved ADB, a reputable financial institution. Petitioner further claims that when it paid Marcoppers obligation to ADB, it stepped into the latters shoes and acquired its (ADBS) rights, titles, and interests under the "Deed of Real Estate and Chattel Mortgage." Lastly, petitioner asserts its existence as a corporation, separate and distinct from Placer Dome and Marcopper. In its comment, Solidbank avers that: a) petitioner is "doing business" in the Philippines and this is evidenced by the "huge investment" it poured into the assignment contracts; b) granting that petitioner is not doing business in the Philippines, the nature of its transaction reveals an "intention to do business" or "to begin a series of transaction" in the country; c) petitioner, Marcopper and Placer Dome are one and the same entity, petitioner being then a wholly-owned subsidiary of Placer Dome, which, in turn, owns 40% of Marcopper; d) the timing under which the

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assignments contracts were executed shows that petitioners purpose was to defeat any judgment favorable to it (Solidbank); and e) petitioner violated the rule on forum shopping since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque) is similar to the other cases filed by Marcopper in order to forestall the sale of the levied properties. Marcopper, in a separate comment, states that it is merely a nominal party to the present case and that its principal concerns are being ventilated in another case. The petition is impressed with merit. Crucial to the outcome of this case is our resolution of the following issues: 1) Does petitioner have the legal capacity to sue? 2) Was the Deed of Assignment between Marcopper and petitioner executed in fraud of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome, and Marcopper one and the same entity? and 4) Is petitioner guilty of forum shopping? We shall resolve the issues in seriatim. I The Court of Appeals ruled that petitioner has no legal capacity to sue in the Philippine courts because it is a foreign corporation doing business here without license. A review of this ruling does

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not pose much complexity as the principles governing a foreign corporations right to sue in local courts have long been settled by our Corporation Law.17 These principles may be condensed in three statements, to wit: a) if a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts;18 b) if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an isolated transaction19 or on a cause of action entirely independent of any business transaction;20 and c) if a foreign corporation does business in the Philippines with the required license, it can sue before Philippine courts on any transaction. Apparently, it is not the absence of the prescribed license but the "doing (of) business" in the Philippines without such license which debars the foreign corporation from access to our courts.21 The task at hand requires us to weigh the facts vis--vis the established principles. The question whether or not a foreign corporation is doing business is dependent principally upon the facts and circumstances of each particular case, considered in the light of the purposes and language of the pertinent statute or statutes involved and of the general principles governing the jurisdictional authority of the state over such corporations.22 Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines," is silent as to what constitutes doing" or "transacting" business in the Philippines. Fortunately,

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jurisprudence has supplied the deficiency and has held that the term "implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object for which the corporation was organized."23 In Mentholatum Co. Inc., vs. Mangaliman,24 this Court laid down the test to determine whether a foreign company is "doing business," thus: " x x x The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction Cos. vs. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984,987.) x x x." The traditional case law definition has metamorphosed into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction. For instance, Republic Act No. 7042, otherwise known as the "Foreign Investment Act of 1991," defines "doing business" as follows: "d) The phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or

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more; participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works; or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase doing business shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to represent its interests in such corporation, nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account." (Emphasis supplied)25 Likewise, Section 1 of Republic Act No. 5455,26 provides that: "SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase doing business shall include soliciting orders, purchases, service contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totaling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the

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Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization." There are other statutes27 defining the term "doing business" in the same tenor as those above-quoted, and as may be observed, one common denominator among them all is the concept of "continuity." In the case at bar, the Court of Appeals categorized as "doing business" petitioners participation under the "Assignment Agreement" and the "Deed of Assignment." This is simply untenable. The expression "doing business" should not be given such a strict and literal construction as to make it apply to any corporate dealing whatever.28 At this early stage and with petitioners acts or transactions limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was organized. It may not be amiss to point out that the purpose or business for which petitioner was organized is not discernible in the records. No effort was exerted by the Court of Appeals to establish the nexus between petitioners business and the acts supposed to constitute "doing business." Thus, whether the assignment contracts were incidental to petitioners business

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or were continuation thereof is beyond determination. We cannot apply the case cited by the Court of Appeals, Far East Intl Import and Export Corp. vs. Nankai Kogyo Co., Ltd.,29 which held that a single act may still constitute "doing business" if "it is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state." In said case, there was an express admission from an official of the foreign corporation that he was sent to the Philippines to look into the operation of mines, thereby revealing the foreign corporations desire to continue engaging in business here. But in the case at bar, there is no evidence of similar desire or intent. Unarguably, petitioner may, as the Court of Appeals suggested, decide to operate Marcoppers mining business, but, of course, at this stage, that is a mere speculation. Or it may decide to sell the credit secured by the mining properties to an offshore investor, in which case the acts will still be isolated transactions. To see through the present facts an intention on the part of petitioner to start a series of business transaction is to rest on assumptions or probabilities falling short of actual proof. Courts should never base its judgments on a state of facts so inadequately developed that it cannot be determined where inference ends and conjecture begins. Indeed, the Court of Appeals holding that petitioner was determined to be "doing business" in the Philippines is based mainly on conjectures and speculation. In concluding that the

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"unmistakable intention" of petitioner is to continue Marcoppers business, the Court of Appeals hangs on the wobbly premise that "there is no other way for petitioner to recover its huge financial investments which it poured into Marcoppers rehabilitation without it (petitioner) continuing Marcoppers business in the country."30 This is a mere presumption. Absent overt acts of petitioner from which we may directly infer its intention to continue Marcoppers business, we cannot give our concurrence. Significantly, a view subscribed upon by many authorities is that the mere ownership by a foreign corporation of a property in a certain state, unaccompanied by its active use in furtherance of the business for which it was formed, is insufficient in itself to constitute doing business.31 In Chittim vs. Belle Fourche Bentonite Products Co.,32 it was held that even if a foreign corporation purchased and took conveyances of a mining claim, did some assessment work thereon, and endeavored to sell it, its acts will not constitute the doing of business so as to subject the corporation to the statutory requirements for the transacting of business. On the same vein, petitioner, a foreign corporation, which becomes the assignee of mining properties, facilities and equipment cannot be automatically considered as doing business, nor presumed to have the intention of engaging in mining business. One important point. Long before petitioner assumed Marcoppers debt to ADB and became their assignee under the two assignment

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contracts, there already existed a "Support and Standby Credit Agreement" between ADB and Placer Dome whereby the latter bound itself to provide cash flow support for Marcoppers payment of its obligations to ADB. Plainly, petitioners payment of US$ 18,453,450.12 to ADB was more of a fulfillment of an obligation under the "Support and Standby Credit Agreement" rather than an investment. That petitioner had to step into the shoes of ADB as Marcoppers creditor was just a necessary legal consequence of the transactions that transpired. Also, we must hasten to add that the "Support and Standby Credit Agreement" was executed four (4) years prior to Marcoppers insovency, hence, the alleged "intention of petitioner to continue Marcoppers business" could have no basis for at that time, Marcoppers fate cannot yet be determined. In the final analysis, we are convinced that petitioner was engaged only in isolated acts or transactions. Single or isolated acts, contracts, or transactions of foreign corporations are not regarded as a doing or carrying on of business. Typical examples of these are the making of a single contract, sale, sale with the taking of a note and mortgage in the state to secure payment therefor, purchase, or note, or the mere commission of a tort.33 In these instances, there is no purpose to do any other business within the country. II

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Solidbank contends that from the chronology and timing of events, it is evident that there existed a pre-set pattern of response on the part of Marcopper to defeat whatever court ruling that may be rendered in favor of Solidbank. We are not convinced. While it may appear, at initial glance, that the assignment contracts are in the nature of fraudulent conveyances, however, a closer look at the events that transpired prior to the execution of those contracts gives rise to a different conclusion. The obvious flaw in the Court of Appeals Decision lies in its constricted view of the facts obtaining in the case. In its factual narration, the Court of Appeals definitely left out some events. We shall see later the significance of those events. Article 1387 of the Civil Code of the Philippines provides: "Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the

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property alienated, and need not have been obtained by the party seeking rescission. In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by law and of evidence. This article presumes the existence of fraud made by a debtor. Thus, in the absence of satisfactory evidence to the contrary, an alienation of a property will be held fraudulent if it is made after a judgment has been rendered against the debtor making the alienation.34 This presumption of fraud is not conclusive and may be rebutted by satisfactory and convincing evidence. All that is necessary is to establish affirmatively that the conveyance is made in good faith and for a sufficient and valuable consideration.35 The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable considerations. Patent from the "Assignment Agreement" is the fact that petitioner assumed the payment of US$ 18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt as of March 20, 1997.36 Solidbank cannot deny this fact considering that a substantial portion of the said payment, in the sum of US$ 13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its major stockholder.37 The facts of the case so far show that the assignment contracts

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were executed in good faith. The execution of the "Assignment Agreement" on March 20, 1997 and the "Deed of Assignment" on December 8,1997 is not the alpha of this case. While the execution of these assignment contracts almost coincided with the rendition on May 7, 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC, however, there was no intention on the part of petitioner to defeat Solidbanks claim. It bears reiterating that as early as November 4, 1992, Placer Dome had already bound itself under a "Support and Standby Credit Agreement" to provide Marcopper with cash flow support for the payment to ADB of its obligations. When Marcopper ceased operations on account of disastrous mine tailings spill into the Boac River and ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary, herein petitioner, paid ADB the amount of US $18,453,450.12. Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner an "Assignment Agreement" and a "Deed of Assignment." Obviously, the assignment contracts were connected with transactions that happened long before the rendition in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC. Those contracts cannot be viewed in isolation. If we may add, it is highly inconceivable that ADB, a reputable international financial organization, will connive with Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for its claim four years thereafter. And it is equally incredible for petitioner to be paying the huge sum of US $ 18,453,450.12 to ADB only for the purpose

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of defrauding Solidbank of the sum of P52,970,756.89. It is said that the test as to whether or not a conveyance is fraudulent is -- does it prejudice the rights of creditors?38 We cannot see how Solidbanks right was prejudiced by the assignment contracts considering that substantially all of Marcoppers properties were already covered by the registered "Deed of Real Estate and Chattel Mortgage" executed by Marcopper in favor of ADB as early as November 11, 1992. As such, Solidbank cannot assert a better right than ADB, the latter being a preferred creditor. It is basic that mortgaged properties answer primarily for the mortgaged credit, not for the judgment credit of the mortgagors unsecured creditor. Considering that petitioner assumed Marcoppers debt to ADB, it follows that Solidbanks right as judgment creditor over the subject properties must give way to that of the former.
1wphi 1.nt

III The record is lacking in circumstances that would suggest that petitioner corporation, Placer Dome and Marcopper are one and the same entity. While admittedly, petitioner is a wholly-owned subsidiary of Placer Dome, which in turn, which, in turn, was then a minority stockholder of Marcopper, however, the mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a subsidiarys

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separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business.39 The recent case of Philippine National Bank vs. Ritratto Group Inc.,40 outlines the circumstances which are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-corporation, to wit: (a) The parent corporation owns all or most of the capital stock of the subsidiary. (b) The parent and subsidiary corporations have common directors or officers. (c) The parent corporation finances the subsidiary. (d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation. (e) The subsidiary has grossly inadequate capital. (f) The parent corporation pays the salaries and other expenses or losses of the subsidiary. (g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by

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the parent corporation. (h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporations own. (i) The parent corporation uses the property of the subsidiary as its own. (j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but take their orders from the parent corporation. (k) The formal legal requirements of the subsidiary are not observed. In this catena of circumstances, what is only extant in the records is the matter of stock ownership. There are no other factors indicative that petitioner is a mere instrumentality of Marcopper or Placer Dome. The mere fact that Placer Dome agreed, under the terms of the "Support and Standby Credit Agreement" to provide Marcopper with cash flow support in paying its obligations to ADB, does not mean that its personality has merged with that of Marcopper. This singular undertaking, performed by Placer Dome with its own stockholders in Canada and elsewhere, is not a sufficient ground to merge its corporate

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personality with Marcopper which has its own set of shareholders, dominated mostly by Filipino citizens. The same view applies to petitioners payment of Marcoppers remaining debt to ADB. With the foregoing considerations and the absence of fraud in the transaction of the three foreign corporations, we find it improper to pierce the veil of corporate fiction that equitable doctrine developed to address situations where the corporate personality of a corporation is abused or used for wrongful purposes. IV On the issue of forum shopping, there could have been a violation of the rules thereon if petitioner and Marcopper were indeed one and the same entity. But since petitioner has a separate personality, it has the right to pursue its third-party claim by filing the independent reivindicatory action with the RTC of Boac, Marinduque, pursuant to Rule 39, Section 16 of the 1997 Rules of Civil Procedures. This remedy has been recognized in a long line of cases decided by this Court.41 In Rodriguez vs. Court of Appeals,42 we held: ". . . It has long been settled in this jurisdiction that the claim of ownership of a third party over properties levied for execution of a judgment presents no issue for determination by the court issuing the writ of execution.

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. . .Thus, when a property levied upon by the sheriff pursuant to a writ of execution is claimed by third person in a sworn statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication arises. And dealing as it does with the all important question of title, it is reasonable to require the filing of proper pleadings and the holding of a trial on the matter in view of the requirements of due process. . . . In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now Section 16 of the 1997 Rules of Civil Procedure), the rights of third-party claimants over certain properties levied upon by the sheriff to satisfy the judgment may not be taken up in the case where such claims are presented but in a separate and independent action instituted by the claimants." (Emphasis supplied) This "reivindicatory action" has for its object the recovery of ownership or possession of the property seized by the sheriff, despite the third party claim, as well as damages resulting therefrom, and it may be brought against the sheriff and such other parties as may be alleged to have connived with him in the supposedly wrongful execution proceedings, such as the judgment creditor himself. Such action is an entirely separate and distinct action from that in which execution has been issued. Thus, there being no identity of parties and cause of action between Civil Case No. 98-13 (RTC, Boac) and those cases filed by Marcopper, including Civil Case No. 96-80083 (RTC, Manila)

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as to give rise to res judicata or litis pendentia, Solidbanks allegation of forum-shopping cannot prosper.43 All considered, we find petitioner to be entitled to the issuance of a writ of preliminary injunction. Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides: "SEC. 3 Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the acts or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual." Petitioners right to stop the further execution of the properties

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covered by the assignment contracts is clear under the facts so far established. An execution can be issued only against a party and not against one who did not have his day in court.44 The duty of the sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying goes, one mans goods shall not be sold for another man's debts.45 To allow the execution of petitioners properties would surely work injustice to it and render the judgment on the reivindicatory action, should it be favorable, ineffectual. In Arabay, Inc., vs. Salvador,46 this Court held that an injunction is a proper remedy to prevent a sheriff from selling the property of one person for the purpose of paying the debts of another; and that while the general rule is that no court has authority to interfere by injunction with the judgments or decrees of another court of equal or concurrent or coordinate jurisdiction, however, it is not so when a third-party claimant is involved. We quote the instructive words of Justice Querube C. Makalintal in Abiera vs. Court of Appeals,47 thus: "The rationale of the decision in the Herald Publishing Company case48 is peculiarly applicable to the one before Us, and removes it from the general doctrine enunciated in the decisions cited by the respondents and quoted earlier herein. 1. Under Section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action. Obviously a judgment rendered in his favor, that is, declaring him to be the owner of the property, would not constitute interference

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with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. If that be so and it is so because the property, being that of a stranger, is not subject to levy then an interlocutory order such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference either." WHEREFORE, the petition is GRANTED. The assailed Decision dated January 8, 1999 and the Resolution dated March 29, 1999 of the Court of Appeals in CA G.R. No. 49226 are set aside. Upon filing of a bond of P1,000,000.00, respondent sheriffs are restrained from further implementing the writ of execution issued in Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until further orders from this Court. The RTC, Branch 94, Boac, Marinduque, is directed to dispose of Civil Case No. 98-13 with dispatch. Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its discretion in deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not doing business in the Philippines and, for this reason, dismissing petitioner's case. Petitioner's appeal is well taken. Rule 14, 14 provides: 14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a nonresident joint stock company or

Hahn v. CA and BMW

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association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. (Emphasis added). What acts are considered "doing business in the Philippines" are enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows: 7
d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts

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business in its own name and for its own account. (Emphasis supplied)

Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor "transacts business in its name and for its own account." In addition, 1(f)(1) of the Rules and Regulations implementing (IRR) the Omnibus Investment Code of 1987 (E.O. No. 226) provided: (f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In particular, "doing business" includes: (1) . . . A foreign firm which does business through middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines. The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products, BMW, a foreign

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corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW). The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own account and not as agent or distributor in the Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring BMW vehicles. Independence characterizes Hahn's undertakings, for which reason he is to be considered, under governing statutes, as doing business." (p. 13) In support of this conclusion, the appellate court cited the following allegations in Hahn's amended complaint: 8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary contributions from defendant BMW, established BMW's goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW. As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's finding that Hahn solicited orders alone and for his own account and

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without "interference from, let alone direction of, BMW." (p. 13) To the contrary, Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. 8 These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals, stated: 9
9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are made, the vehicles are shipped to the Philippines. (The payments may be made by the purchasers or thirdpersons or even by Hahn.) The bills of lading are made up in the name of the purchasers, but Hahn-Manila is therein indicated as the person to be notified.

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9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-delivery inspections. Thereafter, he delivers the vehicles to the purchasers. 9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen percent (14%) of the full purchase price thereof, and as soon as he confirms in writing that the vehicles have been registered in the Philippines and have been serviced by him, he will receive an additional three percent (3%) of the full purchase prices as commission. Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the service centers to see to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards that BMW was terminating Hahn's dealership. The fact that Hahn invested his own money to put up these

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service centers and showrooms does not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. 10 For example, in its letter to Hahn dated February 23,
1996, BMW stated:

In the last years we have pointed out to you in several discussions and letters that we have to tackle the Philippine market more professionally and that we are through your present activities not adequately prepared to cope with the forthcoming challenges. 11 In effect, BMW was holding Hahn accountable to it under the 1967 Agreement. This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, 12 in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of which the latter was appointed "exclusive representative" in the Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation sold products exported by the foreign corporation and put up a service center for the products sold locally. This Court held that these acts constituted doing business in the Philippines. The arrangement showed that the foreign corporation's purpose was to penetrate the Philippine market and establish its presence in the Philippines.

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In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian region that Hahn was the "official BMW agent" in the Philippines. 13 The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its motion to dismiss filed in the trial court and in its petition for certiorari before the Court of Appeals. 14 But this allegation was denied by Hahn 15 and
therefore the Court of Appeals should not have cited it as if it were the fact.

Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals the necessity of affirming the trial court's order deferring resolution of BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an agent of BMW, the fact is that BMW did business in the Philippines because it sold cars directly to Philippine buyers. 16 This was denied
by BMW, which claimed that Hahn was not its agent and that, while it was true that it had sold cars to Philippine buyers, this was done without solicitation on its part. 17

It is not true then that the question whether BMW is doing business could have been resolved simply by considering the parties' pleadings. There are genuine issues of facts which can

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only be determined on the basis of evidence duly presented. BMW cannot short circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court which precisely it denies. Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is based does not appear to be indubitable. Here the record of the case bristles with factual issues and it is not at all clear whether some allegations correspond to the proof. Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial court's jurisdiction. It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need not go beyond the allegations of the complaint in order to determine whether it has Jurisdiction. 18 A determination
that the foreign corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding should evidence later show that it is not transacting business in the country. As this Court has explained:

This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a

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foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventilation, in effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do business at the time of the filing of a complaint, can still be made to answer for a cause of action which accrued while it was doing business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably been raised by the petitioner, there should be no real cause for what may understandably be its apprehension, i.e., that by its participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to have voluntarily submitted itself to the court's jurisdiction. 19 Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It is the Court of Appeals which, by ruling

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that BMW is not doing business on the basis merely of uncertain allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his cause of action. Nor was there justification for nullifying the writ of preliminary injunction issued by the trial court. Although the injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss. WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further proceedings. The petition is partly meritorious. There is no general rule or governing principle laid down as to what constitutes "doing" or "engaging in" or "transacting" business in the Philippines. Thus, it has often been held that a single act or transaction may be considered as "doing business" when a corporation performs acts for which it was created or exercises some of the functions for which it was organized.19 We have held that the act of participating in a bidding process constitutes "doing business" because it shows the foreign corporations intention to engage in business in the Philippines. In this regard, it is the performance by a foreign corporation of the acts for which it was created, regardless of volume of business, that determines whether a foreign corporation needs a license or not.20 Consequently, the German Consortium is doing business in the

European v. Ingenieuburo Birkhan

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Philippines without the appropriate license as required by our laws. By participating in the bidding conducted by the CDC for the operation of the waste management center, the German Consortium exhibited its intent to transact business in the Philippines. Although the Contract for Services provided for the establishment of a local corporation to serve as respondents representative, it is clear from the other provisions of the Contract for Services as well as the letter by the CDC containing the disapproval that it will be the German Consortium which shall manage and conduct the operations of the waste management center for at least twenty-five years. Moreover, the German Consortium was allowed to transact with other entities outside the CSEZ for solid waste collection. Thus, it is clear that the local corporation to be established will merely act as a conduit or extension of the German Consortium. As a general rule, unlicensed foreign non-resident corporations cannot file suits in the Philippines. Section 133 of the Corporation Code specifically provides: SECTION 133. No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines, but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action

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recognized under Philippine laws. A corporation has legal status only within the state or territory in which it was organized. For this reason, a corporation organized in another country has no personality to file suits in the Philippines. In order to subject a foreign corporation doing business in the country to the jurisdiction of our courts, it must acquire a license from the Securities and Exchange Commission (SEC) and appoint an agent for service of process. Without such license, it cannot institute a suit in the Philippines.21 However, there are exceptions to this rule. In a number of cases,22 we have declared a party estopped from challenging or questioning the capacity of an unlicensed foreign corporation from initiating a suit in our courts. In the case of Communication Materials and Design, Inc. v. Court of Appeals,23 a foreign corporation instituted an action before our courts seeking to enjoin a local corporation, with whom it had a "Representative Agreement", from using its corporate name, letter heads, envelopes, sign boards and business dealings as well as the foreign corporations trademark. The case arose when the foreign corporation discovered that the local corporation has violated certain contractual commitments as stipulated in their agreement. In said case, we held that a foreign corporation doing business in the Philippines without license may sue in Philippine Courts a Philippine citizen or entity that had contracted with and benefited

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from it. Hence, the party is estopped from questioning the capacity of a foreign corporation to institute an action in our courts where it had obtained benefits from its dealings with such foreign corporation and thereafter committed a breach of or sought to renege on its obligations. The rule relating to estoppel is deeply rooted in the axiom of commodum ex injuria sua non habere debetno person ought to derive any advantage from his own wrong. In the case at bar, petitioners have clearly not received any benefit from its transactions with the German Consortium. In fact, there is no question that petitioners were the ones who have expended a considerable amount of money and effort preparatory to the implementation of the MOA. Neither do petitioners seek to back out from their obligations under both the MOU and the MOA by challenging respondents capacity to sue. The reverse could not be any more accurate. Petitioners are insisting on the full validity and implementation of their agreements with the German Consortium. To rule that the German Consortium has the capacity to institute an action against petitioners even when the latter have not committed any breach of its obligation would be tantamount to an unlicensed foreign corporation gaining access to our courts for protection and redress. We cannot allow this without violating the very rationale for the law prohibiting a foreign corporation not

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licensed to do business in the Philippines from suing or maintaining an action in Philippine courts. The object of requiring a license is not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring domicile for the purpose of business without taking the steps necessary to render it amenable to suits in the local courts.24 In other words, the foreign corporation is merely prevented from being in a position where it takes the good without accepting the bad. On the issue of whether the respondents were entitled to the injunctive writ, the petitioners claim that respondents right is not in esse but is rather a future right which is contingent upon a judicial declaration that the MOA has been validly rescinded. The Court of Appeals, in its decision, held that the MOA should be deemed subject to a suspensive condition, that is, that CDCs prior written consent must be obtained for the validity of the assignment. This issue must be resolved in a separate proceeding. It must be noted that the hearing conducted in the trial court was merely a preliminary hearing relating to the issuance of the injunctive writ. In order to fully appreciate the facts of this case and the surrounding circumstances relating to the agreements and contract involved, further proof should be presented for consideration of the court. Likewise, corollary matters, such as whether either of the parties is liable for damages and to what extent, cannot be resolved with absolute certainty, thus rendering any decision we might make incomplete as to fully dispose of this

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case. More importantly, it is evident that CDC must be made a proper party in any case which seeks to resolve the effectivity or ineffectivity of its disapproval of the assignment made between petitioners and respondent German Consortium. Where, as in the instant case, CDC is not impleaded as a party, any decision of the court which will inevitably affect or involve CDC cannot be deemed binding on it. For the same reason, petitioners assertion that the instant case should be referred to arbitration pursuant to the provision of the MOA is untenable. We have ruled in several cases that arbitration agreements are valid, binding, enforceable and not contrary to public policy such that when there obtains a written provision for arbitration which is not complied with, the trial court should suspend the proceedings and order the parties to proceed to arbitration in accordance with the terms of their agreement.25 In the case at bar, the MOA between petitioner ERTI and respondent German Consortium provided: 17. Should there be a disagreement between or among the Parties relative to the interpretation or implementation of this Agreement and the collateral documents including but not limited to the Contract for Services between GERMAN CONSORTIUM

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and CDC and the Parties cannot resolve the same by themselves, the same shall be endorsed to a panel of arbitrators which shall be convened in accordance with the process ordained under the Arbitration Law of the Republic of the Philippines.26 Indeed, to brush aside a contractual agreement calling for arbitration in case of disagreement between parties would be a step backward.27 But there are exceptions to this rule. Even if there is an arbitration clause, there are instances when referral to arbitration does not appear to be the most prudent action. The object of arbitration is to allow the expeditious determination of a dispute. Clearly, the issue before us could not be speedily and efficiently resolved in its entirety if we allow simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration.28 As discussed earlier, the dispute between respondent German Consortium and petitioners involves the disapproval by the CDC of the assignment by the German Consortium of its rights under the Contract for Services to petitioner ERTI. Admittedly, the arbitration clause is contained in the MOA to which only the German Consortium and petitioner ERTI were parties. Even if the case is brought before an arbitration panel, the decision will not be binding upon CDC who is a non-party to the arbitration agreement. What is more, the arbitration panel will not be able to completely dispose of all the issues of this case without including CDC in its proceedings. Accordingly, the interest of justice would only be

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served if the trial court hears and adjudicates the case in a single and complete proceeding. Lastly, petitioners question the propriety of the issuance of writ of preliminary injunction claiming that such is already tantamount to granting the main prayer of respondents complaint without the benefit of a trial. Petitioners point out that the purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and decided. It cannot be used to railroad the main case and seek a judgment without a full-blown trial as in the instant case. The Court of Appeals ruled that since petitioners did not raise this issue during the hearing on the application for preliminary injunction before the trial court, the same cannot be raised for the first time on appeal and even in special civil actions for certiorari as in this case. At the outset, it must be noted that with the finding that the German Consortium is without any personality to file the petition with the trial court, the propriety of the injunction writ issued is already moot and academic. Even assuming for the sake of argument that respondents have the capacity to file the petition, we find merit in the issue raised by petitioners against the injunction writ issued.

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Before an injunctive writ can be issued, it is essential that the following requisites are present: (1) there must be a right in esse or the existence of a right to be protected; and (2) the act against which injunction to be directed is a violation of such right.29 The onus probandi is on movant to show that there exists a right to be protected, which is directly threatened by the act sought to be enjoined. Further, there must be a showing that the invasion of the right is material and substantial and that there is an urgent and paramount necessity for the writ to prevent a serious damage.30 Thus, it is clear that for the issuance of the writ of preliminary injunction to be proper, it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage.31 At the time of its application for an injunctive writ, respondents right to operate and manage the waste management center, to the exclusion of or without any participation by petitioner ERTI, cannot be said to be clear and unmistakable. The MOA executed between respondents and petitioner ERTI has not yet been judicially declared as rescinded when the complaint was lodged in court.32 Hence, a cloud of doubt exists over respondent German Consortiums exclusive right relating to the waste management center. WHEREFORE, the decision of the Court of Appeals in CAG.R. SP No. 68923 dated May 15, 2003 is REVERSED and SET

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Agilent v. Integrated Silicon

ASIDE. The Orders of the trial court dated June 28, 2001 and November 21, 2001 are ANNULLED and SET ASIDE and Civil Case No. 10049 is DISMISSED for lack of legal capacity of respondents to institute the action. Costs against respondents. We find merit in the petition. The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO Standard Eastern, Inc.,20 held that the lower court had no jurisdiction over Civil Case No. 3123-2001-C because of the pendency of Civil Case No. 3110-2001-C and, therefore, a motion for reconsideration was not necessary before resort to a petition for certiorari. This was error. Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction over the subject matter of Civil Case No. 3123-2001-C in the RTC.21 The Court of Appeals ruling that the assailed Order issued by the RTC of Calamba, Branch 92, was a nullity for lack of jurisdiction due to litis pendentia and forum shopping, has no legal basis. The pendency of another action does not strip a court of the jurisdiction granted by law. The Court of Appeals further ruled that a Motion for Reconsideration was not necessary in view of the urgent necessity in this case. We are not convinced. In the case of Bache and Co. (Phils.), Inc. v. Ruiz,22 relied on by the Court of Appeals, it was

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held that "time is of the essence in view of the tax assessments sought to be enforced by respondent officers of the Bureau of Internal Revenue against petitioner corporation, on account of which immediate and more direct action becomes necessary." Tax assessments in that case were based on documents seized by virtue of an illegal search, and the deprivation of the right to due process tainted the entire proceedings with illegality. Hence, the urgent necessity of preventing the enforcement of the tax assessments was patent. Respondents, on the other hand, cite the case of Geronimo v. Commission on Elections,23 where the urgent necessity of resolving a disqualification case for a position in local government warranted the expeditious resort to certiorari. In the case at bar, there is no analogously urgent circumstance which would necessitate the relaxation of the rule on a Motion for Reconsideration. Indeed, none of the exceptions for dispensing with a Motion for Reconsideration is present here. None of the following cases cited by respondents serves as adequate basis for their procedural lapse. In Vigan Electric Light Co., Inc. v. Public Service Commission,24 the questioned order was null and void for failure of respondent tribunal to comply with due process requirements; in Matanguihan v. Tengco,25 the questioned order was a patent nullity for failure to acquire jurisdiction over the defendants, which fact the records plainly disclosed; and in National Electrification Administration v.

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Court of Appeals,26 the questioned orders were void for vagueness. No such patent nullity is evident in the Order issued by the trial court in this case. Finally, while urgency may be a ground for dispensing with a Motion for Reconsideration, in the case of Vivo v. Cloribel,27 cited by respondents, the slow progress of the case would have rendered the issues moot had a motion for reconsideration been availed of. We find no such urgent circumstance in the case at bar. Respondents, therefore, availed of a premature remedy when they immediately raised the matter to the Court of Appeals on certiorari; and the appellate court committed reversible error when it took cognizance of respondents petition instead of dismissing the same outright. We come now to the substantive issues of the petition. Litis pendentia is a Latin term which literally means "a pending suit." It is variously referred to in some decisions as lis pendens and auter action pendant. While it is normally connected with the control which the court has on a property involved in a suit during the continuance proceedings, it is more interposed as a ground for the dismissal of a civil action pending in court. Litis pendentia as a ground for the dismissal of a civil action refers to that situation wherein another action is pending between the same parties for the same cause of action, such that the second

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action becomes unnecessary and vexatious. For litis pendentia to be invoked, the concurrence of the following requisites is necessary: (a) identity of parties or at least such as represent the same interest in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is successful, amount to res judicata in the other.28 The Court of Appeals correctly appreciated the identity of parties in Civil Cases No. 3123-2001-C and 3110-2001-C. Well-settled is the rule that lis pendens requires only substantial, and not absolute, identity of parties.29 There is substantial identity of parties when there is a community of interest between a party in the first case and a party in the second case, even if the latter was not impleaded in the first case.30 The parties in these cases are vying over the interests of the two opposing corporations; the individuals are only incidentally impleaded, being the natural persons purportedly accused of violating these corporations rights. Likewise, the fact that the positions of the parties are reversed,

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i.e., the plaintiffs in the first case are the defendants in the second case or vice versa, does not negate the identity of parties for purposes of determining whether the case is dismissible on the ground of litis pendentia.31 The identity of parties notwithstanding, litis pendentia does not obtain in this case because of the absence of the second and third requisites. The rights asserted in each of the cases involved are separate and distinct; there are two subjects of controversy presented for adjudication; and two causes of action are clearly involved. The fact that respondents instituted a prior action for "Specific Performance and Damages" is not a ground for defeating the petitioners action for "Specific Performance, Recovery of Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and Damages." In Civil Case No. 3110-2001-C filed by respondents, the issue is whether or not there was a breach of an oral promise to renew of the VAASA. The issue in Civil Case No. 3123-2001-C, filed by petitioner, is whether petitioner has the right to take possession of the subject properties. Petitioners right of possession is founded on the ownership of the subject goods, which ownership is not disputed and is not contingent on the extension or non-extension of the VAASA. Hence, the replevin suit can validly be tried even while the prior suit is being litigated in the Regional Trial Court. Possession of the subject properties is not an issue in Civil Case

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No. 3110-2001-C. The reliefs sought by respondent Integrated Silicon therein are as follows: (1) execution of a written extension or renewal of the VAASA; (2) compliance with the extended VAASA; and (3) payment of overdue accounts, damages, and attorneys fees. The reliefs sought by petitioner Agilent in Civil Case No. 3123-2001-C, on the other hand, are as follows: (1) issuance of a Writ of Replevin or Writ of Preliminary Mandatory Injunction; (2) recovery of possession of the subject properties; (3) damages and attorneys fees. Concededly, some items or pieces of evidence may be admissible in both actions. It cannot be said, however, that exactly the same evidence will support the decisions in both, since the legally significant and controlling facts in each case are entirely different. Although the VAASA figures prominently in both suits, Civil Case No. 3110-2001-C is premised on a purported breach of an oral obligation to extend the VAASA, and damages arising out of Agilents alleged failure to comply with such purported extension. Civil Case No. 3123-2001-C, on the other hand, is premised on a breach of the VAASA itself, and damages arising to Agilent out of that purported breach. It necessarily follows that the third requisite for litis pendentia is also absent. The following are the elements of res judicata: (a) The former judgment must be final;

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(b) The court which rendered judgment must have jurisdiction over the parties and the subject matter; (c) It must be a judgment on the merits; and (d) There must be between the first and second actions identity of parties, subject matter, and cause of action.32 In this case, any judgment rendered in one of the actions will not amount to res judicata in the other action. There being different causes of action, the decision in one case will not constitute res judicata as to the other. Of course, a decision in one case may, to a certain extent, affect the other case. This, however, is not the test to determine the identity of the causes of action. Whatever difficulties or inconvenience may be entailed if both causes of action are pursued on separate remedies, the proper solution is not the dismissal order of the Court of Appeals. The possible consolidation of said cases, as well as stipulations and appropriate modes of discovery, may well be considered by the court below to subserve not only procedural expedience but, more important, the ends of justice.33 We now proceed to the issue of forum shopping. The test for determining whether a party violated the rule against

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forum-shopping was laid down in the case of Buan v. Lopez.34 Forum shopping exists where the elements of litis pendentia are present, or where a final judgment in one case will amount to res judicata in the final other. There being no litis pendentia in this case, a judgment in the said case will not amount to res judicata in Civil Case No. 3110-2001-C, and respondents contention on forum shopping must likewise fail. We are not unmindful of the afflictive consequences that may be suffered by both petitioner and respondents if replevin is granted by the trial court in Civil Case No. 3123-2001-C. If respondent Integrated Silicon eventually wins Civil Case No. 3110-2001-C, and the VAASAs terms are extended, petitioner corporation will have to comply with its obligations thereunder, which would include the consignment of properties similar to those it may recover by way of replevin in Civil Case No. 3123-2001-C. However, petitioner will also suffer an injustice if denied the remedy of replevin, resort to which is not only allowed but encouraged by law. Respondents argue that since Agilent is an unlicensed foreign corporation doing business in the Philippines, it lacks the legal capacity to file suit.35 The assailed acts of petitioner Agilent, purportedly in the nature of "doing business" in the Philippines, are the following: (1) mere entering into the VAASA, which is a "service contract";36 (2) appointment of a full-time representative in Integrated Silicon, to "oversee and supervise the production" of

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Agilents products;37 (3) the appointment by Agilent of six full-time staff members, who were permanently stationed at Integrated Silicons facilities in order to inspect the finished goods for Agilent;38 and (4) Agilents participation in the management, supervision and control of Integrated Silicon,39 including instructing Integrated Silicon to hire more employees to meet Agilents increasing production needs,40 regularly performing quality audit, evaluation and supervision of Integrated Silicons employees,41 regularly performing inventory audit of raw materials to be used by Integrated Silicon, which was also required to provide weekly inventory updates to Agilent,42 and providing and dictating Integrated Silicon on the daily production schedule, volume and models of the products to manufacture and ship for Agilent.43 A foreign corporation without a license is not ipso facto incapacitated from bringing an action in Philippine courts. A license is necessary only if a foreign corporation is "transacting" or "doing business" in the country. The Corporation Code provides: Sec. 133. Doing business without a license. No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized

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under Philippine laws. The aforementioned provision prevents an unlicensed foreign corporation "doing business" in the Philippines from accessing our courts. In a number of cases, however, we have held that an unlicensed foreign corporation doing business in the Philippines may bring suit in Philippine courts against a Philippine citizen or entity who had contracted with and benefited from said corporation.44 Such a suit is premised on the doctrine of estoppel. A party is estopped from challenging the personality of a corporation after having acknowledged the same by entering into a contract with it. This doctrine of estoppel to deny corporate existence and capacity applies to foreign as well as domestic corporations.45 The application of this principle prevents a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract.46 The principles regarding the right of a foreign corporation to bring suit in Philippine courts may thus be condensed in four statements: (1) if a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts;47 (2) if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an isolated transaction or on a cause of action entirely

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independent of any business transaction48; (3) if a foreign corporation does business in the Philippines without a license, a Philippine citizen or entity which has contracted with said corporation may be estopped from challenging the foreign corporations corporate personality in a suit brought before Philippine courts;49 and (4) if a foreign corporation does business in the Philippines with the required license, it can sue before Philippine courts on any transaction. The challenge to Agilents legal capacity to file suit hinges on whether or not it is doing business in the Philippines. However, there is no definitive rule on what constitutes "doing", "engaging in", or "transacting" business in the Philippines, as this Court observed in the case of Mentholatum v. Mangaliman.50 The Corporation Code itself is silent as to what acts constitute doing or transacting business in the Philippines. Jurisprudence has it, however, that the term "implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and subject of its organization."51 In Mentholatum,52 this Court discoursed on the two general tests to determine whether or not a foreign corporation can be considered as "doing business" in the Philippines. The first of

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these is the substance test, thus:53 The true test [for doing business], however, seems to be whether the foreign corporation is continuing the body of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. The second test is the continuity test, expressed thus:54 The term [doing business] implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in the progressive prosecution of, the purpose and object of its organization. Although each case must be judged in light of its attendant circumstances, jurisprudence has evolved several guiding principles for the application of these tests. For instance, considering that it transacted with its Philippine counterpart for seven years, engaging in futures contracts, this Court concluded that the foreign corporation in Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses Lara,55 was doing business in the Philippines. In Commissioner of Internal Revenue v. Japan Airlines ("JAL"),56 the Court held that JAL was doing business in the Philippines, i.e., its commercial dealings in the country were continuous despite the fact that no JAL aircraft landed in the country as it sold tickets in the Philippines through a general

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sales agent, and opened a promotions office here as well. In General Corp. of the Phils. v. Union Insurance Society of Canton and Firemans Fund Insurance,57 a foreign insurance corporation was held to be doing business in the Philippines, as it appointed a settling agent here, and issued 12 marine insurance policies. We held that these transactions were not isolated or casual, but manifested the continuity of the foreign corporations conduct and its intent to establish a continuous business in the country. In Eriks PTE Ltd. v. Court of Appeals and Enriquez,58 the foreign corporation sold its products to a Filipino buyer who ordered the goods 16 times within an eight-month period. Accordingly, this Court ruled that the corporation was doing business in the Philippines, as there was a clear intention on its part to continue the body of its business here, despite the relatively short span of time involved. Communication Materials and Design, Inc., et al. v. Court of Appeals, ITEC, et al.59 and TopWeld Manufacturing v. ECED, IRTI, et al.60 both involved the License and Technical Agreement and Distributor Agreement of foreign corporations with their respective local counterparts that were the primary bases for the Courts ruling that the foreign corporations were doing business in the Philippines.61 In particular, the Court cited the highly restrictive nature of certain provisions in the agreements involved, such that, as stated in Communication Materials, the Philippine entity is reduced to a mere extension or instrument of the foreign corporation. For example, in

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Communication Materials, the Court deemed the "No Competing Product" provision of the Representative Agreement therein restrictive.62 The case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of legislation. The Foreign Investments Act of 1991 (the "FIA"; Republic Act No. 7042, as amended), defines "doing business" as follows: Sec. 3, par. (d). The phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totaling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in the progressive prosecution of, commercial gain or of the purpose and object of the business organization. An analysis of the relevant case law, in conjunction with Section 1 of the Implementing Rules and Regulations of the FIA (as amended by Republic Act No. 8179), would demonstrate that the

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acts enumerated in the VAASA do not constitute "doing business" in the Philippines. Section 1 of the Implementing Rules and Regulations of the FIA (as amended by Republic Act No. 8179) provides that the following shall not be deemed "doing business": (1) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; (2) Having a nominee director or officer to represent its interest in such corporation; (3) Appointing a representative or distributor domiciled in the Philippines which transacts business in the representatives or distributors own name and account; (4) The publication of a general advertisement through any print or broadcast media; (5) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines; (6) Consignment by a foreign entity of equipment with a local

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company to be used in the processing of products for export; (7) Collecting information in the Philippines; and (8) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. By and large, to constitute "doing business", the activity to be undertaken in the Philippines is one that is for profit-making.63 By the clear terms of the VAASA, Agilents activities in the Philippines were confined to (1) maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by Integrated Silicon; and (2) consignment of equipment with Integrated Silicon to be used in the processing of products for export. As such, we hold that, based on the evidence presented thus far, Agilent cannot be deemed to be "doing business" in the Philippines. Respondents contention that Agilent lacks the legal capacity to file suit is therefore devoid of merit. As a foreign corporation not doing business in the Philippines, it needed no license before it can sue before our courts. Finally, as to Agilents purported failure to state a cause of action against the individual respondents, we likewise rule in favor of

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petitioner. A Motion to Dismiss hypothetically admits all the allegations in the Complaint, which plainly alleges that these individual respondents had committed or permitted the commission of acts prejudicial to Agilent. Whether or not these individuals had divested themselves of their interests in Integrated Silicon, or are no longer members of Integrated Silicons Board of Directors, is a matter of defense best threshed out during trial. WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 66574 dated August 12, 2002, which dismissed Civil Case No. 3123-2001-C, is REVERSED and SET ASIDE. The Order dated September 4, 2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92, in Civil Case No. 3123-2001-C, is REINSTATED. Agilents application for a Writ of Replevin is GRANTED.
Pioneer v. Guadiz EXCEPTIONS TO COMITY

Same
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and proof of a foreign law and admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the Commission ample discretion to

Cadalin v. POEA

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use every and all reasonable means to ascertain the facts in each case without regard to the technicalities of law or procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23, being more favorable and beneficial to the workers, should form part of the overseas employment contract of the complainants. NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in Bahrain, and set aside awards of the POEA Administrator in favor of the claimants, who worked elsewhere. On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the complainants was three years, as provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976. On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as a class suit for the simple reason that not all the complainants worked in Bahrain and therefore, the subject matter of the action, the claims arising from the Bahrain law, is not of common or general interest to all the complainants. On the fourth issue, NLRC found at least three infractions of the

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cardinal rules of administrative due process: namely, (1) the failure of the POEA Administrator to consider the evidence presented by AIBC and BRII; (2) some findings of fact were not supported by substantial evidence; and (3) some of the evidence upon which the decision was based were not disclosed to AIBC and BRII during the hearing. On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are solidarily liable for the claims of the complainants and held that BRII was the actual employer of the complainants, or at the very least, the indirect employer, with AIBC as the labor contractor. NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the summons served on AIBC, its local agent. On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to Declare AIBC in default. On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC ruled: (1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS premiums and refund of withholding taxes and the claimants should file their claims for said refund with the

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appropriate government agencies; (2) the claimants failed to establish that they are entitled to the claims which are not based on the overseas employment contracts nor the Amiri Decree No. 23 of 1976; (3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary damages and nonetheless, the basis for granting said damages was not established; (4) that the claims for salaries corresponding to the unexpired portion of their contract may be allowed if filed within the threeyear prescriptive period; (5) that the allegation that complainants were prematurely repatriated prior to the expiration of their overseas contract was not established; and (6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or cancellation of the AIBC's recruitment license and the cancellation of the accreditation of BRII. NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have been dismissed on the ground that the claimants in said case were also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case

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No. (L) 86-65-460, the POEA just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other words, the POEA did not pass upon the same claims twice. V G.R. No. 104776 Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds: (1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their cases as guaranteed by Section 16, Article III of the 1987 Constitution. The POEA Administrator allowed private respondents to file their answers in two years (on June 19, 1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total disregard of its own rules, affirmed the action of the POEA Administrator; (2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and should have rendered summary judgment on the basis of the pleadings and evidence submitted by claimants; (3) the NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC and BRII cannot be considered a

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class suit; (4) that the prescriptive period for the filing of the claims is ten years; and (5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-05-460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40). AIBC and BRII, commenting on the petition in G.R. No. 104776, argued: (1) that they were not responsible for the delay in the disposition of the labor cases, considering the great difficulty of getting all the records of the more than 1,500 claimants, the piece-meal filing of the complaints and the addition of hundreds of new claimants by petitioners; (2) that considering the number of complaints and claimants, it was impossible to prepare the answers within the ten-day period provided in the NLRC Rules, that when the motion to declare AIBC in default was filed on July 19, 1987, said party had already filed its answer, and that considering the staggering amount of the claims (more than US$50,000,000.00) and the complicated issues raised by the parties, the ten-day rule to answer was not fair and reasonable;

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(3) that the claimants failed to refute NLRC's finding that there was no common or general interest in the subject matter of the controversy which was the applicability of the Amiri Decree No. 23. Likewise, the nature of the claims varied, some being based on salaries pertaining to the unexpired portion of the contracts while others being for pure money claims. Each claimant demanded separate claims peculiar only to himself and depending upon the particular circumstances obtaining in his case; (4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor Code of the Philippines (three years) and not the one prescribed by Article 1144 of the Civil Code of the Philippines (ten years); and (5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be dismissed, this being a private quarrel between the two labor lawyers (Rollo, pp. 292-305). Attorney's Lien On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and motions of AIBC and BRII dated September 2 and 11, 1992, claiming that all the claimants who entered into the compromise agreements subject of said manifestations and motions were his clients and that Atty. Florante M. de Castro had no right to represent them in said agreements. He also claimed that the claimants were paid less than the award

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given them by NLRC; that Atty. De Castro collected additional attorney's fees on top of the 25% which he was entitled to receive; and that the consent of the claimants to the compromise agreements and quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court denied the motion to strike out the Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609). On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging that the claimants who entered into compromise agreements with AIBC and BRII with the assistance of Atty. De Castro, had all signed a retainer agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535). Contempt of Court On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of the Code of Professional Responsibility. The said lawyers allegedly misled this Court, by making it appear that the claimants who entered into the compromise agreements were represented by Atty. De Castro, when in fact they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614). On September 23, 1994, Atty. Del Mundo reiterated his charges

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against Atty. De Castro for unethical practices and moved for the voiding of the quitclaims submitted by some of the claimants. G.R. Nos. 104911-14 The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC gravely abused its discretion when it: (1) applied the three-year prescriptive period under the Labor Code of the Philippines; and (2) it denied the claimant's formula based on an average overtime pay of three hours a day (Rollo, pp. 18-22). The claimants argue that said method was proposed by BRII itself during the negotiation for an amicable settlement of their money claims in Bahrain as shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22). BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive period in the Labor Code of the Philippines, a special law, prevails over that provided in the Civil Code of the Philippines, a general law. As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime pay, BRII and AIBC claimed that they were not bound by what appeared therein, because such memorandum was proposed by a subordinate Bahrain official and there was no showing that it was approved by the Bahrain Minister

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of Labor. Likewise, they claimed that the averaging method was discussed in the course of the negotiation for the amicable settlement of the dispute and any offer made by a party therein could not be used as an admission by him (Rollo, pp. 228-236). G.R. Nos. 105029-32 In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1) enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of the employment contracts; (2) granted claims for holiday, overtime and leave indemnity pay and other benefits, on evidence admitted in contravention of petitioner's constitutional right to due process; and (3) ordered the POEA Administrator to hold new hearings for the 683 claimants whose claims had been dismissed for lack of proof by the POEA Administrator or NLRC itself. Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply the one-year prescription provided in said law (Rollo, pp. 29-30). VI G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32 All the petitions raise the common issue of prescription although they disagreed as to the time that should be embraced within the

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prescriptive period. To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at three years as provided in Article 291 of the Labor Code of the Philippines. The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that NLRC erred in ruling that the prescriptive period applicable to the claims was three years, instead of ten years, as found by the POEA Administrator. The Solicitor General expressed his personal view that the prescriptive period was one year as prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article 291 of the Labor Code of the Philippines was the operative law. The POEA Administrator held the view that: These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's violation of the employee's right as provided by the Labor Code. In the instant case, what the respondents violated are not the rights of the workers as provided by the Labor Code, but the provisions of the Amiri Decree No. 23 issued in Bahrain, which

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ipso facto amended the worker's contracts of employment. Respondents consciously failed to conform to these provisions which specifically provide for the increase of the worker's rate. It was only after June 30, 1983, four months after the brown builders brought a suit against B & R in Bahrain for this same claim, when respondent AIBC's contracts have undergone amendments in Bahrain for the new hires/renewals (Respondent's Exhibit 7). Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the Civil Code of the Philippines, which provides: Art. 1144. The following actions may be brought within ten years from the time the cause of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; Thus, herein money claims of the complainants against the respondents shall prescribe in ten years from August 16, 1976. Inasmuch as all claims were filed within the ten-year prescriptive period, no claim suffered the infirmity of being prescribed (G.R. No. 104776, Rollo, 89-90). In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided in Article 291 of the

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Labor Code of the Philippines, the NLRC argued as follows: The Labor Code provides that "all money claims arising from employer-employee relations . . . shall be filed within three years from the time the cause of action accrued; otherwise they shall be forever barred" (Art. 291, Labor Code, as amended). This threeyear prescriptive period shall be the one applied here and which should be reckoned from the date of repatriation of each individual complainant, considering the fact that the case is having (sic) filed in this country. We do not agree with the POEA Administrator that this three-year prescriptive period applies only to money claims specifically recoverable under the Philippine Labor Code. Article 291 gives no such indication. Likewise, We can not consider complainants' cause/s of action to have accrued from a violation of their employment contracts. There was no violation; the claims arise from the benefits of the law of the country where they worked. (G.R. No. 104776, Rollo, pp. 90-91). Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of 1976, NLRC opined that the applicability of said law was one of characterization, i.e., whether to characterize the foreign law on prescription or statute of limitation as "substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the applicability of the Panama Labor Code in a case filed in the State of New York for claims arising from said Code. In said case, the claims would have

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prescribed under the Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was not "specifically intended to be substantive," hence, the prescriptive period provided in the law of the forum should apply. The Court observed: . . . And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not clear on the face of the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned, of the substantive rights to which the statute pertains, we think that as a yardstick for determining whether that was the purpose this test is the most satisfactory one. It does not lead American courts into the necessity of examining into the unfamiliar peculiarities and refinements of different foreign legal systems. . . The court further noted: xxx xxx xxx Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have failed to satisfy us that the Panamanian period of limitation in question was specifically aimed against the particular rights which the libelant seeks to enforce. The Panama Labor Code is a statute having broad objectives, viz: "The present Code regulates the relations between capital and

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labor, placing them on a basis of social justice, so that, without injuring any of the parties, there may be guaranteed for labor the necessary conditions for a normal life and to capital an equitable return to its investment." In pursuance of these objectives the Code gives laborers various rights against their employers. Article 623 establishes the period of limitation for all such rights, except certain ones which are enumerated in Article 621. And there is nothing in the record to indicate that the Panamanian legislature gave special consideration to the impact of Article 623 upon the particular rights sought to be enforced here, as distinguished from the other rights to which that Article is also applicable. Were we confronted with the question of whether the limitation period of Article 621 (which carves out particular rights to be governed by a shorter limitation period) is to be regarded as "substantive" or "procedural" under the rule of "specifity" we might have a different case; but here on the surface of things we appear to be dealing with a "broad," and not a "specific," statute of limitations (G.R. No. 104776, Rollo, pp. 92-94). Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the Philippines, which was applied by NLRC, refers only to claims "arising from the employer's violation of the employee's right as provided by the Labor Code." They assert that their claims are based on the violation of their employment contracts, as amended by the Amiri Decree No. 23 of 1976 and therefore the claims may be brought within ten years as provided

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by Article 1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp. 18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244 (1976). AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23 of 1976, argue that there is in force in the Philippines a "borrowing law," which is Section 48 of the Code of Civil Procedure and that where such kind of law exists, it takes precedence over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46). First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law. Article 156 of the Amiri Decree No. 23 of 1976 provides: A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226). As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private International Law, 131

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[1979]). A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive, depending on the characterization given such a law. Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of limitations of New York, instead of the Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive. Being considered merely a procedural law even in Panama, it has to give way to the law of the forum on prescription of actions. However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has a "borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation as one of substance (Goodrich, Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form provides that an action barred by the laws of the place where it accrued, will not be enforced in the forum even though the local statute has not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code

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of Civil Procedure is of this kind. Said Section provides: If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippines Islands. Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed only those provisions of the Code of Civil Procedures as to which were inconsistent with it. There is no provision in the Civil Code of the Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]). In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976. The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy (Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor. In the Declaration of Principles and State Policies, the 1987

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Constitution emphasized that: The state shall promote social justice in all phases of national development. (Sec. 10). The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare (Sec. 18). In article XIII on Social Justice and Human Rights, the 1987 Constitution provides: Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. Having determined that the applicable law on prescription is the Philippine law, the next question is whether the prescriptive period governing the filing of the claims is three years, as provided by the Labor Code or ten years, as provided by the Civil Code of the Philippines. The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the Philippines, which provides: The following actions must be brought within ten years from the time the right of action accrues:

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(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the Philippines, which in pertinent part provides: Money claims-all money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued, otherwise they shall be forever barred. xxx xxx xxx The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said case involved the correct computation of overtime pay as provided in the collective bargaining agreements and not the Eight-Hour Labor Law. As noted by the Court: "That is precisely why petitioners did not make any reference as to the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and

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instead insisted that work computation provided in the collective bargaining agreements between the parties be observed. Since the claim for pay differentials is primarily anchored on the written contracts between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern." Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides: Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of action accrued otherwise such action shall be forever barred, . . . . The court further explained: The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will apply, if the claim for differentials for overtime work is solely based on said law, and not on a collective bargaining agreement or any other contract. In the instant case, the claim for overtime compensation is not so much because of Commonwealth Act No. 444, as amended but because the claim is demandable right of the employees, by reason of the above-mentioned collective bargaining agreement. Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce any cause of action under said law." On the other hand, Article 291 of the Labor Code of the

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Philippines provides the prescriptive period for filing "money claims arising from employer-employee relations." The claims in the cases at bench all arose from the employer-employee relations, which is broader in scope than claims arising from a specific law or from the collective bargaining agreement. The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of the Labor Code of the Philippines applies only to money claims specifically recoverable under said Code, does not find support in the plain language of the provision. Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the employer's violation of the employee's right," as provided by the Labor Code supported by the facial reading of the provision. VII G.R. No. 104776 A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their complaints were filed on June 6, 1984 with POEA, the case was decided only on January 30, 1989, a clear denial of their right to a speedy disposition of the case; and (2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default (Rollo, pp. 31-35). Claimants invoke a new provision incorporated in the 1987

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Constitution, which provides: Sec. 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or administrative bodies. It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in criminal proceedings but extends to all parties in all cases, including civil and administrative cases, and in all proceedings, including judicial and quasi-judicial hearings. Hence, under the Constitution, any party to a case may demand expeditious action on all officials who are tasked with the administration of justice. However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is a relative term. Just like the constitutional guarantee of "speedy trial" accorded to the accused in all criminal proceedings, "speedy disposition of cases" is a flexible concept. It is consistent with delays and depends upon the circumstances of each case. What the Constitution prohibits are unreasonable, arbitrary and oppressive delays which render rights nugatory. Caballero laid down the factors that may be taken into consideration in determining whether or not the right to a "speedy disposition of cases" has been violated, thus:

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In the determination of whether or not the right to a "speedy trial" has been violated, certain factors may be considered and balanced against each other. These are length of delay, reason for the delay, assertion of the right or failure to assert it, and prejudice caused by the delay. The same factors may also be considered in answering judicial inquiry whether or not a person officially charged with the administration of justice has violated the speedy disposition of cases. Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held: It must be here emphasized that the right to a speedy disposition of a case, like the right to speedy trial, is deemed violated only when the proceeding is attended by vexatious, capricious, and oppressive delays; or when unjustified postponements of the trial are asked for and secured, or when without cause or justified motive a long period of time is allowed to elapse without the party having his case tried. Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended complaint, claimants had been asking that AIBC and BRII be declared in default for failure to file their answers within the ten-day period provided in Section 1, Rule III of Book VI of the Rules and Regulations of the POEA. At that time, there was a pending motion of AIBC and BRII to strike out of the records the amended complaint and the "Compliance" of

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claimants to the order of the POEA, requiring them to submit a bill of particulars. The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the administrative level after seven years from their inception, cannot be said to be attended by unreasonable, arbitrary and oppressive delays as to violate the constitutional rights to a speedy disposition of the cases of complainants. The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint had undergone several amendments, the first being on April 3, 1985. The claimants were hired on various dates from 1975 to 1983. They were deployed in different areas, one group in and the other groups outside of, Bahrain. The monetary claims totalling more than US$65 million according to Atty. Del Mundo, included: 1. Unexpired portion of contract; 2. Interest earnings of Travel and Fund; 3. Retirement and Savings Plan benefit; 4. War Zone bonus or premium pay of at least 100% of basic pay;

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5. Area Differential pay; 6. Accrued Interest of all the unpaid benefits; 7. Salary differential pay; 8. Wage Differential pay; 9. Refund of SSS premiums not remitted to Social Security System; 10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.); 11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of 43 pages (Annex "Q" of Amended Complaint); 12. Moral and Exemplary Damages; 13. Attorney's fees of at least ten percent of amounts; 14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued by the POEA; and 15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial requirements thereof (NLRC Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-

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74). Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the claimants were ordered to comply with the motion of AIBC for a bill of particulars. When claimants filed their "Compliance and Manifestation," AIBC moved to strike out the complaint from the records for failure of claimants to submit a proper bill of particulars. While the POEA Administrator denied the motion to strike out the complaint, he ordered the claimants "to correct the deficiencies" pointed out by AIBC. Before an intelligent answer could be filed in response to the complaint, the records of employment of the more than 1,700 claimants had to be retrieved from various countries in the Middle East. Some of the records dated as far back as 1975. The hearings on the merits of the claims before the POEA Administrator were interrupted several times by the various appeals, first to NLRC and then to the Supreme Court. Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos. L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted that the exact number of claimants had never been completely established (Resolution, Sept. 2, 1991,

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G.R. No. 104776, Rollo, p. 57). All the three new cases were consolidated with POEA Case No. L-84-06-555. NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus: These cases could have been spared the long and arduous route towards resolution had the parties and their counsel been more interested in pursuing the truth and the merits of the claims rather than exhibiting a fanatical reliance on technicalities. Parties and counsel have made these cases a litigation of emotion. The intransigence of parties and counsel is remarkable. As late as last month, this Commission made a last and final attempt to bring the counsel of all the parties (this Commission issued a special order directing respondent Brown & Root's resident agent/s to appear) to come to a more conciliatory stance. Even this failed (Rollo, p. 58). The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to the lament of NLRC, which complained: It is very evident from the records that the protagonists in these consolidated cases appear to be not only the individual complainants, on the one hand, and AIBC and Brown & Root, on the other hand. The two lawyers for the complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to

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settle the right of representation, each one persistently claiming to appear in behalf of most of the complainants. As a result, there are two appeals by the complainants. Attempts by this Commission to resolve counsels' conflicting claims of their respective authority to represent the complainants prove futile. The bickerings by these two counsels are reflected in their pleadings. In the charges and countercharges of falsification of documents and signatures, and in the disbarment proceedings by one against the other. All these have, to a large extent, abetted in confounding the issues raised in these cases, jumble the presentation of evidence, and even derailed the prospects of an amicable settlement. It would not be far-fetched to imagine that both counsel, unwittingly, perhaps, painted a rainbow for the complainants, with the proverbial pot of gold at its end containing more than US$100 million, the aggregate of the claims in these cases. It is, likewise, not improbable that their misplaced zeal and exuberance caused them to throw all caution to the wind in the matter of elementary rules of procedure and evidence (Rollo, pp. 58-59). Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants in both petitions filed by the two lawyers. As noted by NLRC, "the problem created by this situation is that if one of the two petitions is dismissed, then the parties and the public respondents would not know which claim of which petitioner was dismissed and which was not."

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B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all the named complainants have similar money claims and similar rights sought irrespective of whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38). A class suit is proper where the subject matter of the controversy is one of common or general interest to many and the parties are so numerous that it is impracticable to bring them all before the court (Revised Rules of Court, Rule 3, Sec. 12). While all the claims are for benefits granted under the Bahrain Law, many of the claimants worked outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysia under different terms and conditions of employment. NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement of a class suit is not present (common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall be entitled to file their claims in a class suit. While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employee's benefits), there is no common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed elsewhere. Thus, each claimant

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is interested only in his own demand and not in the claims of the other employees of defendants. The named claimants have a special or particular interest in specific benefits completely different from the benefits in which the other named claimants and those included as members of a "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each claimant is only interested in collecting his own claims. A claimants has no concern in protecting the interests of the other claimants as shown by the fact, that hundreds of them have abandoned their coclaimants and have entered into separate compromise settlements of their respective claims. A principle basic to the concept of "class suit" is that plaintiffs brought on the record must fairly represent and protect the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]). For this matter, the claimants who worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding. The most that can be accorded to them under the Rules of Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6). The Court is extra-cautious in allowing class suits because they are the exceptions to the condition sine qua non, requiring the joinder of all indispensable parties. In an improperly instituted class suit, there would be no problem if the decision secured is favorable to the plaintiffs. The problem arises when the decision is adverse to them, in which case the

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others who were impleaded by their self-appointed representatives, would surely claim denial of due process. C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should have declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasing activities, falsification, duplicity and other unprofessional activities" and his appearances as counsel for some of the claimants as illegal (Rollo, pp. 38-40). The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice of some parties of filing multiple petitions and complaints involving the same issues, with the result that the courts or agencies have to resolve the same issues. Said Rule, however, applies only to petitions filed with the Supreme Court and the Court of Appeals. It is entitled "Additional Requirements For Petitions Filed with the Supreme Court and the Court of Appeals To Prevent Forum Shopping or Multiple Filing of Petitioners and Complainants." The first sentence of the circular expressly states that said circular applies to an governs the filing of petitions in the Supreme Court and the Court of Appeals. While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to the lower courts and administrative agencies, said circular took effect only on April 1, 1994.

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POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De Castro because NLRC and POEA have no jurisdiction to investigate charges of unethical conduct of lawyers. Attorney's Lien The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty. Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844). A statement of a claim for a charging lien shall be filed with the court or administrative agency which renders and executes the money judgment secured by the lawyer for his clients. The lawyer shall cause written notice thereof to be delivered to his clients and to the adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien of Atty. Del Mundo should have been filed with the administrative agency that rendered and executed the judgment. Contempt of Court The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra for violation of the Code of Professional Responsibility should be filed in a separate and

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appropriate proceeding. G.R. No. 104911-14 Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three Hours Average Daily Overtime" in computing the overtime payments. They claim that it was BRII itself which proposed the formula during the negotiations for the settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22). Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which in pertinent part states: After the perusal of the memorandum of the Vice President and the Area Manager, Middle East, of Brown & Root Co. and the Summary of the compensation offered by the Company to the employees in respect of the difference of pay of the wages of the overtime and the difference of vacation leave and the perusal of the documents attached thereto i.e., minutes of the meetings between the Representative of the employees and the management of the Company, the complaint filed by the employees on 14/2/83 where they have claimed as hereinabove stated, sample of the Service Contract executed between one of the employees and the company through its agent in (sic) Philippines, Asia International Builders Corporation where it has been provided for 48 hours of work per week and an annual leave

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of 12 days and an overtime wage of 1 & 1/4 of the normal hourly wage. xxx xxx xxx The Company in its computation reached the following averages: A. 1. The average duration of the actual service of the employee is 35 months for the Philippino (sic) employees . . . . 2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . . 3. The average hours for the overtime is 3 hours plus in all public holidays and weekends. 4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the wages of the overtime done for each Philippino (sic) employee . . . (Rollo, p.22). BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate official in the Bahrain Department of Labor; (2) that there was no showing that the Bahrain Minister of Labor had approved said memorandum; and (3) that the offer was made in the course of the negotiation for an amicable settlement of the claims and therefore it was not admissible in evidence to prove that anything is due to the

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claimants. While said document was presented to the POEA without observing the rule on presenting official documents of a foreign government as provided in Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be admitted in evidence in proceedings before an administrative body. The opposing parties have a copy of the said memorandum, and they could easily verify its authenticity and accuracy. The admissibility of the offer of compromise made by BRII as contained in the memorandum is another matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offer to settle a claim is not an admission that anything is due. Said Rule provides: Offer of compromise not admissible. In civil cases, an offer of compromise is not an admission of any liability, and is not admissible in evidence against the offeror. This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence but a statement of public policy. There is great public interest in having the protagonists settle their differences amicable before these ripen into litigation. Every effort must be taken to encourage them to arrive at a settlement. The submission of offers and counter-offers in the

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negotiation table is a step in the right direction. But to bind a party to his offers, as what claimants would make this Court do, would defeat the salutary purpose of the Rule. G.R. Nos. 105029-32 A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those stipulated in the overseasemployment contracts of the claimants. It was of the belief that "where the laws of the host country are more favorable and beneficial to the workers, then the laws of the host country shall form part of the overseas employment contract." It quoted with approval the observation of the POEA Administrator that ". . . in labor proceedings, all doubts in the implementation of the provisions of the Labor Code and its implementing regulations shall be resolved in favor of labor" (Rollo, pp. 90-94). AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the overseas-employment contracts, which became the law of the parties. They contend that the principle that a law is deemed to be a part of a contract applies only to provisions of Philippine law in relation to contracts executed in the Philippines. The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the host country became applicable to said contracts if they offer terms and

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conditions more favorable that those stipulated therein. It was stipulated in said contracts that: The Employee agrees that while in the employ of the Employer, he will not engage in any other business or occupation, nor seek employment with anyone other than the Employer; that he shall devote his entire time and attention and his best energies, and abilities to the performance of such duties as may be assigned to him by the Employer; that he shall at all times be subject to the direction and control of the Employer; and that the benefits provided to Employee hereunder are substituted for and in lieu of all other benefits provided by any applicable law, provided of course, that total remuneration and benefits do not fall below that of the host country regulation or custom, it being understood that should applicable laws establish that fringe benefits, or other such benefits additional to the compensation herein agreed cannot be waived, Employee agrees that such compensation will be adjusted downward so that the total compensation hereunder, plus the nonwaivable benefits shall be equivalent to the compensation herein agreed (Rollo, pp. 352-353). The overseas-employment contracts could have been drafted more felicitously. While a part thereof provides that the compensation to the employee may be "adjusted downward so that the total computation (thereunder) plus the non-waivable benefits shall be equivalent to the compensation" therein agreed, another part of the same provision categorically states "that total

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remuneration and benefits do not fall below that of the host country regulation and custom." Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]). Article 1377 of the Civil Code of the Philippines provides: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the stipulations of the employment contract and the employees merely "take it or leave it." The presumption is that there was an imposition by one party against the other and that the employees signed the contracts out of necessity that reduced their bargaining power (Fieldmen's Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]). Applying the said legal precepts, we read the overseasemployment contracts in question as adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof. The parties to a contract may select the law by which it is to be governed (Cheshire, Private International Law, 187 [7th ed.]). In

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such a case, the foreign law is adopted as a "system" to regulate the relations of the parties, including questions of their capacity to enter into the contract, the formalities to be observed by them, matters of performance, and so forth (16 Am Jur 2d, 150-161). Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign statute shall be deemed incorporated into their contract "as a set of terms." By such reference to the provisions of the foreign law, the contract does not become a foreign contract to be governed by the foreign law. The said law does not operate as a statute but as a set of contractual terms deemed written in the contract (Anton, Private International Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]). A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such party expectation is protected by giving effect to the parties' own choice of the applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear some relationship to the parties or their transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the contracts sought to be enforced by claimants have a direct connection with the Bahrain law because the services were rendered in that country.

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In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the "Employment Agreement," between Norse Management Co. and the late husband of the private respondent, expressly provided that in the event of illness or injury to the employee arising out of and in the course of his employment and not due to his own misconduct, "compensation shall be paid to employee in accordance with and subject to the limitation of the Workmen's Compensation Act of the Republic of the Philippines or the Worker's Insurance Act of registry of the vessel, whichever is greater." Since the laws of Singapore, the place of registry of the vessel in which the late husband of private respondent served at the time of his death, granted a better compensation package, we applied said foreign law in preference to the terms of the contract. The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission, 135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts of the cases at bench. The issue in that case was whether the amount of the death compensation of a Filipino seaman should be determined under the shipboard employment contract executed in the Philippines or the Hongkong law. Holding that the shipboard employment contract was controlling, the court differentiated said case from Norse Management Co. in that in the latter case there was an express stipulation in the employment contract that the foreign law would be applicable if it afforded greater compensation. B. AIBC and BRII claim that they were denied by NLRC of their

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right to due process when said administrative agency granted Friday-pay differential, holiday-pay differential, annual-leave differential and leave indemnity pay to the claimants listed in Annex B of the Resolution. At first, NLRC reversed the resolution of the POEA Administrator granting these benefits on a finding that the POEA Administrator failed to consider the evidence presented by AIBC and BRII, that some findings of fact of the POEA Administrator were not supported by the evidence, and that some of the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of remanding the case to the POEA Administrator for a new hearing, which means further delay in the termination of the case, NLRC decided to pass upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of as being irregular and a "reversible error." They pointed out that NLRC took into consideration evidence submitted on appeal, the same evidence which NLRC found to have been "unilaterally submitted by the claimants and not disclosed to the adverse parties" (Rollo, pp. 37-39). NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrator by the claimants after the cases were deemed submitted for resolution and which were taken cognizance of by the POEA Administrator in resolving the cases. While AIBC and BRII had no opportunity to refute said evidence of the claimants before the POEA Administrator, they had all the opportunity to rebut said evidence and to present

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their counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to present before NLRC additional evidence which they failed to present before the POEA Administrator. Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process." In deciding to resolve the validity of certain claims on the basis of the evidence of both parties submitted before the POEA Administrator and NLRC, the latter considered that it was not expedient to remand the cases to the POEA Administrator for that would only prolong the already protracted legal controversies. Even the Supreme Court has decided appealed cases on the merits instead of remanding them to the trial court for the reception of evidence, where the same can be readily determined from the uncontroverted facts on record (Development Bank of the Philippines v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission, 127 SCRA 463 [1984]). C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA Administrator to hold new hearings for

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683 claimants listed in Annex D of the Resolution dated September 2, 1991 whose claims had been denied by the POEA Administrator "for lack of proof" and for 69 claimants listed in Annex E of the same Resolution, whose claims had been found by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45). NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowers it "[to] conduct investigation for the determination of a question, matter or controversy, within its jurisdiction, . . . ." It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a case involving claims which had already been dismissed because such provision contemplates only situations where there is still a question or controversy to be resolved (Rollo, pp. 41-42). A principle well embedded in Administrative Law is that the technical rules of procedure and evidence do not apply to the proceedings conducted by administrative agencies (First Asian Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Code of the Philippines and is now the bedrock of proceedings before NLRC. Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative proceedings, there are

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cardinal rules which must be observed by the hearing officers in order to comply with the due process requirements of the Constitution. These cardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940). VIII The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that NLRC had committed grave abuse of discretion amounting to lack of jurisdiction in issuing the questioned orders. We find no such abuse of discretion.
Pakistani Airlines v. Ople

WHEREFORE, all the three petitions are DISMISSED. In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the Deputy Minister as having been rendered without jurisdiction; for having been rendered without support in the evidence of record since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of petitioner's rights under the employment contracts with private respondents. 1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the complaint initiated by private respondents for illegal dismissal, jurisdiction over the same being lodged in the Arbitration Branch of the National Labor Relations Commission ("NLRC") It appears to us

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beyond dispute, however, that both at the time the complaint was initiated in September 1980 and at the time the Orders assailed were rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over termination cases. Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one (1) year of service without prior clearance from the Department of Labor and Employment: Art. 278. Miscellaneous Provisions . . . (b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the employment of employees with at least one year of service during the last two (2) years, whether such service is continuous or broken, without prior written authority issued in accordance with such rules and regulations as the Secretary may promulgate . . . (emphasis supplied) Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case of a termination without the necessary clearance, the Regional Director was authorized to order the reinstatement of the employee concerned and the payment of backwages; necessarily, therefore, the Regional

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Director must have been given jurisdiction over such termination cases: Sec. 2. Shutdown or dismissal without clearance. Any shutdown or dismissal without prior clearance shall be conclusively presumed to be termination of employment without a just cause. The Regional Director shall, in such case order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismissal until the time of reinstatement. (emphasis supplied) Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly very explicit about the jurisdiction of the Regional Director over termination of employment cases: Under PD 850, termination cases with or without CBA are now placed under the original jurisdiction of the Regional Director. Preventive suspension cases, now made cognizable for the first time, are also placed under the Regional Director. Before PD 850, termination cases where there was a CBA were under the jurisdiction of the grievance machinery and voluntary arbitration, while termination cases where there was no CBA were under the jurisdiction of the Conciliation Section. In more details, the major innovations introduced by PD 850 and its implementing rules and regulations with respect to termination

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and preventive suspension cases are: 1. The Regional Director is now required to rule on every application for clearance, whether there is opposition or not, within ten days from receipt thereof. xxx xxx xxx (Emphasis supplied) 2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still his order was null and void because it had been issued in violation of petitioner's right to procedural due process . 6 This claim, however, cannot be given
serious consideration. Petitioner was ordered by the Regional Director to submit not only its position paper but also such evidence in its favor as it might have. Petitioner opted to rely solely upon its position paper; we must assume it had no evidence to sustain its assertions. Thus, even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to the Ministry of Labor and Employment. 7

There is another reason why petitioner's claim of denial of due process must be rejected. At the time the complaint was filed by private respondents on 21 September 1980 and at the time the Regional Director issued his questioned order on 22 January 1981, applicable regulation, as noted above, specified that a

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"dismissal without prior clearance shall be conclusively presumed to be termination of employment without a cause", and the Regional Director was required in such case to" order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown or dismiss until . . . reinstatement." In other words, under the then applicable rule, the Regional Director did not even have to require submission of position papers by the parties in view of the conclusive (juris et de jure) character of the presumption created by such applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor and Employment, 8 the Court pointed out that "under Rule 14,
Section 2, of the Implementing Rules and Regulations, the termination of [an employee] which was without previous clearance from the Ministry of Labor is conclusively presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary proof however strong."

3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. 9 Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the parties; while paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to terminate the employment

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agreement at any time by giving one-month's notice to the employee or, in lieu of such notice, one-months salary. A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties. 10 The
principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations.

As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into, and hence refused to give effect to said paragraph 5. These

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Articles read as follows: Art. 280. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his reinstatement. Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his

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employment shall continue while such actually exists. (Emphasis supplied) In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al.,
the Court had occasion to examine in detail the question of whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. After an extensive examination of the history and development of Articles 280 and 281, the Court reached the conclusion that a contract providing for employment with a fixed period was not necessarily unlawful:
12

There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist e.g. where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non would an agreement fixing a period be essentially evil or illicit, therefore anathema Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?"

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As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employers" using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. xxx xxx xxx Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent

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security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. (emphasis supplied) It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to evade. Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read

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together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a onemonth period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years, 13 and thus to escape completely
the thrust of Articles 280 and 281 of the Labor Code.

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case, i.e., the employer-employee relationship

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between petitioner PIA and private respondents. We have already pointed out that the relationship is much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the sole venue for the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationship between the parties, upon the other: the contract was not only executed in the Philippines, it was also performed here, at least partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative agencies as a proper forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the

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applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. 14 We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess of jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3) years backwages without qualification or deduction. Should their reinstatement to their former or other substantially equivalent positions not be feasible in view of the length of time which has gone by since their services were unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting to one (1) month's salary for every year of service rendered by them, including the three (3) years service putatively rendered. ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years backwages, without deduction or qualification; and (2) should reinstatement of private respondents to their former positions or to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents separation pay amounting to one (1)month's salary for every year of service actually rendered by them and for the three (3) years putative service by private respondents.

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Bank of America v. American Realty

The Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs against petitioner. The petition is bereft of merit. First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of foreclosure requires the concurrence of two requisites: an ordinary civil action for collection should be filed and subsequently a final judgment be correspondingly rendered therein. According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice; a final judgment must be secured and obtained in the personal action so that waiver of the remedy of foreclosure may be appreciated. To put it differently, absent any of the two requisites, the mortgagee-creditor is deemed not to have waived the remedy of foreclosure. We do not agree. Certainly, this Court finds petitioner's arguments untenable and upholds the jurisprudence laid down in Bachrach 15 and similar
cases adjudicated thereafter, thus:

In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action or debt or a real action to foreclose the mortgage. In other words, he may he may pursue either of the two remedies,

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but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to bring a personal action will leave open to him all the properties of the debtor for attachment and execution, even including the mortgaged property itself. And, if he waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give him the right to sue for a deficiency judgment, in which case, all the properties of the defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the property lies. In Danao vs. Court of Appeals,
this Court, reiterating jurisprudence enunciated in Manila Trading and Supply Co vs. Co Kim 17 and Movido vs. RFC, 18 invariably held:
16

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. . . The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the properties of the debtor, including the subject matter of the mortgage . . . , subject to the qualification that if he fails in the remedy by him elected, he cannot pursue further the remedy he has waived. (Emphasis Ours) Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. 19 In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by Act No. 4118. In the case at bench, private respondent ARC constituted real

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estate mortgages over its properties as security for the debt of the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property. 20 Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of another's obligation by mortgaging his own property, to be solidarily bound with the principal obligor. The signatory to the principal contractloanremains to be primarily bound. It is only upon default of the latter that the creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. 21 In the instant case, petitioner's contention that the requisites of filing the action for collection and rendition of final judgment therein should concur, is untenable. Thus, in Cerna vs. Court of Appeals,
we agreed with the petitioner in said case, that the filing of a collection suit barred the foreclosure of the mortgage:
22

A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage constituted over the personal property as security for the debt or value of the promissory note when he seeks to recover in the said collection

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suit. . . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the chattel mortgage as basis for relief, he clearly manifests his lack of desire and interest to go after the mortgaged property as security for the promissory note . . .. Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere act of filing of an ordinary action for collection operates as a waiver of the mortgagecreditor's remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection against the principal debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is required for the rule on waiver to apply. Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case relied upon by petitioner, supposedly to buttress its
contention, this Court had occasion to rule that the mere act of filing a collection suit for the recovery of a debt secured by a mortgage constitutes waiver of the other remedy of foreclosure.

In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt. Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner

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then may opt to exercise only one of two remedies so as not to violate the rule against splitting a cause of action. As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc, vs. Icarangal. 24 For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two demands, the payment of the debt and the foreclosure of his mortgage. But both demands arise from the same cause, the nonpayment of the debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the same obligation. Consequently, there exists only one cause of action for a single breach of that obligation. Plaintiff, then, by applying the rules above stated, cannot split up his single cause of action by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two separate complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single breach of contract at so much cost to the courts and with so

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much vexation and oppression to the debtor. Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in Caltex wherein this High Court relaxed the application of the general rules to wit: In the present case, however, we shall not follow this rule to the letter but declare that it is the collection suit which was waived and/or abandoned. This ruling is more in harmony with the principles underlying our judicial system. It is of no moment that the collection suit was filed ahead, what is determinative is the fact that the foreclosure proceedings ended even before the decision in the collection suit was rendered. . . . Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case was never intended to overrule the well-entrenched doctrine enunciated Bachrach, which to our mind still finds applicability in cases of this sort. To reiterate, Bachrach is still good law. We then quote the decision
thus:
25

of the trial court, in the present case,

The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar circumstances obtaining therein. In the said case, the Supreme Court chastised Caltex for making ". . . a mockery of our judicial system when it initially filed a collection

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suit then, during the pendency thereof, foreclosed extrajudicially the mortgaged property which secured the indebtedness, and still pursued the collection suit to the end." Thus, to prevent a mockery of our judicial system", the collection suit had to be nullified because the foreclosure proceedings have already been pursued to their end and can no longer be undone. xxx xxx xxx In the case at bar, it has not been shown whether the defendant pursued to the end or are still pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for this court to apply the exception laid down by the Supreme Court in Caltex by nullifying the collection suits. Quite obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the only way the court may prevent the spector of a creditor having "plural redress for a single breach of contract" is by holding, as the Court hereby holds, that the defendant has waived the right to foreclose the mortgages constituted by the plaintiff on its properties originally covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761. (RTC Decision pp., 10-11) In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 26 Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC. 27 Again, petitioner tried to fit a square peg in a

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round hole. It must be stressed that far from overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed its firm stand on this issue by declaring:

While the law allows a mortgage creditor to either institute a personal action for the debt or a real action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or successively as was done by PCIB in this case. xxx xxx xxx Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory note secured by real estate mortgages and subsequently filed a petition for extrajudicial foreclosure, it violates the rule against splitting a cause of action. Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extrajudicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute books. In Bachrach, this Court resolved to deny the creditor the remedy of

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foreclosure after the collection suit was filed, considering that the creditor should not be afforded "plural redress for a single breach of contract." For cause of action should not be confused with the remedy created for its enforcement. 28 Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in addressing the creditor's cause. Hence, a suit brought before a foreign court having competence and jurisdiction to entertain the action is deemed, for this purpose, to be within the contemplation of the remedy available to the mortgagee-creditor. This pronouncement would best serve the interest of justice and fair play and further discourage the noxious practice of splitting up a lone cause of action. Incidentally, BANTSA alleges that under English Law, which according to petitioner is the governing law with regard to the principal agreements, the mortgagee does not lose its security interest by simply filing civil actions for sums of money. 29 We rule in the negative. This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at bench, Philippine law shall apply notwithstanding the evidence presented by petitioner to prove the English law on the matter. In a long line of decisions, this Court adopted the well-imbedded

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principle in our jurisdiction that there is no judicial notice of any foreign law. A foreign law must be properly pleaded and proved as a fact. 30 Thus, if the foreign law involved is not properly pleaded and
proved, our courts will presume that the foreign law is the same as our local or domestic or internal law. 31 This is what we refer to as the doctrine of processual presumption.

In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and proved in accordance with Section 24, Rule 132 of the Rules of Court and the jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales, 32 said foreign law
would still not find applicability.

Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of the forum, the said foreign law, judgment or order shall not be applied. 33 Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. 34 The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction proscribing the splitting up of a single cause of action.

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Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal of the others. Moreover, foreign law should not be applied when its application would work undeniable injustice to the citizens or residents of the forum. To give justice is the most important function of law; hence, a law, or judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws. 35 Clearly then, English Law is not applicable. As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real estate mortgages constituted a clear violation of the rights of herein private respondent ARC, as third-party mortgagor. Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade, property, profession, job or occupation and the same must be proved, otherwise if the proof is flimsy and non-substantial, no damages will be given. 36 Indeed, the
question of the value of property is always a difficult one to settle as

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valuation of real property is an imprecise process since real estate has no inherent value readily ascertainable by an appraiser or by the court. 37 The opinions of men vary so much concerning the real value of property that the best the courts can do is hear all of the witnesses which the respective parties desire to present, and then, by carefully weighing that testimony, arrive at a conclusion which is just and equitable. 38

In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made by Philippine Appraisal Company. In effect, BANTSA questions the act of the appellate court in giving due weight to the appraisal report composed of twenty three pages, signed by Mr. Lauro Marquez and submitted as evidence by private respondent. The appraisal report, as the records would readily show, was corroborated by the testimony of Mr. Reynaldo Flores, witness for private respondent. On this matter, the trial court observed: The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23) pages which set out in detail the valuation of the property to determine its fair market value (TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one Mr. Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company, Inc. (TSN, ibid., p. 3). The

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latter's testimony was subjected to extensive cross-examination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-22). 39 In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule that the factual findings of the trial court should be respected. 40 The time-tested jurisprudence is
that the findings and conclusions of the trial court on the credibility of witnesses enjoy a badge of respect for the reason that trial courts have the advantage of observing the demeanor of witnesses as they testify.
41

This Court will not alter the findings of the trial court on the credibility of witnesses, principally because they are in a better position to assess the same than the appellate court. 42 Besides,
trial courts are in a better position to examine real evidence as well as observe the demeanor of witnesses. 43

Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest primarily with the trial court. 44 In the
case at bar, we see no reason that would justify this Court to disturb the factual findings of the trial court, as affirmed by the Court of Appeals, with regard to the award of actual damages.

In arriving at the amount of actual damages, the trial court justified the award by presenting the following ratiocination in its assailed decision 45, to wit: Indeed, the Court has its own mind in the matter of valuation. The

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size of the subject real properties are (sic) set forth in their individuals titles, and the Court itself has seen the character and nature of said properties during the ocular inspection it conducted. Based principally on the foregoing, the Court makes the following observations: 1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan, which is (sic) not distant from Metro Manila the biggest urban center in the Philippines and are easily accessible through well-paved roads; 2. The properties are suitable for development into a subdivision for low cost housing, as admitted by defendant's own appraiser (TSN, May 30, 1994, p. 31); 3. The pigpens which used to exist in the property have already been demolished. Houses of strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a growing community. It has even been shown that the house of the Barangay Chairman is located adjacent to the property in question (Exh. 27), and the only remaining piggery (named Cherry Farm) in the vicinity is about 2 kilometers away from the western boundary of the property in question (TSN, November 19, p. 3); 4. It will not be hard to find interested buyers of the property, as indubitably shown by the fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the consolidated real

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estate properties to Stateland Investment Corporation, in whose favor new titles were issued, i.e., TCT Nos. T-187781(m); T187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the Register of Deeds of Meycauayan (sic), Bulacan; 5. The fact that ICCS was able to sell the subject properties to Stateland Investment Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple defendant's appraisal (Exh. 2) clearly shows that the Court cannot rely on defendant's aforesaid estimate (Decision, Records, p. 603). It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses command great respect and consideration especially when the conclusions are supported by the evidence on record. 46 Applying the foregoing principle, we
therefore hold that the trial court committed no palpable error in giving credence to the testimony of Reynaldo Flores, who according to the records, is a licensed real estate broker, appraiser and director of Philippine Appraisal Company, Inc. since 1990. 47 As the records show, Flores had been with the company for 26 years at the time of his testimony.

Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated 29 March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the fair market value of the real property. Above all these, the record would likewise show that the trial judge in order to appraise

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himself of the characteristics and condition of the property, conducted an ocular inspection where the opposing parties appeared and were duly represented. Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as regards the valuation of the property . . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties (sic) translates to just about Two Hundred Fifty Four Pesos (P254.00) per square meter. This appears to be, as the court so holds, a better approximation of the fair market value of the subject properties. This is the amount which should be restituted by the defendant to the plaintiff by way of actual or compensatory damages . . . . 48 Further, petitioner ascribes error to the lower court awarding an amount allegedly not asked nor prayed for in private respondent's complaint. Notwithstanding the fact that the award of actual and compensatory damages by the lower court exceeded that prayed for in the complaint, the same is nonetheless valid, subject to certain qualifications. On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:

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Sec. 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgement; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made. The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de Talisay-Silay, Inc. 49 citing Northern
Cement Corporation vs. Intermediate Appellate Court 50 is enlightening:

There have been instances where the Court has held that even without the necessary amendment, the amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than that asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the point on which recovery was based. The appellate court could treat the pleading as amended to conform to the evidence

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although the pleadings were actually not amended. Amendment is also unnecessary when only clerical error or non substantial matters are involved, as we held in Bank of the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed that the rule on amendment need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting party. And in the recent case of National Power Corporation vs. Court of Appeals (113 SCRA 556), we held that where there is a variance in the defendant's pleadings and the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform with the evidence. It is the view of the Court that pursuant to the above-mentioned rule and in light of the decisions cited, the trial court should not be precluded from awarding an amount higher than that claimed in the pleading notwithstanding the absence of the required amendment. But it is upon the condition that the evidence of such higher amount has been presented properly, with full opportunity on the part of the opposing parties to support their respective contentions and to refute each other's evidence. The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude an adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings, or serve as a basis for a higher award of damages. Although the pleading may not have been amended to conform to the evidence submitted during trial,

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judgment may nonetheless be rendered, not simply on the basis of the issues alleged but also the basis of issues discussed and the assertions of fact proved in the course of trial. The court may treat the pleading as if it had been amended to conform to the evidence, although it had not been actually so amended. Former Chief Justice Moran put the matter in this way: When evidence is presented by one party, with the expressed or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards those issues, which shall be considered as if they have been raised in the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto. Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basis requirements of fair play had been met, as where litigants were given full opportunity to support their respective contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it. In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and object to the evidence, both documentary

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and testimonial, formally offered by private respondent, the rudiments of fair play are deemed satisfied. In fact, the testimony of Reynaldo Flores was put under scrutiny during the course of the cross-examination. Under these circumstances, the court acted within the bounds of its jurisdiction and committed no reversible error in awarding actual damages the amount of which is higher than that prayed for. Verily, the lower court's actuations are sanctioned by the Rules and supported by jurisprudence. Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos (P5,000,000.00) awarded, being excessive, is subject to reduction. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. 51 Considering its purpose, it must be fair
and reasonable in every case and should not be awarded to unjustly enrich a prevailing party. 52 In our view, an award of P50,000.00 as exemplary damages in the present case qualifies the test of reasonableness.f
FORUM NON CONVENIENS

Manila Hotel v. NLRC

The petition is meritorious. I. Forum Non-Conveniens The NLRC was a seriously inconvenient forum.

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We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here. The employment contract. Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without the intervention of the POEA or any authorized recruitment agency of the government.36 Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in the case at bar. Not Convenient. We fail to see how the NLRC is a convenient forum given that all the incidents of the case from the time of recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is compounded by the fact that the

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proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines. No power to determine applicable law. Neither can an intelligent decision be made as to the law governing the employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci contractus (the law of the place where the contract was made).38 The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People's Republic of China. No power to determine the facts. Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a position to determine whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment. Principle of effectiveness, no power to execute decision. Even assuming that a proper decision could be reached by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated

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under the laws of China and was not even served with summons. Jurisdiction over its person was not acquired. This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign employers. Neither are we saying that we do not have power over an employment contract executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract worker" a fact which he admits with conviction.40 Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot be sustained. II. MHC Not Liable Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable. True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC. Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to defeat public

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convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a corporation is a mere alter ego or business conduit of a person or another corporation. In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities." The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or complete domination of the other corporation's finances, policy and business practices with regard to the transaction attacked. There must be proof that the other corporation had no separate mind, will or existence with respect the act complained of. Second, control must be used by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the injury or loss complained of. The absence of any of the elements prevents the piercing of the corporate veil.43 It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of any other legal entity to which it may be related.44 Clear and convincing evidence is needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that MHICL and MHC are one

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and the same entity. III. MHICL not Liable Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment contract with the Palace Hotel. This fact fails to persuade us. First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the employment contract as a mere witness. He merely signed under the word "noted". When one "notes" a contract, one is not expressing his agreement or approval, as a party would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term "noted" means that the person so noting has merely taken cognizance of the existence of an act or declaration, without exercising a judicious deliberation or rendering a decision on the matter. Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is that which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party to a contract, a witness is simply one who, "being present, personally sees or perceives a

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thing; a beholder, a spectator, or eyewitness."49 One who "notes" something just makes a "brief written statement"50 a memorandum or observation. Second, and more importantly, there was no existing employeremployee relationship between Santos and MHICL. In determining the existence of an employer-employee relationship, the following elements are considered:51 "(1) the selection and engagement of the employee; "(2) the payment of wages; "(3) the power to dismiss; and "(4) the power to control employee's conduct." MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of employment were negotiated and finalized through correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it was the Palace Hotel,

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through Mr. Schmidt and not MHICL that terminated respondent Santos' services. Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel. Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and the Palace Hotel. IV. Grave Abuse of Discretion Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90. Labor Arbiters have exclusive and original jurisdiction only over the following:53 "1. Unfair labor practice cases; "2. Termination disputes;

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"3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; "4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations; "5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and "6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement." In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employeremployee relationship which can be resolved by reference to the Labor Code, or other labor statutes, or their collective bargaining agreements.54 "To determine which body has jurisdiction over the present

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controversy, we rely on the sound judicial principle that jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein."55 The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to dismiss the case amounts to grave abuse of discretion.56 V. The Fallo WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of the National Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).

Puyat v. Zabarte

This Courts Ruling

The Petition has no merit.

First Question: Summary Judgment

Petitioner vehemently insists that summary judgment is

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inappropriate to resolve the case at bar, arguing that his Answer allegedly raised genuine and material factual matters which he should have been allowed to prove during trial. On the other hand, respondent argues that the alleged genuine issues of fact raised by petitioner are mere conclusions of law, or propositions arrived at not by any process of natural reasoning from a fact or a combination of facts stated but by the application of the artificial rules of law to the facts pleaded.[11] The RTC granted respondents Motion for Summary Judgment because petitioner, in his Answer, admitted the existence of the Judgment on Stipulation for Entry in Judgment. Besides, he had already paid $5,000 to respondent, as provided in the foreign judgment sought to be enforced. [12] Hence, the trial court ruled that, there being no genuine issue as to any material fact, the case should properly be resolved through summary judgment. The CA affirmed this ruling. We concur with the lower courts. Summary judgment is a procedural device for the prompt disposition of actions in which the pleadings raise only a legal issue, and not a genuine issue as to any material fact. By genuine issue is meant a question of

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fact that calls for the presentation of evidence. It should be distinguished from an issue that is sham, contrived, set in bad faith and patently unsubstantial.[13] Summary judgment is resorted to in order to avoid long drawn out litigations and useless delays. When affidavits, depositions and admissions on file show that there are no genuine issues of fact to be tried, the Rules allow a party to pierce the allegations in the pleadings and to obtain immediate relief by way of summary judgment. In short, since the facts are not in dispute, the court is allowed to decide the case summarily by applying the law to the material facts. Petitioner contends that by allowing summary judgment, the two courts a quo prevented him from presenting evidence to substantiate his claims. We do not agree. Summary judgment is based on facts directly proven by affidavits, depositions or admissions.[14] In this case, the CA and the RTC both merely ruled that trial was not necessary to resolve the case. Additionally and correctly, the RTC specifically ordered petitioner to submit opposing affidavits to support his contentions that (1) the Judgment on Stipulation for Entry in Judgment was procured on the basis of fraud, collusion, undue influence, or a clear mistake of law or fact; and (2) that it was

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contrary to public policy or the canons of morality.[15] Again, in its Order[16] dated November 29, 1995, the trial court clarified that the opposing affidavits were for [petitioner] to spell out the facts or circumstances [that] would constitute lack of jurisdiction over the subject matter of and over the persons involved in Case No. C21-00265, and that would render the judgment therein null and void. In this light, petitioners contention that he was not allowed to present evidence to substantiate his claims is clearly untenable. For summary judgment to be valid, Rule 34, Section 3 of the Rules of Court, requires (a) that there must be no genuine issue as to any material fact, except for the amount of damages; and (b) that the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law. [17] As mentioned earlier, petitioner admitted that a foreign judgment had been rendered against him and in favor of respondent, and that he had paid $5,000 to the latter in partial compliance therewith. Hence, respondent, as the party presenting the Motion for Summary Judgment, was shown to be entitled to the judgment. The CA made short shrift of the first requirement. To show

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that petitioner had raised no genuine issue, it relied instead on the finality of the foreign judgment which was, in fact, partially executed. Hence, we shall show in the following discussion how the defenses presented by petitioner failed to tender any genuine issue of fact, and why a full-blown trial was not necessary for the resolution of the issues.
Jurisdiction

Petitioner alleges that jurisdiction over Case No. C2100265, which involved partnership interest, was vested in the Securities and Exchange Commission, not in the Superior Court of California, County of Contra Costa. We disagree. In the absence of proof of California law on the jurisdiction of courts, we presume that such law, if any, is similar to Philippine law. We base this conclusion on the presumption of identity or similarity, also known as processual presumption.[18] The Complaint,[19] which respondent filed with the trial court, was for the enforcement of a foreign judgment. He alleged therein that the action of the foreign court was for the collection of a sum of money, breach of promissory notes, and damages.[20]

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In our jurisdiction, such a case falls under the jurisdiction of civil courts, not of the Securities and Exchange Commission (SEC). The jurisdiction of the latter is exclusively over matters enumerated in Section 5, PD 902-A,[21] prior to its latest amendment. If the foreign court did not really have jurisdiction over the case, as petitioner claims, it would have been very easy for him to show this. Since jurisdiction is determined by the allegations in a complaint, he only had to submit a copy of the complaint filed with the foreign court. Clearly, this issue did not warrant trial.
Rights to Counsel and to Due Process

Petitioner contends that the foreign judgment, which was in the form of a Compromise Agreement, cannot be executed without the parties being assisted by their chosen lawyers. The reason for this, he points out, is to eliminate collusion, undue influence and/or improper exertion of ascendancy by one party over the other. He alleges that he discharged his counsel during the proceedings, because he felt that the latter was not properly attending to the case. The judge, however, did not allow him to secure the services of another counsel. Insisting that petitioner settle the case with respondent, the judge practically imposed

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the settlement agreement on him. In his Opposing Affidavit, petitioner states: It is true that I was initially represented by a counsel in the proceedings in #C21-00625. I discharged him because I then felt that he was not properly attending to my case or was not competent enough to represent my interest. I asked the Judge for time to secure another counsel but I was practically discouraged from engaging one as the Judge was insistent that I settle the case at once with the [respondent]. Being a foreigner and not a lawyer at that I did not know what to do. I felt helpless and the Judge and [respondents] lawyer were the ones telling me what to do. Under ordinary circumstances, their directives should have been taken with a grain of salt especially so [since respondents] counsel, who was telling me what to do, had an interest adverse to mine. But [because] time constraints and undue influence exerted by the Judge and [respondents] counsel on me disturbed and seriously affected my freedom to act according to my best judgment and belief. In point of fact, the terms of the settlement were practically imposed on me by the Judge seconded all the time by [respondents] counsel. I was then helpless as I had no counsel to assist me and the collusion between the Judge and [respondents] counsel was

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becoming more evident by the way I was treated in the Superior Court of [t]he State of California. I signed the Judgment on Stipulation for Entry in Judgment without any lawyer assisting me at the time and without being fully aware of its terms and stipulations.[22] The manifestation of petitioner that the judge and the counsel for the opposing party had pressured him would gain credibility only if he had not been given sufficient time to engage the services of a new lawyer. Respondents Affidavit[23] dated May 23, 1994, clarified, however, that petitioner had sufficient time, but he failed to retain a counsel. Having dismissed his lawyer as early as June 19, 1991, petitioner directly handled his own defense and negotiated a settlement with respondent and his counsel in December 1991. Respondent also stated that petitioner, ignoring the judges reminder of the importance of having a lawyer, argued that he would be the one to settle the case and pay anyway. Eventually, the Compromise Agreement was presented in court and signed before Judge Ellen James on January 3, 1992. Hence, petitioners rights to counsel and to due process were not violated.

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Unjust Enrichment

Petitioner avers that the Compromise Agreement violated the norm against unjust enrichment because the judge made him shoulder all the liabilities in the case, even if there were two other defendants, G.S.P & Sons, Inc. and the Genesis Group. We cannot exonerate petitioner from his obligation under the foreign judgment, even if there are other defendants who are not being held liable together with him. First, the foreign judgment itself does not mention these other defendants, their participation or their liability to respondent. Second, petitioners undated Opposing Affidavit states: [A]lthough myself and these entities were initially represented by Atty. Lawrence L. Severson of the Law Firm Kouns, Quinlivan & Severson, x x x I discharged x x x said lawyer. Subsequently, I assumed the representation for myself and these firms and this was allowed by the Superior Court of the State of California without any authorization from G.G.P. & Sons, Inc. and the Genesis Group.[24] Clearly, it was petitioner who chose to represent the other defendants; hence, he cannot now be allowed to impugn a decision based on this ground. In any event, contrary to petitioners contention, unjust

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enrichment or solutio indebiti does not apply to this case. This doctrine contemplates payment when there is no duty to pay, and the person who receives the payment has no right to receive it.[25] In this case, petitioner merely argues that the other two defendants whom he represented were liable together with him. This is not a case of unjust enrichment. We do not see, either, how the foreign judgment could be contrary to law, morals, public policy or the canons of morality obtaining in the country. Petitioner owed money, and the judgment required him to pay it. That is the long and the short of this case. In addition, the maneuverings of petitioner before the trial court reinforce our belief that his claims are unfounded. Instead of filing opposing affidavits to support his affirmative defenses, he filed a Motion for Reconsideration of the Order allowing summary judgment, as well as a Motion to Dismiss the action on the ground of forum non conveniens. His opposing affidavits were filed only after the Order of November 29, 1995 had denied both Motions.[26] Such actuation was considered by the trial court as a dilatory ploy which justified the resolution of the action by summary judgment. According to the CA, petitioners allegations sought to delay the full effects of the

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judgment; hence, summary judgment was proper. On this point, we concur with both courts.
Second Question: Forum Non Conveniens

Petitioner argues that the RTC should have refused to entertain the Complaint for enforcement of the foreign judgment on the principle of forum non conveniens. He claims that the trial court had no jurisdiction, because the case involved partnership interest, and there was difficulty in ascertaining the applicable law in California. All the aspects of the transaction took place in a foreign country, and respondent is not even Filipino. We disagree. Under the principle of forum non conveniens, even if the exercise of jurisdiction is authorized by law, courts may nonetheless refuse to entertain a case for any of the following practical reasons: 1) The belief that the matter can be better tried and decided elsewhere, either because the main aspects of the case transpired in a foreign jurisdiction or the material witnesses have their residence there;

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2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum shopping[,] merely to secure procedural advantages or to convey or harass the defendant; 3) The unwillingness to extend local judicial facilities to nonresidents or aliens when the docket may already be overcrowded; 4) The inadequacy of the local judicial machinery for effectuating the right sought to be maintained; and The difficulty of ascertaining foreign law.[27] None of the aforementioned reasons barred the RTC from exercising its jurisdiction. In the present action, there was no more need for material witnesses, no forum shopping or harassment of petitioner, no inadequacy in the local machinery to enforce the foreign judgment, and no question raised as to the application of any foreign law. Authorities agree that the issue of whether a suit should be entertained or dismissed on the basis of the above-mentioned principle depends largely upon the facts of each case and on the sound discretion of the trial court.[28] Since the present action

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lodged in the RTC was for the enforcement of a foreign judgment, there was no need to ascertain the rights and the obligations of the parties based on foreign laws or contracts. The parties needed only to perform their obligations under the Compromise Agreement they had entered into. Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a judgment in an action in personam rendered by a foreign tribunal clothed with jurisdiction is presumptive evidence of a right as between the parties and their successorsin-interest by a subsequent title.[29] Also, under Section 5(n) of Rule 131, a court -- whether in the Philippines or elsewhere -- enjoys the presumption that it is acting in the lawful exercise of its jurisdiction, and that it is regularly performing its official duty.[30] Its judgment may, however, be assailed if there is evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. But precisely, this possibility signals the need for a local trial court to exercise jurisdiction. Clearly, the application of forum non coveniens is not called for. The grounds relied upon by petitioner are contradictory. On the one hand, he insists that the RTC take

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jurisdiction over the enforcement case in order to invalidate the foreign judgment; yet, he avers that the trial court should not exercise jurisdiction over the same case on the basis of forum non conveniens. Not only do these defenses weaken each other, but they bolster the finding of the lower courts that he was merely maneuvering to avoid or delay payment of his obligation. WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Double costs against petitioner. SO ORDERED.
Pioneer v. Guadiz Raytheon v. Rouzie

SAME Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations with the law firm even before the filing of the instant petition and that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite diligent efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing of a comment.

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The instant petition lacks merit. Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the presence of foreign elements in the dispute namely, the parties and witnesses involved are American corporations and citizens and the evidence to be presented is located outside the Philippines that renders our local courts inconvenient forums. Petitioner theorizes that the foreign elements of the dispute necessitate the immediate application of the doctrine of forum non conveniens. Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution of conflicts-oflaws problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments. Thus, in the instances27 where the Court held that the local judicial machinery was adequate to resolve controversies with a foreign element, the following requisites had to be proved: (1) that the Philippine Court is one to which the parties may conveniently resort; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.28 On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and where the court

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has jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case even if the rules of conflict-oflaws or the convenience of the parties point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case is filed.29 Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law30 and by the material allegations in the complaint, irrespective of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the action and the amount of damages prayed are within the jurisdiction of the RTC. As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person of petitioner (as party defendant) was acquired by its voluntary appearance in court.32 That the subject contract included a stipulation that the same shall be governed by the laws of the State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice

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of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both parties.33 The choice of law stipulation will become relevant only when the substantive issues of the instant case develop, that is, after hearing on the merits proceeds before the trial court. Under the doctrine of forum non conveniens, a court, in conflictsof-laws cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.34 Petitioners averments of the foreign elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved. Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the courts desistance.35 Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In the same manner, the Court defers to the sound discretion of the lower

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courts because their findings are binding on this Court. Petitioner also contends that the complaint in Civil Case No. 1192BG failed to state a cause of action against petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the pleading.36 As a general rule, the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded.37 The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner contends that the deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court of Appeals is instructive, thus: x x x Our examination of the deposition of Mr. Walter Browning as well as other documents produced in the hearing shows that these evidence aliunde are not quite sufficient for us to mete a ruling that the complaint fails to state a cause of action. Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of defendant Rust International in the Makar Port Project in General Santos City, after Rust International ceased to exist after being absorbed by REC. Other documents already submitted in evidence are likewise meager to preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have

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combined into one company, so much so that Raytheon International, Inc., the surviving company (if at all) may be held liable for the obligation of BMSI to respondent Rouzie for unpaid commissions. Neither these documents clearly speak otherwise.38 As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST merged together requires the presentation of further evidence, which only a full-blown trial on the merits can afford. WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner.
Hasegawa v. Kitamura Pioneer Concrete v. Judge Guadiz Bank of America v. CA

SAME SAME On the other hand, private respondents contend that certain material facts and pleadings are omitted and/or misrepresented in the present petition for certiorari; that the prefatory statement failed to state that part of the security of the foreign loans were mortgages on a 39-hectare piece of real estate located in the Philippines;28 that while the complaint was filed only by the stockholders of the corporate borrowers, the latter are whollyowned by the private respondents who are Filipinos and therefore

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under Philippine laws, aside from the said corporate borrowers being but their alter-egos, they have interests of their own in the vessels.29 Private respondents also argue that the dismissal by the Court of Appeals of the petition for certiorari was justified because there was neither allegation nor any showing whatsoever by the petitioners that they had no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law from the Order of the trial judge denying their Motion to Dismiss; that the remedy available to the petitioners after their Motion to Dismiss was denied was to file an Answer to the complaint;30 that as upheld by the Court of Appeals, the decision of the trial court in not applying the principle of forum non conveniens is in the lawful exercise of its discretion.31 Finally, private respondents aver that the statement of petitioners that the doctrine of res judicata also applies to foreign judgment is merely an opinion advanced by them and not based on a categorical ruling of this Court;32 and that herein private respondents did not actually participate in the proceedings in the foreign courts.33 We deny the petition for lack of merit. It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition for certiorari. Petitioners should have filed an answer to the complaint, proceed to trial and await judgment before making an appeal. As repeatedly held by this Court:

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"An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari or mandamus. The remedy of the aggrieved party is to file an answer and to interpose as defenses the objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in due course. xxx Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or (c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a defendant from the injurious effects of the patently mistaken order maintaining the plaintiff's baseless action and compelling the defendant needlessly to go through a protracted trial and clogging the court dockets by another futile case."34 Records show that the trial court acted within its jurisdiction when it issued the assailed Order denying petitioners' motion to dismiss. Does the denial of the motion to dismiss constitute a patent grave abuse of discretion? Would appeal, under the circumstances, not prove to be a speedy and adequate remedy? We will resolve said questions in conjunction with the issues raised by the parties. First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint on the ground that plaintiffs have no cause of action against defendants since plaintiffs are merely

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stockholders of the corporations which are the registered owners of the vessels and the borrowers of petitioners? No. Petitioners' argument that private respondents, being mere stockholders of the foreign corporations, have no personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action.35 In San Lorenzo Village Association, Inc. vs. Court of Appeals,36 this Court clarified that a complaint states a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.37 To emphasize, it is not the lack or absence of cause of action that is a ground for dismissal of the complaint but rather the fact that the complaint states no cause of action.38 "Failure to state a cause of action" refers to the insufficiency of allegation in the pleading, unlike "lack of cause of action" which refers to the insufficiency of factual basis for the action. "Failure to state a cause of action" may be raised at the earliest stages of an action through a motion to dismiss the complaint, while "lack of

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cause of action" may be raised any time after the questions of fact have been resolved on the basis of stipulations, admissions or evidence presented.39 In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1) plaintiffs, herein private respondents, have the right to demand for an accounting from defendants (herein petitioners), as trustees by reason of the fiduciary relationship that was created between the parties involving the vessels in question; (2) petitioners have the obligation, as trustees, to render such an accounting; and (3) petitioners failed to do the same. Petitioners insist that they do not have any obligation to the private respondents as they are mere stockholders of the corporation; that the corporate entities have juridical personalities separate and distinct from those of the private respondents. Private respondents maintain that the corporations are wholly owned by them and prior to the incorporation of such entities, they were clients of petitioners which induced them to acquire loans from said petitioners to invest on the additional ships. We agree with private respondents. As held in the San Lorenzo case,40 "xxx assuming that the allegation of facts constituting plaintiffs' cause of action is not as clear and categorical as would otherwise

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be desired, any uncertainty thereby arising should be so resolved as to enable a full inquiry into the merits of the action." As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of suits which the law abhors, and conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort the action on account of the alleged fatal flaws of the complaint would obviously be indecisive and would not end the controversy, since the institution of another action upon a revised complaint would not be foreclosed.41 Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens? No. The doctrine of forum non-conveniens, literally meaning 'the forum is inconvenient', emerged in private international law to deter the practice of global forum shopping,42 that is to prevent non-resident litigants from choosing the forum or place wherein to bring their suit for malicious reasons, such as to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.43

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Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court.44 In the case of Communication Materials and Design, Inc. vs. Court of Appeals,45 this Court held that "xxx [a Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision."46 Evidently, all these requisites are present in the instant case. Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,47 that the doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This Court further ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the court's desistance; and that the propriety of dismissing a case based on this principle of forum non conveniens requires a factual determination, hence it is more properly considered a matter of defense.48 Third issue. Are private respondents guilty of forum shopping

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because of the pendency of foreign action? No. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case will amount to res judicata in the other.49 Parenthetically, for litis pendentia to be a ground for the dismissal of an action there must be: (a) identity of the parties or at least such as to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the two cases should be such that the judgment which may be rendered in one would, regardless of which party is successful, amount to res judicata in the other.50 In case at bar, not all the requirements for litis pendentia are present. While there may be identity of parties, notwithstanding the presence of other respondents,51 as well as the reversal in positions of plaintiffs and defendants52, still the other requirements necessary for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were filed in Hongkong and England without however showing the identity of rights asserted and the reliefs sought for as well as the presence of the elements of res judicata should one of the cases be adjudged. As the Court of Appeals aptly observed: "xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein xxx, failed to provide

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this Court with relevant and clear specifications that would show the presence of the above-quoted elements or requisites for res judicata. While it is true that the petitioners in their motion for reconsideration (CA Rollo, p. 72), after enumerating the various civil actions instituted abroad, did aver that "Copies of the foreign judgments are hereto attached and made integral parts hereof as Annexes 'B', 'C', 'D' and 'E'", they failed, wittingly or inadvertently, to include a single foreign judgment in their pleadings submitted to this Court as annexes to their petition. How then could We have been expected to rule on this issue even if We were to hold that foreign judgments could be the basis for the application of the aforementioned principle of res judicata?"53 Consequently, both courts correctly denied the dismissal of herein subject complaint. WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED.

Philsec Investment v. CA

We will deal with these contentions in the order in which they are made.

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First. It is important to note in connection with the first point that while the present case was pending in the Court of Appeals, the United States District Court for the Southern District of Texas rendered judgment[5] in the case before it. The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals.[6] Thus, the principal issue to be resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court. Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39, 50 of the Rules of Court, to wit: want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Petitioners contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases,[7] it was after the parties opposed to the judgment had been given ample opportunity to repel them

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on grounds allowed under the law.[8] It is not necessary for this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima facie evidence of the justness of the claim of a party and, as such, is subject to proof to the contrary.[9] Rule 39, 50 provides: SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the judgment is as follows: (a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing; (b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title; but the judgment may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or

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fact. Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd.,[10] which private respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment was considered res judicata because this Court found from the evidence as well as from appellants own pleadings[11] that the foreign court did not make a clear mistake of law or fact or that its judgment was void for want of jurisdiction or because of fraud or collusion by the defendants. Trial had been previously held in the lower court and only afterward was a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to have the effect of res judicata in the case before the lower court. In the same vein, in Philippine International Shipping Corp. v. Court of Appeals,[12] this Court held that the foreign judgment was valid and enforceable in the Philippines there being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the Rule had not been rebutted. In the case at bar, it cannot be said that petitioners

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were given the opportunity to challenge the judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its disputed order dated March 9, 1988: On the plaintiffs claim in its Opposition that the causes of action of this case and the pending case in the United States are not identical, precisely the Order of January 26, 1988 never found that the causes of action of this case and the case pending before the USA Court, were identical. (emphasis added) It was error therefore for the Court of Appeals to summarily rule that petitioners action is barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was brushed aside by both the trial court and the

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Court of Appeals.[13] Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the pendency of this case. To sustain the appellate courts ruling that the foreign judgment constitutes res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore that: [A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in the interest of justice, the complaint should be considered as a petition for the recognition of the

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Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable.[14] Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be consolidated.[15] After all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have the burden of impeaching the foreign judgment and only in the event they succeed in doing so may they proceed with their action against private respondents. Second. Nor is the trial courts refusal to take cognizance of the case justifiable under the principle of forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which does not include forum non conveniens.[16] The propriety of dismissing a case based on this principle requires a factual determination, hence, it is more properly

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considered a matter of defense. Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the courts desistance.[17] In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latters debt which was the object of the transaction under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case. Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in personam and summons were served by extraterritorial service. Rule 14, 17 on extraterritorial service provides that service of summons on a non-resident defendant may be effected out of the Philippines by leave of Court

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where, among others, the property of the defendant has been attached within the Philippines.[18] It is not disputed that the properties, real and personal, of the private respondents had been attached prior to service of summons under the Order of the trial court dated April 20, 1987.[19] Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The separability of Guevarras claim is not only admitted by petitioners,[20] it appears from the pleadings that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563.[21] Hence, the TRO should be lifted and Civil Case No. 921445 allowed to proceed. WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation with

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Civil Case No. 92-1070 and for further proceedings in accordance with this decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED. SO ORDERED.
CHOICE OF LAW Saudi Arabian Airlines v. CA Philippine Export v. Eusebio

SAME
The main issue in this case is whether the petitioner is entitled to reimbursement of what it paid under Letter of Guarantee No. 81194-F it issued to Al Ahli Bank of Kuwait based on the deed of undertaking and surety bond from the respondents. The petitioner asserts that since the guarantee it issued was absolute, unconditional, and irrevocable the nature and extent of its liability are analogous to those of suretyship. Its liability accrued upon the failure of the respondents to finish the construction of the Institute of Physical Therapy Buildings in Baghdad. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the contract is called suretyship. 37 Strictly speaking, guaranty and surety are nearly related, and

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many of the principles are common to both. In both contracts, there is a promise to answer for the debt or default of another. However, in this jurisdiction, they may be distinguished thus: 1. A surety is usually bound with his principal by the same instrument executed at the same time and on the same consideration. On the other hand, the contract of guaranty is the guarantor's own separate undertaking often supported by a consideration separate from that supporting the contract of the principal; the original contract of his principal is not his contract. 2. A surety assumes liability as a regular party to the undertaking; while the liability of a guarantor is conditional depending on the failure of the primary debtor to pay the obligation. 3. The obligation of a surety is primary, while that of a guarantor is secondary. 4. A surety is an original promissor and debtor from the beginning, while a guarantor is charged on his own undertaking. 5. A surety is, ordinarily, held to know every default of his principal; whereas a guarantor is not bound to take notice of the non-performance of his principal. 6. Usually, a surety will not be discharged either by the mere indulgence of the creditor to the principal or by want of notice of

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the default of the principal, no matter how much he may be injured thereby. A guarantor is often discharged by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal. 38 In determining petitioner's status, it is necessary to read Letter of Guarantee No. 81-194-F, which provides in part as follows: In consideration of your issuing the above performance guarantee/counter-guarantee, we hereby unconditionally and irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you on your first written or telex demand Iraq Dinars Two Hundred Seventy One Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610) representing 100% of the performance bond required of V.P. EUSEBIO for the construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other incidental expenses related thereto. In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation unpaid but in no case shall such amount exceed Iraq Dinars (ID) 271,808/610 plus interest and other incidental expenses. (Emphasis supplied)39 Guided by the abovementioned distinctions between a surety and a guaranty, as well as the factual milieu of this case, we find that the Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety. That the guarantee

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issued by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still characterized by its subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely, that the principal obligor should fail in his obligation at the time and in the form he bound himself.40 In other words, an unconditional guarantee is still subject to the condition that the principal debtor should default in his obligation first before resort to the guarantor could be had. A conditional guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous event, beyond the mere default of the principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper remedies against the principal.41 It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by respondent VPECI the petitioner shall pay, the obligation assumed by the petitioner was simply that of an unconditional guaranty, not conditional guaranty. But as earlier ruled the fact that petitioner's guaranty is unconditional does not make it a surety. Besides, surety is never presumed. A party should not be considered a surety where the contract itself stipulates that he is acting only as a guarantor. It is only when the guarantor binds himself solidarily with the principal debtor that the contract becomes one of suretyship.42 Having determined petitioner's liability as guarantor, the next question we have to grapple with is whether the respondent

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contractor has defaulted in its obligations that would justify resort to the guaranty. This is a mixed question of fact and law that is better addressed by the lower courts, since this Court is not a trier of facts. It is a fundamental and settled rule that the findings of fact of the trial court and the Court of Appeals are binding or conclusive upon this Court unless they are not supported by the evidence or unless strong and cogent reasons dictate otherwise.43 The factual findings of the Court of Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when they are at variance with those of the trial court. 44 The trial court and the Court of Appeals were in unison that the respondent contractor cannot be considered to have defaulted in its obligations because the cause of the delay was not primarily attributable to it. A corollary issue is what law should be applied in determining whether the respondent contractor has defaulted in the performance of its obligations under the service contract. The question of whether there is a breach of an agreement, which includes default or mora,45 pertains to the essential or intrinsic validity of a contract. 46 No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus or "proper law of the contract."

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This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis). The law selected may be implied from such factors as substantial connection with the transaction, or the nationality or domicile of the parties.47 Philippine courts would do well to adopt the first and most basic rule in most legal systems, namely, to allow the parties to select the law applicable to their contract, subject to the limitation that it is not against the law, morals, or public policy of the forum and that the chosen law must bear a substantive relationship to the transaction. 48 It must be noted that the service contract between SOB and VPECI contains no express choice of the law that would govern it. In the United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties may choose the governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has the most significant relationship to the transaction and the parties."49 Another authority proposed that all matters relating to the time, place, and manner of performance and valid excuses for non-performance are determined by the law of the place of performance or lex loci solutionis, which is useful because it is undoubtedly always connected to the contract in a significant way.50 In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the place of performance is in Iraq. Hence, the issue of whether

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respondent VPECI defaulted in its obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours.51 Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: "In reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him." Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the former. 52 It is the non-fulfillment of an obligation with respect to time.53 It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished portion consisted in the purchase and installation of electro-mechanical equipment and materials, which were available from foreign suppliers, thus requiring US Dollars for their importation. The monthly billings and payments made by SOB54 reveal that the agreement between the parties was a periodic payment by the Project owner to the contractor depending on the percentage of accomplishment within the period. 55 The payments were, in turn, to be used by the

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contractor to finance the subsequent phase of the work. 56 However, as explained by VPECI in its letter to the Department of Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely affected the completion of the project; thus: 4. Despite protests from the plaintiff, SOB continued paying the accomplishment billings of the Contractor purely in Iraqi Dinars and which payment came only after some delays. 5. SOB is fully aware of the following: 5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign currency (US$), to finance the purchase of various equipment, materials, supplies, tools and to pay for the cost of project management, supervision and skilled labor not available in Iraq and therefore have to be imported and or obtained from the Philippines and other sources outside Iraq. 5.3 That the Ministry of Labor and Employment of the Philippines requires the remittance into the Philippines of 70% of the salaries of Filipino workers working abroad in US Dollars; 5.5 That the Iraqi Dinar is not a freely convertible currency such

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that the same cannot be used to purchase equipment, materials, supplies, etc. outside of Iraq; 5.6 That most of the materials specified by SOB in the CONTRACT are not available in Iraq and therefore have to be imported; 5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars) out of Iraq and hence, imported materials, equipment, etc., cannot be purchased or obtained using Iraqui Dinars as medium of acquisition. 8. Following the approved construction program of the CONTRACT, upon completion of the civil works portion of the installation of equipment for the building, should immediately follow, however, the CONTRACT specified that these equipment which are to be installed and to form part of the PROJECT have to be procured outside Iraq since these are not being locally manufactured. Copy f the relevant portion of the Technical Specification is hereto attached as Annex "C" and made an integral part hereof; 10. Due to the lack of Foreign currency in Iraq for this purpose,

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and if only to assist the Iraqi government in completing the PROJECT, the Contractor without any obligation on its part to do so but with the knowledge and consent of SOB and the Ministry of Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign currency loan, through the facilities of Circle International S.A., the Contractor's Sub-contractor and SACE MEDIO CREDITO which will act as the guarantor for this foreign currency loan. Arrangements were first made with Banco di Roma. Negotiation started in June 1985. SOB is informed of the developments of this negotiation, attached is a copy of the draft of the loan Agreement between SOB as the Borrower and Agent. The Several Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio Termine (Mediocredito) Sezione Speciale Per L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations went on and continued until it suddenly collapsed due to the reported default by Iraq in the payment of its obligations with Italian government, copy of the news clipping dated June 18, 1986 is hereto attached as Annex "D" to form an integral part hereof; 15. On September 15, 1986, Contractor received information from Circle International S.A. that because of the news report that Iraq defaulted in its obligations with European banks, the approval by Banco di Roma of the loan to SOB shall be deferred indefinitely, a copy of the letter of Circle International together with the news clippings are hereto attached as Annexes "F" and "F-1",

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respectively.57 As found by both the Court of Appeals and the trial court, the delay or the non-completion of the Project was caused by factors not imputable to the respondent contractor. It was rather due mainly to the persistent violations by SOB of the terms and conditions of the contract, particularly its failure to pay 75% of the accomplished work in US Dollars. Indeed, where one of the parties to a contract does not perform in a proper manner the prestation which he is bound to perform under the contract, he is not entitled to demand the performance of the other party. A party does not incur in delay if the other party fails to perform the obligation incumbent upon him. The petitioner, however, maintains that the payments by SOB of the monthly billings in purely Iraqi Dinars did not render impossible the performance of the Project by VPECI. Such posture is quite contrary to its previous representations. In his 26 March 1987 letter to the Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-President Jesus M. Taedo stated that while VPECI had taken every possible measure to complete the Project, the war situation in Iraq, particularly the lack of foreign exchange, was proving to be a great obstacle; thus: VPECI has taken every possible measure for the completion of the project but the war situation in Iraq particularly the lack of foreign

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exchange is proving to be a great obstacle. Our performance counterguarantee was called last 26 October 1986 when the negotiations for a foreign currency loan with the Italian government through Banco de Roma bogged down following news report that Iraq has defaulted in its obligation with major European banks. Unless the situation in Iraq is improved as to allay the bank's apprehension, there is no assurance that the project will ever be completed. 58 In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance because it must appear that the tolerance or benevolence of the creditor must have ended. 59 As stated earlier, SOB cannot yet demand complete performance from VPECI because it has not yet itself performed its obligation in a proper manner, particularly the payment of the 75% of the cost of the Project in US Dollars. The VPECI cannot yet be said to have incurred in delay. Even assuming that there was delay and that the delay was attributable to VPECI, still the effects of that delay ceased upon the renunciation by the creditor, SOB, which could be implied when the latter granted several extensions of time to the former. 60 Besides, no demand has yet been made by SOB against the respondent contractor. Demand is generally necessary even if a period has been fixed in the obligation. And

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default generally begins from the moment the creditor demands judicially or extra-judicially the performance of the obligation. Without such demand, the effects of default will not arise.61 Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been resorted to by the creditor.62 It could also set up compensation as regards what the creditor SOB may owe the principal debtor VPECI.63 In this case, however, the petitioner has clearly waived these rights and remedies by making the payment of an obligation that was yet to be shown to be rightfully due the creditor and demandable of the principal debtor. As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which could be set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of a telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent by the Iraqi Ministry of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would "be deducted from the dues of the two contractors."64 Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the

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arguments to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066 retained by SOB from the Project was more than enough to cover the counter-guarantee of ID271,808/610; thus: 6.1 Present the counterguarantee: following arguments in cancelling the

The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of paying 75% of progress billings in US dollars. It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed project is more than the amount of the outstanding counterguarantee.65 In a nutshell, since the petitioner was aware of the contractor's outstanding receivables from SOB, it should have set up compensation as was proposed in its project situationer. Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the OMEAA, DFA, Manila, it stated: VPECI also maintains that the delay in the completion of the

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project was mainly due to SOB's violation of contract terms and as such, call on the guarantee has no basis. While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be an instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to seek your assistance not only in ascertaining the veracity of Al Ahli Bank's claim that it has paid Rafidain Bank but possibly averting such an event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency of VPECI's bid for government intervention for the amicable termination of the contract and release of the performance guarantee. 66 But surprisingly, though fully cognizant of SOB's violations of the service contract and VPECI's outstanding receivables from SOB, as well as the situation obtaining in the Project site compounded by the Iran-Iraq war, the petitioner opted to pay the second layer guarantor not only the full amount of the performance bond counter-guarantee but also interests and penalty charges. This brings us to the next question: May the petitioner as a guarantor secure reimbursement from the respondents for what it has paid under Letter of Guarantee No. 81-194-F? As a rule, a guarantor who pays for a debtor should be

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indemnified by the latter67 and would be legally subrogated to the rights which the creditor has against the debtor.68 However, a person who makes payment without the knowledge or against the will of the debtor has the right to recover only insofar as the payment has been beneficial to the debtor.69 If the obligation was subject to defenses on the part of the debtor, the same defenses which could have been set up against the creditor can be set up against the paying guarantor.70 From the findings of the Court of Appeals and the trial court, it is clear that the payment made by the petitioner guarantor did not in any way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that time. Moreover, the respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence and which have been meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of undertaking and the surety bond secured petitioner's guaranty, the petitioner is precluded from enforcing the same by reason of the petitioner's undue payment on the guaranty. Rights under the deed of undertaking and the surety bond do not arise because these contracts depend on the validity of the enforcement of the guaranty. The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first place, defaulted in its obligation and that the creditor SOB should have

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first made a demand from the principal debtor. It is only when the debtor does not or cannot pay, in whole or in part, that the guarantor should pay.71 When the petitioner guarantor in this case paid against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of payment. This is the hard lesson that the petitioner must learn. As the government arm in pursuing its objective of providing "the necessary support and assistance in order to enable [Filipino exporters and contractors to operate viably under the prevailing economic and business conditions,"72 the petitioner should have exercised prudence and caution under the circumstances. As aptly put by the Court of Appeals, it would be the height of inequity to allow the petitioner to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank and constantly apprised it of the developments in the Project implementation. WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the decision of the Court of appeals in CA-G.R. CV No. 39302 is AFFIRMED. No pronouncement as to costs. SO ORDERED.

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Crescent v. M/V Lok Maheswari

Hence, this petition submitting the following issues for resolution, viz: 1. Philippine courts have jurisdiction over a foreign vessel found inside Philippine waters for the enforcement of a maritime lien against said vessel and/or its owners and operators; 2. The principle of forum non conveniens is inapplicable to the instant case; The trial court acquired jurisdiction over the subject matter of the instant case, as well as over the res and over the persons of the parties; The enforcement of a maritime lien on the subject vessel is expressly granted by law. The Ship Mortgage Acts as well as

3.

4.

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the Code of Commerce provides for relief to petitioner for its unpaid claim; 5. The arbitration clause in the contract was not rigid or inflexible but expressly allowed petitioner to enforce its maritime lien in Philippine courts provided the vessel was in the Philippines; The law of the state of New York is inapplicable to the present controversy as the same has not been properly pleaded and proved; Petitioner has legal capacity to sue before Philippine courts as it is suing upon an isolated business transaction;

6.

7.

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8.

Respondents were duly served summons although service of summons upon respondents is not a jurisdictional requirement, the action being a suit quasi in rem; The trial courts decision has factual and legal bases; and, The respondents should be held jointly and solidarily liable.

9.

10.

In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign supplier in a foreign port to a vessel of foreign registry that is owned, chartered and sub-chartered by foreign entities. Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise exclusive

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original jurisdiction (i)n all actions in admiralty and maritime where the demand or claim exceeds two hundred thousand pesos (P200,000) or in Metro Manila, where such demand or claim exceeds four hundred thousand pesos (P400,000). Two (2) tests have been used to determine whether a case involving a contract comes within the admiralty and maritime jurisdiction of a court - the locational test and the subject matter test. The English rule follows the locational test wherein maritime and admiralty jurisdiction, with a few exceptions, is exercised only on contracts made upon the sea and to be executed thereon. This is totally rejected under the American rule where the criterion in determining whether a contract is maritime depends on the nature and subject matter of the contract, having reference to maritime service and transactions.[4] In International Harvester Company of the Philippines v. Aragon,[5] we adopted the American

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rule and held that (w)hether or not a contract is maritime depends not on the place where the contract is made and is to be executed, making the locality the test, but on the subject matter of the contract, making the true criterion a maritime service or a maritime transaction. A contract for furnishing supplies like the one involved in this case is maritime and within the jurisdiction of admiralty.[6] It may be invoked before our courts through an action in rem or quasi in rem or an action in personam. Thus: [7] xxx Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or enforcing not only the liens created under Section 580 but also for the collection of any kind of lien whatsoever.[8] In the Philippines, we have a complete legislation, both substantive and adjective, under which to bring

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an action in rem against a vessel for the purpose of enforcing liens. The substantive law is found in Article 580 of the Code of Commerce. The procedural law is to be found in Article 584 of the same Code. The result is, therefore, that in the Philippines any vessel even though it be a foreign vessel found in any port of this Archipelago may be attached and sold under the substantive law which defines the right, and the procedural law contained in the Code of Commerce by which this right is to be enforced.[9] x x x. But where neither the law nor the contract between the parties creates any lien or charge upon the vessel, the only way in which it can be seized before judgment is by pursuing the remedy relating to attachment under Rule 59 [now Rule 57] of the Rules of Court.[10]

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But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner Crescent bases its claim of a maritime lien on Sections 21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also known as the Ship Mortgage Decree of 1978, viz: Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person furnishing repairs, supplies, towage, use of dry dock or maritime railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. Sec. 22. Persons Authorized to Procure

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Repairs, Supplies and Necessaries. - The following persons shall be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry dock or marine railway, and other necessaries for the vessel: The managing owner, ships husband, master or any person to whom the management of the vessel at the port of supply is entrusted. No person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel. Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and agents of a vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of

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the vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel therefor. Petitioner Crescent submits that these provisions apply to both domestic and foreign vessels, as well as domestic and foreign suppliers of necessaries. It contends that the use of the term any person in Section 21 implies that the law is not restricted to domestic suppliers but also includes all persons who supply provisions and necessaries to a vessel, whether foreign or domestic. It points out further that the law does not indicate that the supplies

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or necessaries must be furnished in the Philippines in order to give petitioner the right to seek enforcement of the lien with a Philippine court.[11] Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D. No. 1521 or the Ship Mortgage Decree of 1978 does not apply to a foreign supplier like petitioner Crescent as the provision refers only to a situation where the person furnishing the supplies is situated inside the territory of the Philippines and not where the necessaries were furnished in a foreign jurisdiction like Canada.[12] We find against petitioner Crescent. I. P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to accelerate the growth and development of the shipping industry and to extend the benefits accorded to overseas shipping under Presidential Decree No. 214 to domestic shipping.[13] It is patterned closely from the U.S.

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Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to preferred mortgages.[14] Notably, Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to Subsections P, Q, and R, respectively, of the U.S. Ship Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case. The various tests used in the U.S. to determine whether a maritime lien exists are the following: One. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign port, whether such lien exists, or whether the court has or will exercise jurisdiction, depends on the law of the country where the supplies were furnished, which must be pleaded and proved.[15] This principle was laid down in the

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1888 case of The Scotia,[16] reiterated in The Kaiser Wilhelm II[17] (1916), in The Woudrichem[18] (1921) and in The City of Atlanta[19] (1924). Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as the law of the place of supply.[20] In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in New York, joined the crew of a ship of Danish flag and registry that is owned by a Danish citizen. He signed the ships articles providing that the rights of the crew members would be governed by Danish law and by the employers contract with the Danish Seamens Union, of which he was a member. While in Havana and in the course of his employment, he was negligently injured. He sued the shipowner in a federal district court in New York for damages under the Jones Act. In holding that Danish law and not the Jones Act was applicable,

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the Supreme Court adopted a multiple-contact test to determine, in the absence of a specific Congressional directive as to the statutes reach, which jurisdictions law should be applied. The following factors were considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7) law of the forum. Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International Terminal Operating Co.[22] again considered a foreign seamans personal injury claim under both the Jones Act and the general maritime law. The Court held that the factors first announced in the case of Lauritzen were applicable not only to personal injury claims arising under the Jones Act but to all matters arising under maritime law in general.[23] Hellenic Lines, Ltd. v. Rhoditis[24] was also

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a suit under the Jones Act by a Greek seaman injured aboard a ship of Greek registry while in American waters. The ship was operated by a Greek corporation which has its largest office in New York and another office in New Orleans and whose stock is more than 95% owned by a U.S. domiciliary who is also a Greek citizen. The ship was engaged in regularly scheduled runs between various ports of the U.S. and the Middle East, Pakistan, and India, with its entire income coming from either originating or terminating in the U.S. The contract of employment provided that Greek law and a Greek collective bargaining agreement would apply between the employer and the seaman and that all claims arising out of the employment contract were to be adjudicated by a Greek court. The U.S. Supreme Court observed that of the seven factors listed in the Lauritzen test, four were in favor of the shipowner and against jurisdiction. In arriving at the

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conclusion that the Jones Act applies, it ruled that the application of the Lauritzen test is not a mechanical one. It stated thus: [t]he significance of one or more factors must be considered in light of the national interest served by the assertion of Jones Act jurisdiction. (footnote omitted) Moreover, the list of seven factors in Lauritzen was not intended to be exhaustive. x x x [T]he shipowners base of operations is another factor of importance in determining whether the Jones Act is applicable; and there well may be others. The principles enunciated in these maritime tort cases have been extended to cases involving unpaid supplies and necessaries such as the cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine Services v. M/V El Centroamericano.[26] Three. The factors provided in Restatement (Second) of Conflicts of Law have also been applied,

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especially in resolving cases brought under the Federal Maritime Lien Act. Their application suggests that in the absence of an effective choice of law by the parties, the forum contacts to be considered include: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.[27] In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,[28] an admiralty action in rem was brought by an American supplier against a vessel of Norwegian flag owned by a Norwegian Company and chartered by a London time charterer for unpaid fuel oil and marine diesel oil delivered while the vessel was in U.S. territory. The contract was executed in London. It was held that because the bunker fuel was delivered to a foreign flag vessel

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within the jurisdiction of the U.S., and because the invoice specified payment in the U.S., the admiralty and maritime law of the U.S. applied. The U.S. Court of Appeals recognized the modern approach to maritime conflict of law problems introduced in the Lauritzen case. However, it observed that Lauritzen involved a torts claim under the Jones Act while the present claim involves an alleged maritime lien arising from unpaid supplies. It made a disclaimer that its conclusion is limited to the unique circumstances surrounding a maritime lien as well as the statutory directives found in the Maritime Lien Statute and that the initial choice of law determination is significantly affected by the statutory policies surrounding a maritime lien. It ruled that the facts in the case call for the application of the Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to the congressional intent in enacting the Maritime Lien

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Statute to protect the interests of American supplier of goods, services or necessaries by making maritime liens available where traditional services are routinely rendered. It concluded that the Maritime Lien Statute represents a relevant policy of the forum that serves the needs of the international legal system as well as the basic policies underlying maritime law. The court also gave equal importance to the predictability of result and protection of justified expectations in a particular field of law. In the maritime realm, it is expected that when necessaries are furnished to a vessel in an American port by an American supplier, the American Lien Statute will apply to protect that supplier regardless of the place where the contract was formed or the nationality of the vessel. The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery I[29] where the American court refused to apply the Federal Maritime Lien Act to create a maritime lien

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for goods and services supplied by foreign companies in foreign ports. In this case, a Swedish company supplied radio equipment in a Spanish port to refurbish a Panamanian vessel damaged by fire. Some of the contract negotiations occurred in Spain and the agreement for supplies between the parties indicated Swedish companys willingness to submit to Swedish law. The ship was later sold under a contract of purchase providing for the application of New York law and was arrested in the U.S. The U.S. Court of Appeals also held that while the contactsbased framework set forth in Lauritzen was useful in the analysis of all maritime choice of law situations, the factors were geared towards a seamans injury claim. As in Gulf Trading, the lien arose by operation of law because the ships owner was not a party to the contract under which the goods were supplied. As a result, the court found it more appropriate to consider the factors contained in

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Section 6 of the Restatement (Second) of Conflicts of Law. The U.S. Court held that the primary concern of the Federal Maritime Lien Act is the protection of American suppliers of goods and services. The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.[30] II. Finding guidance from the foregoing decisions, the Court cannot sustain petitioner Crescents insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien exists. First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one the law of the forum. All other elements are foreign Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the place of contract; India is the law of the flag and the allegiance of the defendant shipowner. Balancing

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these basic interests, it is inconceivable that the Philippine court has any interest in the case that outweighs the interests of Canada or India for that matter. Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to protect Filipino suppliers and was not intended to create a lien from a contract for supplies between foreign entities delivered in a foreign port. Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime lien exists would not promote the public policy behind the enactment of the law to develop the domestic shipping industry. Opening up our courts to foreign suppliers by granting them a maritime lien

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under our laws even if they are not entitled to a maritime lien under their laws will encourage forum shopping. Finally. The submission of petitioner is not in keeping with the reasonable expectation of the parties to the contract. Indeed, when the parties entered into a contract for supplies in Canada, they could not have intended the laws of a remote country like the Philippines to determine the creation of a lien by the mere accident of the Vessels being in Philippine territory. III. But under which law should petitioner Crescent prove the existence of its maritime lien? In light of the interests of the various foreign elements involved, it is clear that Canada has the most significant interest in this dispute. The injured party is a Canadian corporation, the sub-charterer which placed the orders for the supplies is also

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Canadian, the entity which physically delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the supplies were delivered in Canada. The arbitration clause contained in the Bunker Fuel Agreement which states that New York law governs the construction, validity and performance of the contract is only a factor that may be considered in the choice-of-law analysis but is not conclusive. As in the cases of Gulf Trading and Swedish Telecom, the lien that is the subject matter of this case arose by operation of law and not by contract because the shipowner was not a party to the contract under which the goods were supplied. It is worthy to note that petitioner Crescent never alleged and proved Canadian law as basis for the existence of a maritime lien. To the end, it insisted on its theory that Philippine law applies. Petitioner contends that even if foreign law

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applies, since the same was not properly pleaded and proved, such foreign law must be presumed to be the same as Philippine law pursuant to the doctrine of processual presumption. Thus, we are left with two choices: (1) dismiss the case for petitioners failure to establish a cause of action[31] or (2) presume that Canadian law is the same as Philippine law. In either case, the case has to be dismissed. It is well-settled that a party whose cause of action or defense depends upon a foreign law has the burden of proving the foreign law. Such foreign law is treated as a question of fact to be properly pleaded and proved.[32] Petitioner Crescents insistence on enforcing a maritime lien before our courts depended on the existence of a maritime lien under the proper law. By erroneously claiming a maritime lien under Philippine law instead of proving that a maritime lien exists under Canadian law, petitioner Crescent failed

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to establish a cause of action.[33] Even if we apply the doctrine of processual presumption, the result will still be the same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following are the requisites for maritime liens on necessaries to exist: (1) the necessaries must have been furnished to and for the benefit of the vessel; (2) the necessaries must have been necessary for the continuation of the voyage of the vessel; (3) the credit must have been extended to the vessel; (4) there must be necessity for the extension of the credit; and (5) the necessaries must be ordered by persons authorized to contract on behalf of the vessel.[34] These do not avail in the instant case. First. It was not established that benefit was extended to the vessel. While this is presumed when the master of the ship is the one who placed the order, it is not disputed that in this case it was the subcharterer Portserv which placed the orders to

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petitioner Crescent.[35] Hence, the presumption does not arise and it is incumbent upon petitioner Crescent to prove that benefit was extended to the vessel. Petitioner did not. Second. Petitioner Crescent did not show any proof that the marine products were necessary for the continuation of the vessel. Third. It was not established that credit was extended to the vessel. It is presumed that in the absence of fraud or collusion, where advances are made to a captain in a foreign port, upon his request, to pay for necessary repairs or supplies to enable his vessel to prosecute her voyage, or to pay harbor dues, or for pilotage, towage and like services rendered to the vessel, that they are made upon the credit of the vessel as well as upon that of her owners.[36] In this case, it was the sub-charterer Portserv which requested for the delivery of the bunker fuels. The issuance of two checks amounting to US$300,000 in

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favor of petitioner Crescent prior to the delivery of the bunkers as security for the payment of the obligation weakens petitioner Crescents contention that credit was extended to the Vessel. We also note that when copies of the charter parties were submitted by respondents in the Court of Appeals, the time charters between respondent SCI and Halla and between Halla and Transmar were shown to contain a clause which states that the Charterers shall provide and pay for all the fuel except as otherwise agreed. This militates against petitioner Crescents position that Portserv is authorized by the shipowner to contract for supplies upon the credit of the vessel. Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed where it appears that the repairs and supplies were necessary for the ship and that they were ordered by the master. This presumption does not arise in this case

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since the fuels were not ordered by the master and there was no proof of necessity for the supplies. Finally. The necessaries were not ordered by persons authorized to contract in behalf of the vessel as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner, the ships husband, master or any person with whom the management of the vessel at the port of supply is entrusted. Clearly, Portserv, a sub-charterer under a time charter, is not someone to whom the management of the vessel has been entrusted. A time charter is a contract for the use of a vessel for a specified period of time or for the duration of one or more specified voyages wherein the owner of the time-chartered vessel retains possession and control through the master and crew who remain his employees.[37] Not enjoying the presumption of authority, petitioner Crescent should have proved that Portserv was authorized by the shipowner to contract

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for supplies. Petitioner failed. A discussion on the principle of forum non conveniens is unnecessary. IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920, dated November 28, 2001, and its subsequent Resolution of September 3, 2002 are AFFIRMED. The instant petition for review on certiorari is DENIED for lack of merit. Cost against petitioner. SO ORDERED.
LWV Construction v. Dupo

Essentially, the issue is whether the Court of Appeals erred in ruling that respondent is entitled to a service award or longevity pay of US$12,640.33 under the provisions of the Saudi Labor Law. Related to this issue are petitioners defenses of payment and prescription. Petitioner points out that the Labor Arbiter awarded longevity pay although the Saudi Labor Law grants no such benefit, and the NLRC confused
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longevity pay and service award. Petitioner maintains that the benefit granted by Article 87 of the Saudi Labor Law is service award which was already paid by MMG each time respondents contract ended. Petitioner insists that prescription barred respondents claim for service award as the complaint was filed one year and seven months after the sixth contract ended. Petitioner alleges that the Court of Appeals erred in ruling that respondents July 6, 1999 claim interrupted the running of the prescriptive period. Such ruling is contrary to Article 13 of the Saudi Labor Law which provides that no case or claim relating to any of the rights provided for under said law shall be heard after the lapse of 12 months from the date of the termination of the contract. Respondent counters that he is entitled to longevity pay under the provisions of the Saudi Labor Law and quotes extensively the decision of the Court of Appeals. He points out that petitioner has not

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refuted the Labor Arbiters finding that MMG offered him longevity pay of US$12,640.33 before his onemonth vacation in the Philippines in 1999. Thus, he submits that such offer indeed exists as he sees no reason for MMG to offer the benefit if no law grants it. After a careful study of the case, we are constrained to reverse the Court of Appeals. We find that respondents service award under Article 87 of the Saudi Labor Law has already been paid. Our computation will show that the severance pay received by respondent was his service award. Article 87 clearly grants a service award. It reads:
Article 87 Where the term of a labor contract concluded for a specified period comes to an end or where the employer cancels a contract of unspecified period, the employer shall pay to the workman an award for the period of his service to be computed on the basis of

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half a months pay for each of the first five years and one months pay for each of the subsequent years. The last rate of pay shall be taken as basis for the computation of the award. For fractions of a year, the workman shall be entitled to an award which is proportionate to his service period during that year. Furthermore, the workman shall be entitled to the service award provided for at the beginning of this article in the following cases: A. If he is called to military service. B. If a workman resigns because of marriage or childbirth. C. If the workman is leaving the work as a result of a force majeure beyond his control.[17] (Emphasis supplied.)

Respondent, however, has called the benefit other names such as long service award and longevity pay. On the other hand, petitioner claimed that the service award is the same as severance pay. Notably, the Labor Arbiter was unable to specify any law to support his award of longevity pay.[18] He anchored the award on his finding that respondents allegations
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were more credible because his seven-year employment at MMG had sufficiently oriented him on the benefits given to workers. To the NLRC, respondent is entitled to service award or longevity pay under Article 87 and that longevity pay is different from severance pay. The Court of Appeals agreed. Considering that Article 87 expressly grants a service award, why is it correct to agree with respondent that service award is the same as longevity pay, and wrong to agree with petitioner that service award is the same as severance pay? And why would it be correct to say that service award is severance pay, and wrong to call service award as longevity pay? We found the answer in the pleadings and evidence presented. Respondents position paper mentioned how his long service award or longevity pay is computed: half-months pay per year of service

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and one-months pay per year after five years of service. Article 87 has the same formula to compute the service award. The payroll submitted by petitioner showed that respondent received severance pay of SR2,786 for his sixth employment contract covering the period April 21, 1998 to April 29, 1999.[19] The computation below shows that respondents severance pay of SR2,786 was his service award under Article 87.
Service Award = (SR5,438)[20] + (9 days/365 days)[21] x (SR5,438) Service Award = SR2,786.04

Respondents service award for the sixth contract is equivalent only to half-months pay plus the proportionate amount for the additional nine days of service he rendered after one year. Respondents employment contracts expressly stated that his employment ended upon his departure from work. Each year he departed from work and successively new contracts were executed before he reported for
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work anew. His service was not cumulative. Pertinently, in Brent School, Inc. v. Zamora,[22] we said that a fixed term is an essential and natural appurtenance of overseas employment contracts,[23] as in this case. We also said in that case that under American law, [w]here a contract specifies the period of its duration, it terminates on the expiration of such period. A contract of employment for a definite period terminates by its own terms at the end of such period.[24] As it is, Article 72 of the Saudi Labor Law is also of similar import. It reads:
A labor contract concluded for a specified period shall terminate upon the expiry of its term. If both parties continue to enforce the contract, thereafter, it shall be considered renewed for an unspecified period.[25]

Regarding respondents claim that he was offered US$12,640.33 as longevity pay before he returned to the Philippines on May 1, 1999, we find that he was not candid on this particular point. His

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categorical assertion about the offer being engrained in his mind such that he reconstructed the computation and arrived at the computation exactly the same with the amount he was previously offered is not only beyond belief. Such assertion is also a stark departure from his July 6, 1999 letter to MMG where he could only express his hope that he was entitled to a long service award and where he never mentioned the supposed previous offer. Moreover, respondents claim that his monthly compensation is SR10,248.92[26] is belied by the payroll which shows that he receives SR5,438 per month. We therefore emphasize that such payroll should have prompted the lower tribunals to examine closely respondents computation of his supposed longevity pay before adopting that computation as their own. On the matter of prescription, however, we

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cannot agree with petitioner that respondents action has prescribed under Article 13 of the Saudi Labor Law. What applies is Article 291 of our Labor Code which reads:
ART. 291. Money claims. All money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever barred. xxxx

In Cadalin v. POEAs Administrator,[27] we held that Article 291 covers all money claims from employer-employee relationship and is broader in scope than claims arising from a specific law. It is not limited to money claims recoverable under the Labor Code, but applies also to claims of overseas contract workers.[28] The following ruling in Cadalin v. POEAs Administrator is instructive:
First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri

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Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law. Article 156 of the Amiri Decree No. 23 of 1976 provides: A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the expiry of the contract x x x. As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private International Law, 131 [1979]). A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive, depending on the characterization given such a law. xxxx However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has a borrowing statute. Said

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statute has the practical effect of treating the foreign statute of limitation as one of substance (Goodrich, Conflict of Laws, 152-153 [1938]). A borrowing statute directs the state of the forum to apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several kinds of borrowing statutes, one form provides that an action barred by the laws of the place where it accrued, will not be enforced in the forum even though the local statute has not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind. Said Section provides:
If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippine Islands.

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed only those provisions of the Code of Civil Procedure as to which were inconsistent with it. There is no provision in the Civil Code of the Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras,

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Philippine Conflict of Laws, 104 [7th ed.]). In the light of the 1987 Constitution, however, Section 48 [of the Code of Civil Procedure] cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of [Article] 156 of the Amiri Decree No. 23 of 1976. The courts of the forum will not enforce any foreign claim obnoxious to the forums public policy x x x. To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor.[29] xxxx

Thus, in our considered view, respondents complaint was filed well within the three-year prescriptive period under Article 291 of our Labor Code. This point, however, has already been mooted by our finding that respondents service award had been paid, albeit the payroll termed such payment as severance pay. WHEREFORE, the petition is

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GRANTED. The assailed Decision dated December 6, 2005 and Resolution dated April 12, 2006, of the Court of Appeals in CA-G.R. SP No. 76843, as well as the Decision dated June 18, 2001 of the Labor Arbiter in NLRC Case No. RAB-CAR-12-0649-00 and the Decision dated November 29, 2002 and Resolution dated January 31, 2003 of the NLRC in NLRC CA No. 028994-01 (NLRC RAB-CAR-12-0649-00) are REVERSED and SET ASIDE. The Complaint of respondent is hereby DISMISSED. No pronouncement as to costs. SO ORDERED.
Deutsche v. CA

Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the Court of Appeals and of the Labor Arbiter. GTZs arguments center on whether the Court of Appeals could have entertained its petition for certiorari despite its not having undertaken an appeal before the NLRC; and whether the complaint for illegal dismissal should have been dismissed for lack of jurisdiction on account of GTZs insistence that it enjoys immunity from suit. No special arguments are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay,

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respectively the then Director and the then Project Manager of GTZ in the Philippines; so we have to presume that the arguments raised in behalf of GTZs alleged immunity from suit extend to them as well. The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its Comment dated 7 November 2005, the OSG took the side of GTZ, with the prayer that the petition be granted on the ground that GTZ was immune from suit, citing in particular its assigned functions in implementing the SHINE programa joint undertaking of the Philippine and German governments which was neither proprietary nor commercial in nature. The Court of Appeals had premised the dismissal of GTZs petition on its procedural misstep in bypassing an appeal to NLRC and challenging the Labor Arbiters Decision directly with the appellate court by way of a Rule 65 petition. In dismissing the petition, the Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.29 The central issue in that case was whether a decision of a Labor Arbiter rendered without jurisdiction over the subject matter may be annulled in a petition before a Regional Trial Court. That case may be differentiated from the present case, since the Regional Trial Court does not have original or appellate jurisdiction to review a decision rendered by a Labor Arbiter. In contrast, there is no doubt, as affirmed by jurisprudence, that the

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Court of Appeals has jurisdiction to review, by way of its original certiorari jurisdiction, decisions ruling on complaints for illegal dismissal. Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper recourse from the decision of the Labor Arbiter is to first appeal the same to the NLRC. Air Services is in fact clearly detrimental to petitioners position in one regard. The Court therein noted that on account of the failure to correctly appeal the decision of the Labor Arbiter to the NLRC, such judgment consequently became final and executory.30 GTZ goes as far as to "request" that the Court re-examine Air Services, a suggestion that is needlessly improvident under the circumstances. Air Services affirms doctrines grounded in sound procedural rules that have allowed for the considered and orderly disposition of labor cases. The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,31 that even when appeal is available, the Court has nonetheless allowed a writ of certiorari when the orders of the lower court were issued either in excess of or without jurisdiction. Indeed, the Court has ruled before that the failure to employ available intermediate recourses, such as a motion for reconsideration, is not a fatal infirmity if the ruling assailed is a patent nullity. This approach suggested by the OSG allows the Court to inquire directly into what is the main issuewhether GTZ

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enjoys immunity from suit. The arguments raised by GTZ and the OSG are rooted in several indisputable facts. The SHINE project was implemented pursuant to the bilateral agreements between the Philippine and German governments. GTZ was tasked, under the 1991 agreement, with the implementation of the contributions of the German government. The activities performed by GTZ pertaining to the SHINE project are governmental in nature, related as they are to the promotion of health insurance in the Philippines. The fact that GTZ entered into employment contracts with the private respondents did not disqualify it from invoking immunity from suit, as held in cases such as Holy See v. Rosario, Jr.,32 which set forth what remains valid doctrine: Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.33 Beyond dispute is the tenability of the comment points raised by GTZ and the OSG that GTZ was not performing proprietary

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functions notwithstanding its entry into the particular employment contracts. Yet there is an equally fundamental premise which GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy the Federal Republics immunity from suit? The principle of state immunity from suit, whether a local state or a foreign state, is reflected in Section 9, Article XVI of the Constitution, which states that "the State may not be sued without its consent." Who or what consists of "the State"? For one, the doctrine is available to foreign States insofar as they are sought to be sued in the courts of the local State,34 necessary as it is to avoid "unduly vexing the peace of nations." If the instant suit had been brought directly against the Federal Republic of Germany, there would be no doubt that it is a suit brought against a State, and the only necessary inquiry is whether said State had consented to be sued. However, the present suit was brought against GTZ. It is necessary for us to understand what precisely are the parameters of the legal personality of GTZ. Counsel for GTZ characterizes GTZ as "the implementing agency of the Government of the Federal Republic of Germany," a depiction similarly adopted by the OSG. Assuming that characterization is correct, it does not automatically invest GTZ with the ability to invoke State immunity from suit. The distinction lies in whether the agency is incorporated or unincorporated. The

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following lucid discussion from Justice Isagani Cruz is pertinent: Where suit is filed not against the government itself or its officials but against one of its entities, it must be ascertained whether or not the State, as the principal that may ultimately be held liable, has given its consent to be sued. This ascertainment will depend in the first instance on whether the government agency impleaded is incorporated or unincorporated. An incorporated agency has a charter of its own that invests it with a separate juridical personality, like the Social Security System, the University of the Philippines, and the City of Manila. By contrast, the unincorporated agency is so called because it has no separate juridical personality but is merged in the general machinery of the government, like the Department of Justice, the Bureau of Mines and the Government Printing Office. If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that it is suable if its charter says so, and this is true regardless of the functions it is performing. Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to suit even in the performance of such functions because their charter provides that they can sue and be sued.35

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State immunity from suit may be waived by general or special law.36 The special law can take the form of the original charter of the incorporated government agency. Jurisprudence is replete with examples of incorporated government agencies which were ruled not entitled to invoke immunity from suit, owing to provisions in their charters manifesting their consent to be sued. These include the National Irrigation Administration,37 the former Central Bank,38 and the National Power Corporation.39 In SSS v. Court of Appeals,40 the Court through Justice Melencio-Herrera explained that by virtue of an express provision in its charter allowing it to sue and be sued, the Social Security System did not enjoy immunity from suit: We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds, there should be no question on this score considering that the SSS is a juridical entity with a personality of its own. It has corporate powers separate and distinct from the Government. SSS' own organic act specifically provides that it can sue and be sued in Court. These words "sue and be sued" embrace all civil process incident to a legal action. So that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit provision of the aforecited enabling law, the Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby concede its liability. That

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statutory law has given to the private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case, to obtain compensation in damages arising from contract, and even for tort. A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled: "It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and controlled corporation, it has a personality of its own, distinct and separate from that of the Government. Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause of action and accordingly it can include a tort claim such as the one instituted by the

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petitioners."41 It is useful to note that on the part of the Philippine government, it had designated two entities, the Department of Health and the Philippine Health Insurance Corporation (PHIC), as the implementing agencies in behalf of the Philippines. The PHIC was established under Republic Act No. 7875, Section 16(g) of which grants the corporation the power "to sue and be sued in court." Applying the previously cited jurisprudence, PHIC would not enjoy immunity from suit even in the performance of its functions connected with SHINE, however, governmental in nature as they may be. Is GTZ an incorporated agency of the German government? There is some mystery surrounding that question. Neither GTZ nor the OSG go beyond the claim that petitioner is "the implementing agency of the Government of the Federal Republic of Germany." On the other hand, private respondents asserted before the Labor Arbiter that GTZ was "a private corporation engaged in the implementation of development projects."42 The Labor Arbiter accepted that claim in his Order denying the Motion to Dismiss,43 though he was silent on that point in his Decision. Nevertheless, private respondents argue in their Comment that the finding that GTZ was a private corporation "was never controverted, and is therefore deemed admitted."44 In its Reply, GTZ controverts that finding, saying that it is a matter of public knowledge that the status of petitioner GTZ is that of the "implementing agency," and

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not that of a private corporation.45 In truth, private respondents were unable to adduce any evidence to substantiate their claim that GTZ was a "private corporation," and the Labor Arbiter acted rashly in accepting such claim without explanation. But neither has GTZ supplied any evidence defining its legal nature beyond that of the bare descriptive "implementing agency." There is no doubt that the 1991 Agreement designated GTZ as the "implementing agency" in behalf of the German government. Yet the catch is that such term has no precise definition that is responsive to our concerns. Inherently, an agent acts in behalf of a principal, and the GTZ can be said to act in behalf of the German state. But that is as far as "implementing agency" could take us. The term by itself does not supply whether GTZ is incorporated or unincorporated, whether it is owned by the German state or by private interests, whether it has juridical personality independent of the German government or none at all. GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website.46 In the "Corporate Profile" section of the English language version of its site, GTZ describes itself as follows: As an international cooperation enterprise for sustainable development with worldwide operations, the federally owned Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its

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development-policy objectives. It provides viable, forward-looking solutions for political, economic, ecological and social development in a globalised world. Working under difficult conditions, GTZ promotes complex reforms and change processes. Its corporate objective is to improve peoples living conditions on a sustainable basis. GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was founded in 1975 as a company under private law. The German Federal Ministry for Economic Cooperation and Development (BMZ) is its major client. The company also operates on behalf of other German ministries, the governments of other countries and international clients, such as the European Commission, the United Nations and the World Bank, as well as on behalf of private enterprises. GTZ works on a public-benefit basis. All surpluses generated are channeled [sic] back into its own international cooperation projects for sustainable development.47 GTZs own website elicits that petitioner is "federally owned," a "federal enterprise," and "founded in 1975 as a company under private law." GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which apparently owns it. At the same time, it appears that GTZ was actually organized not through a legislative public charter, but under private law, in the same way that Philippine corporations can be organized under the Corporation Code even if fully owned by the Philippine

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government. This self-description of GTZ in its own official website gives further cause for pause in adopting petitioners argument that GTZ is entitled to immunity from suit because it is "an implementing agency." The above-quoted statement does not dispute the characterization of GTZ as an "implementing agency of the Federal Republic of Germany," yet it bolsters the notion that as a company organized under private law, it has a legal personality independent of that of the Federal Republic of Germany. The Federal Republic of Germany, in its own official website,48 also makes reference to GTZ and describes it in this manner: x x x Going by the principle of "sustainable development," the German Technical Cooperation (Deutsche Gesellschaft fr Technische Zusammenarbeit GmbH, GTZ) takes on non-profit projects in international "technical cooperation." The GTZ is a private company owned by the Federal Republic of Germany.49 Again, we are uncertain of the corresponding legal implications under German law surrounding "a private company owned by the Federal Republic of Germany." Yet taking the description on face value, the apparent equivalent under Philippine law is that of a corporation organized under the Corporation Code but owned by the Philippine government, or a government-owned or controlled corporation without original charter. And it bears notice that

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Section 36 of the Corporate Code states that "[e]very corporation incorporated under this Code has the power and capacity x x x to sue and be sued in its corporate name."50 It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has not been vested or has been specifically deprived the power and capacity to sue and/or be sued. Yet in the proceedings below and before this Court, GTZ has failed to establish that under German law, it has not consented to be sued despite it being owned by the Federal Republic of Germany. We adhere to the rule that in the absence of evidence to the contrary, foreign laws on a particular subject are presumed to be the same as those of the Philippines,51 and following the most intelligent assumption we can gather, GTZ is akin to a governmental owned or controlled corporation without original charter which, by virtue of the Corporation Code, has expressly consented to be sued. At the very least, like the Labor Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ enjoys immunity from suit. This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in his rulings. Our ruling in Holy See v. Del Rosario52 provided a template on how a foreign entity desiring to invoke State immunity from suit could duly prove such immunity before our local courts. The principles enunciated in that

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case were derived from public international law. We stated then: In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court that said defendant is entitled to immunity. In the United States, the procedure followed is the process of "suggestion," where the foreign state or the international organization sued in an American court requests the Secretary of State to make a determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]). In the Philippines, the practice is for the foreign government or the international organization to first secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a

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letter directly to the Secretary of Labor and Employment, informing the latter that the respondent-employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a Manifestation and Memorandum as amicus curiae.53 It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for petitioners to secure from the Department of Foreign Affairs "a certification of respondents diplomatic status and entitlement to diplomatic privileges including immunity from suits."54 The requirement might not necessarily be imperative. However, had GTZ obtained such certification from the DFA, it would have provided factual basis for its claim of immunity that would, at the very least, establish a disputable evidentiary presumption that the foreign party is indeed immune which the opposing party will have to overcome with its own factual evidence. We do not see why GTZ could not have secured such certification or endorsement from the DFA for purposes of this case. Certainly, it would have been highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the motion to

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dismiss. Still, even at this juncture, we do not see any evidence that the DFA, the office of the executive branch in charge of our diplomatic relations, has indeed endorsed GTZs claim of immunity. It may be possible that GTZ tried, but failed to secure such certification, due to the same concerns that we have discussed herein. Would the fact that the Solicitor General has endorsed GTZs claim of States immunity from suit before this Court sufficiently substitute for the DFA certification? Note that the rule in public international law quoted in Holy See referred to endorsement by the Foreign Office of the State where the suit is filed, such foreign office in the Philippines being the Department of Foreign Affairs. Nowhere in the Comment of the OSG is it manifested that the DFA has endorsed GTZs claim, or that the OSG had solicited the DFAs views on the issue. The arguments raised by the OSG are virtually the same as the arguments raised by GTZ without any indication of any special and distinct perspective maintained by the Philippine government on the issue. The Comment filed by the OSG does not inspire the same degree of confidence as a certification from the DFA would have elicited.
1avvphi 1

Holy See made reference to Baer v. Tizon,55 and that in the said case, the United States Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make a "suggestion" to the trial court, accomplished by way of a Manifestation and Memorandum, that the petitioner therein enjoyed immunity as the

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Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated in the text of Baer itself and was likely supplied in Holy See because its author, Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG in Baer. Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs which directed the OSG to intervene in behalf of the United States government in the Baer case, and such fact is manifest enough of the endorsement by the Foreign Office. We do not find a similar circumstance that bears here. The Court is thus holds and so rules that GTZ consistently has been unable to establish with satisfaction that it enjoys the immunity from suit generally enjoyed by its parent country, the Federal Republic of Germany. Consequently, both the Labor Arbiter and the Court of Appeals acted within proper bounds when they refused to acknowledge that GTZ is so immune by dismissing the complaint against it. Our finding has additional ramifications on the failure of GTZ to properly appeal the Labor Arbiters decision to the NLRC. As pointed out by the OSG, the direct recourse to the Court of Appeals while bypassing the NLRC could have been sanctioned had the Labor Arbiters decision been a "patent nullity." Since the Labor Arbiter acted properly in deciding the complaint, notwithstanding GTZs claim of immunity, we cannot see how the decision could have translated into a "patent nullity." As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing directly with the Court of Appeals the

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petition for certiorari. It then follows that the Court of Appeals acted correctly in dismissing the petition on that ground. As a further consequence, since petitioners failed to perfect an appeal from the Labor Arbiters Decision, the same has long become final and executory. All other questions related to this case, such as whether or not private respondents were illegally dismissed, are no longer susceptible to review, respecting as we do the finality of the Labor Arbiters Decision. A final note. This decision should not be seen as deviation from the more common methodology employed in ascertaining whether a party enjoys State immunity from suit, one which focuses on the particular functions exercised by the party and determines whether these are proprietary or sovereign in nature. The nature of the acts performed by the entity invoking immunity remains the most important barometer for testing whether the privilege of State immunity from suit should apply. At the same time, our Constitution stipulates that a State immunity from suit is conditional on its withholding of consent; hence, the laws and circumstances pertaining to the creation and legal personality of an instrumentality or agency invoking immunity remain relevant. Consent to be sued, as exhibited in this decision, is often conferred by the very same statute or general law creating the instrumentality or agency.

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ATCI v. Echin

Petitioners maintain that they should not be held liable because respondents employment contract specifically stipulates that her employment shall be governed by the Civil Service Law and Regulations of Kuwait. They thus conclude that it was patent error for the labor tribunals and the appellate court to apply the Labor Code provisions governing probationary employment in deciding the present case. Further, petitioners argue that even the Philippine Overseas Employment Act (POEA) Rules relative to master employment contracts (Part III, Sec. 2 of the POEA Rules and Regulations) accord respect to the customs, practices, company policies and labor laws and legislation of the host country. Finally, petitioners posit that assuming arguendo that Philippine labor laws are applicable,

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given that the foreign principal is a government agency which is immune from suit, as in fact it did not sign any document agreeing to be held jointly and solidarily liable, petitioner ATCI cannot likewise be held liable, more so since the Ministrys liability had not been judicially determined as jurisdiction was not acquired over it. The petition fails. Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the money claims of Overseas Filipino workers (OFWs) which it deploys abroad by the mere expediency of claiming that its foreign principal is a government agency clothed with immunity from suit, or that such foreign principals liability must first be established before it, as agent, can be held jointly and solidarily liable.

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In providing for the joint and solidary liability of private recruitment agencies with their foreign principals, Republic Act No. 8042 precisely affords the OFWs with a recourse and assures them of immediate and sufficient payment of what is due them. Skippers United Pacific v. Maguad[8] explains:
. . . [T]he obligations covenanted in the recruitment agreement entered into by and between the local agent and its foreign principal are not coterminous with the term of such agreement so that if either or both of the parties decide to end the agreement, the responsibilities of such parties towards the contracted employees under the agreement do not at all end, but the same extends up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the said recruitment agreement. Otherwise, this will render nugatory the very purpose for which the law governing the employment of workers for foreign jobs abroad was

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enacted. (emphasis supplied)

The imposition of joint and solidary liability is in line with the policy of the state to protect and alleviate the plight of the working class.[9] Verily, to allow petitioners to simply invoke the immunity from suit of its foreign principal or to wait for the judicial determination of the foreign principals liability before petitioner can be held liable renders the law on joint and solidary liability inutile. As to petitioners contentions that Philippine labor laws on probationary employment are not applicable since it was expressly provided in respondents employment contract, which she voluntarily entered into, that the terms of her engagement shall be governed by prevailing Kuwaiti Civil Service Laws and Regulations as in fact POEA Rules accord respect to such rules, customs and

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practices of the host country, the same was not substantiated. Indeed, a contract freely entered into is considered the law between the parties who can establish stipulations, clauses, terms and conditions as they may deem convenient, including the laws which they wish to govern their respective obligations, as long as they are not contrary to law, morals, good customs, public order or public policy. It is hornbook principle, however, that the party invoking the application of a foreign law has the burden of proving the law, under the doctrine of processual presumption which, in this case, petitioners failed to discharge. The Courts ruling in EDI-Staffbuilders Intl., v. NLRC[10] illuminates:
In the present case, the employment contract signed by Gran specifically states that Saudi Labor Laws will govern matters not provided for in the

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contract (e.g. specific causes for termination, termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern all matters relating to the termination of the employment of Gran. In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving the foreign law. The foreign law is treated as a question of fact to be properly pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is presumed to know only domestic or forum law. Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the International Law doctrine of presumed-identity approach or processual presumption comes into play. Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours. Thus, we apply Philippine labor laws in determining the issues presented before us. (emphasis and underscoring supplied)

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The Philippines does not take judicial notice of foreign laws, hence, they must not only be alleged; they must be proven. To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court which reads:
SEC. 24. Proof of official record. The record of public documents referred to in paragraph (a) of Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the

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seal of his office. (emphasis supplied)

SEC. 25. What attestation of copy must state. Whenever a copy of a document or record is attested for the purpose of the evidence, the attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be. The attestation must be under the official seal of the attesting officer, if there be any, or if he be the clerk of a court having a seal, under the seal of such court.

To prove the Kuwaiti law, petitioners submitted the following: MOA between respondent and the Ministry, as represented by ATCI, which provides that the employee is subject to a probationary period of one (1) year and that the host countrys Civil Service Laws and Regulations apply; a translated copy[11] (Arabic to English) of the termination letter to respondent stating that she did
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not pass the probation terms, without specifying the grounds therefor, and a translated copy of the certificate of termination,[12] both of which documents were certified by Mr. Mustapha Alawi, Head of the Department of Foreign Affairs-Office of Consular Affairs Inslamic Certification and Translation Unit; and respondents letter[13] of reconsideration to the Ministry, wherein she noted that in her first eight (8) months of employment, she was given a rating of Excellent albeit it changed due to changes in her shift of work schedule. These documents, whether taken singly or as a whole, do not sufficiently prove that respondent was validly terminated as a probationary employee under Kuwaiti civil service laws. Instead of submitting a copy of the pertinent Kuwaiti labor laws duly authenticated and translated by Embassy officials thereat, as required under the Rules, what

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petitioners submitted were mere certifications attesting only to the correctness of the translations of the MOA and the termination letter which does not prove at all that Kuwaiti civil service laws differ from Philippine laws and that under such Kuwaiti laws, respondent was validly terminated. Thus the subject certifications read:
xxxx This is to certify that the herein attached translation/s from Arabic to English/Tagalog and or vice versa was/were presented to this Office for review and certification and the same was/were found to be in order. This Office, however, assumes no responsibility as to the contents of the document/s. This certification is being issued upon request of the interested party for whatever legal purpose it may serve. (emphasis supplied)

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Respecting Ikdals joint and solidary liability as a corporate officer, the same is in order too following the express provision of R.A. 8042 on money claims, viz:
SEC. 10. Money Claims.Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual moral, exemplary and other forms of damages. The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a condition precedent

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for its approval. The performance bond to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and damages. (emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. SO ORDERED.

Proof of foreign law Williamette v. Muzzal CIR v. Fisher

In deciding the first issue, the lower court applied a well-known doctrine in our civil law that in the absence of any ante-nuptial agreement, the contracting parties are presumed to have adopted the system of conjugal partnership as to the properties acquired during their marriage. The application of this doctrine to the instant case is being disputed, however, by petitioner Collector of Internal

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Revenue, who contends that pursuant to Article 124 of the New Civil Code, the property relation of the spouses Stevensons ought not to be determined by the Philippine law, but by the national law of the decedent husband, in this case, the law of England. It is alleged by petitioner that English laws do not recognize legal partnership between spouses, and that what obtains in that jurisdiction is another regime of property relation, wherein all properties acquired during the marriage pertain and belong Exclusively to the husband. In further support of his stand, petitioner cites Article 16 of the New Civil Code (Art. 10 of the old) to the effect that in testate and intestate proceedings, the amount of successional rights, among others, is to be determined by the national law of the decedent. In this connection, let it be noted that since the mariage of the Stevensons in the Philippines took place in 1909, the applicable law is Article 1325 of the old Civil Code and not Article 124 of the New Civil Code which became effective only in 1950. It is true that both articles adhere to the so-called nationality theory of determining the property relation of spouses where one of them is a foreigner and they have made no prior agreement as to the administration disposition, and ownership of their conjugal properties. In such a case, the national law of the husband becomes the dominant law in determining the property relation of the spouses. There is, however, a difference between the two articles in that Article 1241 of the new Civil Code expressly

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provides that it shall be applicable regardless of whether the marriage was celebrated in the Philippines or abroad while Article 13252 of the old Civil Code is limited to marriages contracted in a foreign land. It must be noted, however, that what has just been said refers to mixed marriages between a Filipino citizen and a foreigner. In the instant case, both spouses are foreigners who married in the Philippines. Manresa,3 in his Commentaries, has this to say on this point: La regla establecida en el art. 1.315, se refiere a las capitulaciones otorgadas en Espana y entre espanoles. El 1.325, a las celebradas en el extranjero cuando alguno de los conyuges es espanol. En cuanto a la regla procedente cuando dos extranjeros se casan en Espana, o dos espanoles en el extranjero hay que atender en el primer caso a la legislacion de pais a que aquellos pertenezean, y en el segundo, a las reglas generales consignadas en los articulos 9 y 10 de nuestro Codigo. (Emphasis supplied.) If we adopt the view of Manresa, the law determinative of the property relation of the Stevensons, married in 1909, would be the English law even if the marriage was celebrated in the Philippines, both of them being foreigners. But, as correctly observed by the Tax Court, the pertinent English law that allegedly vests in the decedent husband full ownership of the properties acquired during

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the marriage has not been proven by petitioner. Except for a mere allegation in his answer, which is not sufficient, the record is bereft of any evidence as to what English law says on the matter. In the absence of proof, the Court is justified, therefore, in indulging in what Wharton calls "processual presumption," in presuming that the law of England on this matter is the same as our law.4 Nor do we believe petitioner can make use of Article 16 of the New Civil Code (art. 10, old Civil Code) to bolster his stand. A reading of Article 10 of the old Civil Code, which incidentally is the one applicable, shows that it does not encompass or contemplate to govern the question of property relation between spouses. Said article distinctly speaks of amount of successional rights and this term, in speaks in our opinion, properly refers to the extent or amount of property that each heir is legally entitled to inherit from the estate available for distribution. It needs to be pointed out that the property relation of spouses, as distinguished from their successional rights, is governed differently by the specific and express provisions of Title VI, Chapter I of our new Civil Code (Title III, Chapter I of the old Civil Code.) We, therefore, find that the lower court correctly deducted the half of the conjugal property in determining the hereditary estate left by the deceased Stevenson. On the second issue, petitioner disputes the action of the Tax Court in the exempting the respondents from paying inheritance tax on the 210,000 shares of stock in the Mindanao Mother Lode

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Mines, Inc. in virtue of the reciprocity proviso of Section 122 of the National Internal Revenue Code, in relation to Section 13851 of the California Revenue and Taxation Code, on the ground that: (1) the said proviso of the California Revenue and Taxation Code has not been duly proven by the respondents; (2) the reciprocity exemptions granted by section 122 of the National Internal Revenue Code can only be availed of by residents of foreign countries and not of residents of a state in the United States; and (3) there is no "total" reciprocity between the Philippines and the state of California in that while the former exempts payment of both estate and inheritance taxes on intangible personal properties, the latter only exempts the payment of inheritance tax.. To prove the pertinent California law, Attorney Allison Gibbs, counsel for herein respondents, testified that as an active member of the California Bar since 1931, he is familiar with the revenue and taxation laws of the State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, the witness cited article 4, section 13851 (a) and (b) of the California Internal and Revenue Code as published in Derring's California Code, a publication of the Bancroft-Whitney Company inc. And as part of his testimony, a full quotation of the cited section was offered in evidence as Exhibits "V-2" by the respondents. It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice

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of them.5 Like any other fact, they must be alleged and proved.6 Section 41, Rule 123 of our Rules of Court prescribes the manner of proving foreign laws before our tribunals. However, although we believe it desirable that these laws be proved in accordance with said rule, we held in the case of Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a reading of sections 300 and 301 of our Code of Civil Procedure (now section 41, Rule 123) will convince one that these sections do not exclude the presentation of other competent evidence to prove the existence of a foreign law." In that case, we considered the testimony of an attorney-atlaw of San Francisco, California who quoted verbatim a section of California Civil Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish the existence of said law. In line with this view, we find no error, therefore, on the part of the Tax Court in considering the pertinent California law as proved by respondents' witness. We now take up the question of reciprocity in exemption from transfer or death taxes, between the State of California and the Philippines.F Section 122 of our National Internal Revenue Code, in pertinent part, provides: ... And, provided, further, That no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent

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at the time of his death was a resident of a foreign country which at the time of his death did not impose a transfer of tax or death tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country." (Emphasis supplied). On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:. "SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt from the tax imposed by this part if the decedent at the time of his death was a resident of a territory or another State of the United States or of a foreign state or country which then imposed a legacy, succession, or death tax in respect to intangible personal property of its own residents, but either:. (a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal property of residents of this State, or (b) Had in its laws a reciprocal provision under which intangible personal property of a non-resident was exempt from legacy,

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succession, or death taxes of every character if the Territory or other State of the United States or foreign state or country in which the nonresident resided allowed a similar exemption in respect to intangible personal property of residents of the Territory or State of the United States or foreign state or country of residence of the decedent." (Id.) It is clear from both these quoted provisions that the reciprocity must be total, that is, with respect to transfer or death taxes of any and every character, in the case of the Philippine law, and to legacy, succession, or death taxes of any and every character, in the case of the California law. Therefore, if any of the two states collects or imposes and does not exempt any transfer, death, legacy, or succession tax of any character, the reciprocity does not work. This is the underlying principle of the reciprocity clauses in both laws. In the Philippines, upon the death of any citizen or resident, or non-resident with properties therein, there are imposed upon his estate and its settlement, both an estate and an inheritance tax. Under the laws of California, only inheritance tax is imposed. On the other hand, the Federal Internal Revenue Code imposes an estate tax on non-residents not citizens of the United States,7 but does not provide for any exemption on the basis of reciprocity. Applying these laws in the manner the Court of Tax Appeals did in the instant case, we will have a situation where a Californian, who is non-resident in the Philippines but has intangible personal

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properties here, will the subject to the payment of an estate tax, although exempt from the payment of the inheritance tax. This being the case, will a Filipino, non-resident of California, but with intangible personal properties there, be entitled to the exemption clause of the California law, since the Californian has not been exempted from every character of legacy, succession, or death tax because he is, under our law, under obligation to pay an estate tax? Upon the other hand, if we exempt the Californian from paying the estate tax, we do not thereby entitle a Filipino to be exempt from a similar estate tax in California because under the Federal Law, which is equally enforceable in California he is bound to pay the same, there being no reciprocity recognized in respect thereto. In both instances, the Filipino citizen is always at a disadvantage. We do not believe that our legislature has intended such an unfair situation to the detriment of our own government and people. We, therefore, find and declare that the lower court erred in exempting the estate in question from payment of the inheritance tax. We are not unaware of our ruling in the case of Collector of Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom. January 6, 1958, 54 O.G. 2881) exempting the estate of the deceased Hugo H. Miller from payment of the inheritance tax imposed by the Collector of Internal Revenue. It will be noted, however, that the issue of reciprocity between the pertinent provisions of our tax law and that of the State of California was not

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there squarely raised, and the ruling therein cannot control the determination of the case at bar. Be that as it may, we now declare that in view of the express provisions of both the Philippine and California laws that the exemption would apply only if the law of the other grants an exemption from legacy, succession, or death taxes of every character, there could not be partial reciprocity. It would have to be total or none at all. With respect to the question of deduction or reduction in the amount of P4,000.00 based on the U.S. Federal Estate Tax Law which is also being claimed by respondents, we uphold and adhere to our ruling in the Lara case (supra) that the amount of $2,000.00 allowed under the Federal Estate Tax Law is in the nature of a deduction and not of an exemption regarding which reciprocity cannot be claimed under the provision of Section 122 of our National Internal Revenue Code. Nor is reciprocity authorized under the Federal Law. . On the issue of the correctness of the appraisal of the two parcels of land situated in Baguio City, it is contended that their assessed values, as appearing in the tax rolls 6 months after the death of Stevenson, ought to have been considered by petitioner as their fair market value, pursuant to section 91 of the National Internal Revenue Code. It should be pointed out, however, that in accordance with said proviso the properties are required to be appraised at their fair market value and the assessed value thereof shall be considered as the fair market value only when

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evidence to the contrary has not been shown. After all review of the record, we are satisfied that such evidence exists to justify the valuation made by petitioner which was sustained by the tax court, for as the tax court aptly observed: "The two parcels of land containing 36,264 square meters were valued by the administrator of the estate in the Estate and Inheritance tax returns filed by him at P43,500.00 which is the assessed value of said properties. On the other hand, defendant appraised the same at P52,200.00. It is of common knowledge, and this Court can take judicial notice of it, that assessments for real estate taxation purposes are very much lower than the true and fair market value of the properties at a given time and place. In fact one year after decedent's death or in 1952 the said properties were sold for a price of P72,000.00 and there is no showing that special or extraordinary circumstances caused the sudden increase from the price of P43,500.00, if we were to accept this value as a fair and reasonable one as of 1951. Even more, the counsel for plaintiffs himself admitted in open court that he was willing to purchase the said properties at P2.00 per square meter. In the light of these facts we believe and therefore hold that the valuation of P52,200.00 of the real estate in Baguio made by defendant is fair, reasonable and justified in the premises." (Decision, p. 19). In respect to the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc., (a domestic corporation),

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respondents contend that their value should be fixed on the basis of the market quotation obtaining at the San Francisco (California) Stock Exchange, on the theory that the certificates of stocks were then held in that place and registered with the said stock exchange. We cannot agree with respondents' argument. The situs of the shares of stock, for purposes of taxation, being located here in the Philippines, as respondents themselves concede and considering that they are sought to be taxed in this jurisdiction, consistent with the exercise of our government's taxing authority, their fair market value should be taxed on the basis of the price prevailing in our country. Upon the other hand, we find merit in respondents' other contention that the said shares of stock commanded a lesser value at the Manila Stock Exchange six months after the death of Stevenson. Through Atty. Allison Gibbs, respondents have shown that at that time a share of said stock was bid for at only P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty. Gibbs in this respect has never been questioned nor refuted by petitioner either before this court or in the court below. In the absence of evidence to the contrary, we are, therefore, constrained to reverse the Tax Court on this point and to hold that the value of a share in the said mining company on August 22, 1951 in the Philippine market was P.325 as claimed by respondents.. It should be noted that the petitioner and the Tax Court valued each share of stock of P.38 on the basis of the declaration made

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by the estate in its preliminary return. Patently, this should not have been the case, in view of the fact that the ancillary administrator had reserved and availed of his legal right to have the properties of the estate declared at their fair market value as of six months from the time the decedent died.. On the fifth issue, we shall consider the various deductions, from the allowance or disallowance of which by the Tax Court, both petitioner and respondents have appealed.. Petitioner, in this regard, contends that no evidence of record exists to support the allowance of the sum of P8,604.39 for the following expenses:. 1) Administrator's fee 2) Attorney's fee 3) Judicial and Administrative expenses Total Deductions P1,204.3 4 6,000.00 2,052.5 5 P8,604.3 9

An examination of the record discloses, however, that the foregoing items were considered deductible by the Tax Court on

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the basis of their approval by the probate court to which said expenses, we may presume, had also been presented for consideration. It is to be supposed that the probate court would not have approved said items were they not supported by evidence presented by the estate. In allowing the items in question, the Tax Court had before it the pertinent order of the probate court which was submitted in evidence by respondents. (Exh. "AA-2", p. 100, record). As the Tax Court said, it found no basis for departing from the findings of the probate court, as it must have been satisfied that those expenses were actually incurred. Under the circumstances, we see no ground to reverse this finding of fact which, under Republic Act of California National Association, which it would appear, that while still living, Walter G. Stevenson obtained we are not inclined to pass upon the claim of respondents in respect to the additional amount of P86.52 for funeral expenses which was disapproved by the court a quo for lack of evidence. In connection with the deduction of P652.50 representing the amount of realty taxes paid in 1951 on the decedent's two parcels of land in Baguio City, which respondents claim was disallowed by the Tax Court, we find that this claim has in fact been allowed. What happened here, which a careful review of the record will reveal, was that the Tax Court, in itemizing the liabilities of the estate, viz:

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1) Administrator's fee 2) Attorney's fee 3) Judicial and Administration expenses as of August 9, 1952 Total

P1,204.3 4 6,000.00 2,052.5 5 P9,256.8 9

added the P652.50 for realty taxes as a liability of the estate, to the P1,400.05 for judicial and administration expenses approved by the court, making a total of P2,052.55, exactly the same figure which was arrived at by the Tax Court for judicial and administration expenses. Hence, the difference between the total of P9,256.98 allowed by the Tax Court as deductions, and the P8,604.39 as found by the probate court, which is P652.50, the same amount allowed for realty taxes. An evident oversight has involuntarily been made in omitting the P2,000.00 for funeral expenses in the final computation. This amount has been expressly allowed by the lower court and there is no reason why it should not be. . We come now to the other claim of respondents that pursuant to section 89(b) (1) in relation to section 89(a) (1) (E) and section 89(d), National Internal Revenue Code, the amount of P10,022.47

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should have been allowed the estate as a deduction, because it represented an indebtedness of the decedent incurred during his lifetime. In support thereof, they offered in evidence a duly certified claim, presented to the probate court in California by the Bank of California National Association, which it would appear, that while still living, Walter G. Stevenson obtained a loan of $5,000.00 secured by pledge on 140,000 of his shares of stock in the Mindanao Mother Lode Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court disallowed this item on the ground that the local probate court had not approved the same as a valid claim against the estate and because it constituted an indebtedness in respect to intangible personal property which the Tax Court held to be exempt from inheritance tax. For two reasons, we uphold the action of the lower court in disallowing the deduction. Firstly, we believe that the approval of the Philippine probate court of this particular indebtedness of the decedent is necessary. This is so although the same, it is averred has been already admitted and approved by the corresponding probate court in California, situs of the principal or domiciliary administration. It is true that we have here in the Philippines only an ancillary administration in this case, but, it has been held, the distinction between domiciliary or principal administration and ancillary administration serves only to distinguish one administration from the other, for the two proceedings are separate and independent.8 The reason for the

390

ancillary administration is that, a grant of administration does not ex proprio vigore, have any effect beyond the limits of the country in which it was granted. Hence, we have the requirement that before a will duly probated outside of the Philippines can have effect here, it must first be proved and allowed before our courts, in much the same manner as wills originally presented for allowance therein.9 And the estate shall be administered under letters testamentary, or letters of administration granted by the court, and disposed of according to the will as probated, after payment of just debts and expenses of administration.10 In other words, there is a regular administration under the control of the court, where claims must be presented and approved, and expenses of administration allowed before deductions from the estate can be authorized. Otherwise, we would have the actuations of our own probate court, in the settlement and distribution of the estate situated here, subject to the proceedings before the foreign court over which our courts have no control. We do not believe such a procedure is countenanced or contemplated in the Rules of Court. Another reason for the disallowance of this indebtedness as a deduction, springs from the provisions of Section 89, letter (d), number (1), of the National Internal Revenue Code which reads: (d) Miscellaneous provisions (1) No deductions shall be allowed in the case of a non-resident not a citizen of the Philippines unless the executor, administrator or anyone of the heirs, as the case

391

may be, includes in the return required to be filed under section ninety-three the value at the time of his death of that part of the gross estate of the non-resident not situated in the Philippines." In the case at bar, no such statement of the gross estate of the non-resident Stevenson not situated in the Philippines appears in the three returns submitted to the court or to the office of the petitioner Collector of Internal Revenue. The purpose of this requirement is to enable the revenue officer to determine how much of the indebtedness may be allowed to be deducted, pursuant to (b), number (1) of the same section 89 of the Internal Revenue Code which provides: (b) Deductions allowed to non-resident estates. In the case of a non-resident not a citizen of the Philippines, by deducting from the value of that part of his gross estate which at the time of his death is situated in the Philippines (1) Expenses, losses, indebtedness, and taxes. That proportion of the deductions specified in paragraph (1) of subjection (a) of this section11 which the value of such part bears the value of his entire gross estate wherever situated;" In other words, the allowable deduction is only to the extent of the portion of the indebtedness which is equivalent to the proportion that the estate in the Philippines bears to the total estate wherever situated. Stated differently, if the properties in the Philippines

392

constitute but 1/5 of the entire assets wherever situated, then only 1/5 of the indebtedness may be deducted. But since, as heretofore adverted to, there is no statement of the value of the estate situated outside the Philippines, no part of the indebtedness can be allowed to be deducted, pursuant to Section 89, letter (d), number (1) of the Internal Revenue Code. For the reasons thus stated, we affirm the ruling of the lower court disallowing the deduction of the alleged indebtedness in the sum of P10,022.47. In recapitulation, we hold and declare that: (a) only the one-half (1/2) share of the decedent Stevenson in the conjugal partnership property constitutes his hereditary estate subject to the estate and inheritance taxes; (b) the intangible personal property is not exempt from inheritance tax, there existing no complete total reciprocity as required in section 122 of the National Internal Revenue Code, nor is the decedent's estate entitled to an exemption of P4,000.00 in the computation of the estate tax; (c) for the purpose of the estate and inheritance taxes, the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. are to be appraised at P0.325 per share; and

393

(d) the P2,000.00 for funeral expenses should be deducted in the determination of the net asset of the deceased Stevenson. In all other respects, the decision of the Court of Tax Appeals is affirmed. Respondent's claim for interest on the amount allegedly overpaid, if any actually results after a recomputation on the basis of this decision is hereby denied in line with our recent decision in Collector of Internal Revenue v. St. Paul's Hospital (G.R. No. L12127, May 29, 1959) wherein we held that, "in the absence of a statutory provision clearly or expressly directing or authorizing such payment, and none has been cited by respondents, the National Government cannot be required to pay interest." WHEREFORE, as modified in the manner heretofore indicated, the judgment of the lower court is hereby affirmed in all other respects not inconsistent herewith. No costs. So ordered.
PCIB v. Escolin Laureano v. CA

Ahh. Too long. Check transcript!

Respondent Court of Appeals acquired jurisdiction when defendant filed its appeal before said court.[5] On this matter, respondent court was correct when it barred defendant-appellant below from raising further the issue of jurisdiction.[6]

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Petitioner now raises the issue of whether his action is one based on Article 1144 or on Article 1146 of the Civil Code. According to him, his termination of employment effective November 1, 1982, was based on an employment contract which is under Article 1144, so his action should prescribe in 10 years as provided for in said article. Thus he claims the ruling of the appellate court based on Article 1146 where prescription is only four (4) years, is an error. The appellate court concluded that the action for illegal dismissal originally filed before the Labor Arbiter on June 29, 1983, but which was withdrawn, then filed again in 1987 before the Regional Trial Court, had already prescribed. In our view, neither Article 1144[7] nor Article 1146[8] of the Civil Code is here pertinent. What is applicable is Article 291 of the Labor Code, viz: "Article 291. Money claims. - All money claims arising from employee-employer relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued;

395

otherwise they shall be forever barred. x x x" Misact What rules on prescription should apply in cases like this one has long been decided by this Court. In illegal dismissal, it is settled, that the ten-year prescriptive period fixed in Article 1144 of the Civil Code may not be invoked by petitioners, for the Civil Code is a law of general application, while the prescriptive period fixed in Article 292 of the Labor Code [now Article 291] is a SPECIAL LAW applicable to claims arising from employee-employer relations.[9] More recently in De Guzman. vs. Court of Appeals,[10] where the money claim was based on a written contract, the Collective Bargaining Agreement, the Court held: "...The language of Art. 291 of the Labor Code does not limit its application only to 'money claims specifically recoverable under said Code' but covers all money claims arising from an employee-employer

396

relations" (Citing Cadalin v. POEA Administrator, 238 SCRA 721, 764 [1994]; and Uy v. National Labor Relations Commission, 261 SCRA 505, 515 [1996]). ... It should be noted further that Article 291 of the Labor Code is a special law applicable to money claims arising from employeremployee relations; thus, it necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule in statutory construction that 'where two statutes are of equal theoretical application to a particular case, the one designed therefore should prevail.' (Citing Leveriza v. Intermediate Appellate Court, 157 SCRA 282, 294.) Generalia specialibus non derogant."[11] In the light of Article 291, aforecited, we agree with the appellate court's conclusion that petitioner's action for damages due to illegal termination filed again on January 8, 1987 or more than four (4) years after the effective date of his dismissal on November 1, 1982 has already

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prescribed. "In the instant case, the action for damages due to illegal termination was filed by plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed." We base our conclusion not on Article 1144 of the Civil Code but on Article 291 of the Labor Code, which sets the prescription period at three (3) years and which governs under this jurisdiction. Petitioner claims that the running of the prescriptive period was tolled when he filed his complaint for illegal dismissal before the Labor Arbiter of the National Labor Relations Commission. However, this claim deserves scant consideration; it has no legal leg to stand on. In Olympia International, Inc. vs. Court of Appeals, we held that "although the commencement of a civil action stops the running of the statute of prescription or limitations, its

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dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the same position as though no action had been commenced at all."[12] Now, as to whether petitioner's separation from the company due to retrenchment was valid, the appellate court found that the employment contract of petitioner allowed for pre-termination of employment. We agree with the Court of Appeals when it said, Sdjad "It is a settled rule that contracts have the force of law between the parties. From the moment the same is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature, may be in keeping with good faith, usage and law. Thus, when plaintiff-appellee accepted the offer of employment, he was bound by the terms and conditions set forth in the contract, among others, the right of mutual termination by giving three months written notice or by payment of three months

399

salary. Such provision is clear and readily understandable, hence, there is no room for interpretation." xxx Further, plaintiff-appellee's contention that he is not bound by the provisions of the Agreement, as he is not a signatory thereto, deserves no merit. It must be noted that when plaintiff-appellee's employment was confirmed, he applied for membership with the Singapore Airlines Limited (Pilots) Association, the signatory to the aforementioned Agreement. As such, plaintiff-appellee is estopped from questioning the legality of the said agreement or any proviso contained therein."[13] Moreover, the records of the present case clearly show that respondent court's decision is amply supported by evidence and it did not err in its findings, including the

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reason for the retrenchment: "When defendant-appellant was faced with the world-wide recession of the airline industry resulting in a slow down in the company's growth particularly in the regional operation (Asian Area) where the Airbus 300 operates. It had no choice but to adopt cost cutting measures, such as cutting down services, number of frequencies of flights, and reduction of the number of flying points for the A-300 fleet (t.s.n., July 6, 1988, pp. 17-18). As a result, defendant-appellant had to layoff A-300 pilots, including plaintiffappellee, which it found to be in excess of what is reasonably needed."[14] All these considered, we find sufficient factual and legal basis to conclude that petitioner's termination from employment was for an authorized cause, for which he was given ample notice and opportunity to be heard, by respondent company. No error nor grave abuse of discretion, therefore, could be attributed to respondent

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appellate court. Sppedsc ACCORDINGLY, the instant petition is DISMISSED. The decision of the Court of Appeals in C.A. CV No. 34476 is AFFIRMED. SO ORDERED.
Yao Kee v. SyGonzales

I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in accordance with Chinese law and custom was conclusively proven. To buttress this argument they rely on the following testimonial and documentary evidence. First, the testimony of Yao Kee summarized by the trial court as follows: Yao Kee testified that she was married to Sy Kiat on January 19, 1931 in Fookien, China; that she does not have a marriage certificate because the practice during that time was for elders to agree upon the betrothal of their children, and in her case, her elder brother was the one who contracted or entered into [an] agreement with the parents of her husband; that the agreement was that she and Sy Mat would be married, the wedding date was set, and invitations were sent out; that the said agreement was complied with; that she has five children with Sy Kiat, but two of them died; that those who are alive are Sze Sook Wah, Sze Lai Cho, and Sze Chun Yen, the eldest being Sze Sook Wah who is

402

already 38 years old; that Sze Sook Wah was born on November 7, 1939; that she and her husband, Sy Mat, have been living in FooKien, China before he went to the Philippines on several occasions; that the practice during the time of her marriage was a written document [is exchanged] just between the parents of the bride and the parents of the groom, or any elder for that matter; that in China, the custom is that there is a go- between, a sort of marriage broker who is known to both parties who would talk to the parents of the bride-to-be; that if the parents of the bride-to-be agree to have the groom-to-be their son in-law, then they agree on a date as an engagement day; that on engagement day, the parents of the groom would bring some pieces of jewelry to the parents of the bride-to-be, and then one month after that, a date would be set for the wedding, which in her case, the wedding date to Sy Kiat was set on January 19, 1931; that during the wedding the bridegroom brings with him a couch (sic) where the bride would ride and on that same day, the parents of the bride would give the dowry for her daughter and then the document would be signed by the parties but there is no solemnizing officer as is known in the Philippines; that during the wedding day, the document is signed only by the parents of the bridegroom as well as by the parents of the bride; that the parties themselves do not sign the document; that the bride would then be placed in a carriage where she would be brought to the town of the bridegroom and before departure the bride would be covered with a sort of a veil; that upon reaching the town of the bridegroom, the

403

bridegroom takes away the veil; that during her wedding to Sy Kiat (according to said Chinese custom), there were many persons present; that after Sy Kiat opened the door of the carriage, two old ladies helped her go down the carriage and brought her inside the house of Sy Mat; that during her wedding, Sy Chick, the eldest brother of Sy Kiat, signed the document with her mother; that as to the whereabouts of that document, she and Sy Mat were married for 46 years already and the document was left in China and she doubt if that document can still be found now; that it was left in the possession of Sy Kiat's family; that right now, she does not know the whereabouts of that document because of the lapse of many years and because they left it in a certain place and it was already eaten by the termites; that after her wedding with Sy Kiat, they lived immediately together as husband and wife, and from then on, they lived together; that Sy Kiat went to the Philippines sometime in March or April in the same year they were married; that she went to the Philippines in 1970, and then came back to China; that again she went back to the Philippines and lived with Sy Mat as husband and wife; that she begot her children with Sy Kiat during the several trips by Sy Kiat made back to China. [CFI decision, pp. 13-15; Rollo, pp. 50-52.] Second, the testimony Kee who stated that attended the wedding marriage certificate is of Gan Ching, a younger brother of Yao he was among the many people who of his sister with Sy Kiat and that no issued by the Chinese government, a

404

document signed by the parents or elders of the parties being sufficient [CFI decision, pp. 15-16; Rollo, pp. 52-53.] Third, the statements made by Asuncion Gillego when she testified before the trial court to the effect that (a) Sy Mat was married to Yao Kee according to Chinese custom; and, (b) Sy Kiat's admission to her that he has a Chinese wife whom he married according to Chinese custom [CFI decision, p. 17; Rollo, p. 54.] Fourth, Sy Kiat's Master Card of Registered Alien issued in Caloocan City on October 3, 1972 where the following entries are found: "Marital statusMarried"; "If married give name of spousesYao Kee"; "Address-China; "Date of marriage1931"; and "Place of marriageChina" [Exhibit "SS-1".] Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila on January 12, 1968 where the following entries are likewise found: "Civil statusMarried"; and, 'If married, state name and address of spouseYao Kee Chingkang, China" [Exhibit "4".] And lastly, the certification issued in Manila on October 28, 1977 by the Embassy of the People's Republic of China to the effect that "according to the information available at the Embassy Mr. Sy Kiat a Chinese national and Mrs. Yao Kee alias Yui Yip also Chinese were married on January 19, 1931 in Fukien, the

405

People's Republic of China" [Exhibit "5".] These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat. However, the same do not suffice to establish the validity of said marriage in accordance with Chinese law or custom. Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory" [In the Matter of the Petition for Authority to Continue Use of the Firm Name "Ozaeta, Romulo, de Leon, Mabanta and Reyes", July 30, 1979, SCRA 3, 12 citing JBL Reyes & RC Puno, Outline of Phil. Civil Law, Fourth Ed., Vol. 1, p. 7.] The law requires that "a custom must be proved as a fact, according to the rules of evidence" [Article 12, Civil Code.] On this score the Court had occasion to state that "a local custom as a source of right can not be considered by a court of justice unless such custom is properly established by competent evidence like any other fact" [Patriarca v. Orate, 7 Phil. 390, 395 (1907).] The same evidence, if not one of a higher degree, should be required of a foreign custom. The law on foreign marriages is provided by Article 71 of the Civil Code which states that: Art. 71. All marriages performed outside the Philippines in accordance with the laws in force in the country where they were

406

performed and valid there as such, shall also be valid in this country, except bigamous, Polygamous, or incestuous marriages, as determined by Philippine law. (Emphasis supplied.) *** Construing this provision of law the Court has held that to establish a valid foreign marriage two things must be proven, namely: (1) the existence of the foreign law as a question of fact; and (2) the alleged foreign marriage by convincing evidence [Adong v. Cheong Seng Gee, 43 Phil. 43, 49 (1922).] In proving a foreign law the procedure is provided in the Rules of Court. With respect to an unwritten foreign law, Rule 130 section 45 states that: SEC. 45. Unwritten law.The oral testimony of witnesses, skilled therein, is admissible as evidence of the unwritten law of a foreign country, as are also printed and published books of reports of decisions of the courts of the foreign country, if proved to be commonly admitted in such courts. Proof of a written foreign law, on the other hand, is provided for under Rule 132 section 25, thus: SEC. 25. Proof of public or official record.An official record or an entry therein, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and

407

accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept and authenticated by the seal of his office. The Court has interpreted section 25 to include competent evidence like the testimony of a witness to prove the existence of a written foreign law [Collector of Internal Revenue v. Fisher 110 Phil. 686, 700-701 (1961) citing Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471 (1935).] In the case at bar petitioners did not present any competent evidence relative to the law and custom of China on marriage. The testimonies of Yao and Gan Ching cannot be considered as proof of China's law or custom on marriage not only because they are self-serving evidence, but more importantly, there is no showing that they are competent to testify on the subject matter. For failure to prove the foreign law or custom, and consequently, the validity of the marriage in accordance with said law or custom, the marriage between Yao Kee and Sy Kiat cannot be recognized in this jurisdiction. Petitioners contend that contrary to the Court of Appeals' ruling they are not duty bound to prove the Chinese law on marriage as

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judicial notice thereof had been taken by this Court in the case of Sy Joc Lieng v. Sy Quia [16 Phil. 137 (1910).] This contention is erroneous. Well-established in this jurisdiction is the principle that Philippine courts cannot take judicial notice of foreign laws. They must be alleged and proved as any other fact [Yam Ka Lim v. Collector of Customs, 30 Phil. 46, 48 (1915); Fluemer v. Hix, 54 Phil. 610 (1930).] Moreover a reading of said case would show that the party alleging the foreign marriage presented a witness, one Li Ung Bieng, to prove that matrimonial letters mutually exchanged by the contracting parties constitute the essential requisite for a marriage to be considered duly solemnized in China. Based on his testimony, which as found by the Court is uniformly corroborated by authors on the subject of Chinese marriage, what was left to be decided was the issue of whether or not the fact of marriage in accordance with Chinese law was duly proven [Sy Joc Lieng v. Sy Quia, supra., at p. 160.] Further, even assuming for the sake of argument that the Court has indeed taken judicial notice of the law of China on marriage in the aforecited case, petitioners however have not shown any proof that the Chinese law or custom obtaining at the time the Sy Joc Lieng marriage was celebrated in 1847 was still the law when the alleged marriage of Sy Kiat to Yao Kee took place in 1931 or

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eighty-four (84) years later. Petitioners moreover cite the case of U.S. v. Memoracion [34 Phil. 633 (1916)] as being applicable to the instant case. They aver that the judicial pronouncement in the Memoracion case, that the testimony of one of the contracting parties is competent evidence to show the fact of marriage, holds true in this case. The Memoracion case however is not applicable to the case at bar as said case did not concern a foreign marriage and the issue posed was whether or not the oral testimony of a spouse is competent evidence to prove the fact of marriage in a complaint for adultery. Accordingly, in the absence of proof of the Chinese law on marriage, it should be presumed that it is the same as ours *** [Wong
Woo Yiu v. Vivo, G.R. No. L-21076, March 31, 1965, 13 SCRA 552, 555.] Since Yao Kee admitted in her testimony that there was no solemnizing officer as is known here in the Philippines [See Article 56, Civil Code] when her alleged marriage to Sy Mat was celebrated [CFI decision, p. 14; Rollo, p. 51], it therefore follows that her marriage to Sy Kiat, even if true, cannot be recognized in this jurisdiction [Wong Woo Yiu v. Vivo, supra., pp. 555-556.]

II. The second issue raised by petitioners concerns the status of private respondents. Respondent court found the following evidence of petitioners' filiation:

410

(1) Sy Kiat's Master Card of Registered Alien where the following are entered: "Children if any: give number of childrenFour"; and, "NameAll living in China" [Exhibit "SS-1";] (2) the testimony of their mother Yao Kee who stated that she had five children with Sy Kiat, only three of whom are alive namely, Sze Sook Wah, Sze Lai Chu and Sze Chin Yan [TSN, December 12, 1977, pp. 9-11;] and, (3) an affidavit executed on March 22,1961 by Sy Kiat for presentation to the Local Civil Registrar of Manila to support Sze Sook Wah's application for a marriage license, wherein Sy Kiat expressly stated that she is his daughter [Exhibit "3".] Likewise on the record is the testimony of Asuncion Gillego that Sy Kiat told her he has three daughters with his Chinese wife, two of whomSook Wah and Sze Kai Choshe knows, and one adopted son [TSN, December 6,1977, pp. 87-88.] However, as petitioners failed to establish the marriage of Yao Kee with Sy Mat according to the laws of China, they cannot be accorded the status of legitimate children but only that of acknowledged natural children. Petitioners are natural children, it appearing that at the time of their conception Yao Kee and Sy Kiat were not disqualified by any impediment to marry one another [See Art. 269, Civil Code.] And they are acknowledged children of the deceased because of Sy Kiat's recognition of Sze Sook Wah

411

[Exhibit "3"] and its extension to Sze Lai Cho and Sy Chun Yen who are her sisters of the full blood [See Art. 271, Civil Code.] Private respondents on the other hand are also the deceased's acknowledged natural children with Asuncion Gillego, a Filipina with whom he lived for twenty-five (25) years without the benefit of marriage. They have in their favor their father's acknowledgment, evidenced by a compromise agreement entered into by and between their parents and approved by the Court of First Instance on February 12, 1974 wherein Sy Kiat not only acknowleged them as his children by Asuncion Gillego but likewise made provisions for their support and future inheritance, thus: xxx xxx xxx 2. The parties also acknowledge that they are common-law husband and wife and that out of such relationship, which they have likewise decided to definitely and finally terminate effective immediately, they begot five children, namely: Aida Sy, born on May 30, 1950; Manuel Sy, born on July 1, 1953; Teresita Sy, born on January 28, 1955; Ricardo Sy now deceased, born on December 14, 1956; and Rodolfo Sy, born on May 7, 1958. 3. With respect to the AVENUE TRACTOR AND DIESEL PARTS SUPPLY ... , the parties mutually agree and covenant that (a) The stocks and merchandize and the furniture and equipments

412

..., shall be divided into two equal shares between, and distributed to, Sy Kiat who shall own one-half of the total and the other half to Asuncion Gillego who shall transfer the same to their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy. (b) the business name and premises ... shall be retained by Sy Kiat. However, it shall be his obligation to give to the aforenamed children an amount of One Thousand Pesos ( Pl,000.00 ) monthly out of the rental of the two doors of the same building now occupied by Everett Construction. xxx xxx xxx (5) With respect to the acquisition, during the existence of the common-law husband-and-wife relationship between the parties, of the real estates and properties registered and/or appearing in the name of Asuncion Gillego ... , the parties mutually agree and covenant that the said real estates and properties shall be transferred in equal shares to their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy, but to be administered by Asuncion Gillego during her lifetime ... [Exhibit "D".] (Emphasis supplied.) xxx xxx xxx This compromise agreement constitutes a statement before a court of record by which a child may be voluntarily acknowledged

413

[See Art. 278, Civil Code.] Petitioners further argue that the questions on the validity of Sy Mat's marriage to Yao Kee and the paternity and filiation of the parties should have been ventilated in the Juvenile and Domestic Relations Court. Specifically, petitioners rely on the following provision of Republic Act No. 5502, entitled "An Act Revising Rep. Act No. 3278, otherwise known as the Charter of the City of Caloocan', with regard to the Juvenile and Domestic Relations Court: SEC. 91-A. Creation and Jurisdiction of the Court. xxx xxx xxx The provisions of the Judiciary Act to the contrary notwithstanding, the court shall have exclusive original jurisdiction to hear and decide the following cases: xxx xxx xxx (2) Cases involving custody, guardianship, adoption, revocation of adoption, paternity and acknowledgment; (3) Annulment of marriages, relief from marital obligations, legal

414

separation of spouses, and actions for support; (4) Proceedings brought under the provisions of title six and title seven, chapters one to three of the civil code; xxx xxx xxx and the ruling in the case of Bartolome v. Bartolome [G.R. No. L23661, 21 SCRA 1324] reiterated in Divinagracia v. Rovira [G.R. No. L-42615, 72 SCRA 307.] With the enactment of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, the Juvenile and Domestic Relations Courts were abolished. Their functions and jurisdiction are now vested with the Regional Trial Courts [See Section 19 (7), B.P. Blg. 129 and Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986, 143 SCRA 356, 360] hence it is no longer necessary to pass upon the issue of jurisdiction raised by petitioners. Moreover, even without the exactment of Batas Pambansa Blg. 129 we find in Rep. Act No. 5502 sec. 91-A last paragraph that: xxx xxx xxx If any question involving any of the above matters should arise as an incident in any case pending in the ordinary court, said incident

415

shall be determined in the main case. xxx xxx xxx As held in the case of Divinagracia v. Rovira [G.R. No. L42615. August 10, 1976, 72 SCRA 307]: xxx xxx xxx It is true that under the aforequoted section 1 of Republic Act No. 4834 **** a case involving paternity and acknowledgment may be
ventilated as an incident in the intestate or testate proceeding (See Baluyot vs. Ines Luciano, L-42215, July 13, 1976). But that legal provision presupposes that such an administration proceeding is pending or existing and has not been terminated. [at pp. 313-314.] (Emphasis supplied.)

xxx xxx xxx The reason for ths rule is not only "to obviate the rendition of conflicting rulings on the same issue by the Court of First Instance and the Juvenile and Domestic Relations Court" [Vda. de Baluyut v. Luciano, G.R. No. L-42215, July 13, 1976, 72 SCRA 52, 63] but more importantly to prevent multiplicity of suits. Accordingly, this Court finds no reversible error committed by respondent court. WHEREFORE, the decision of the Court of Appeals is hereby

416

AFFIRMED. SO ORDERED.
Wildvalley v. CA

he petition is without merit. The primary issue to be determined is whether or not Venezuelan law is applicable to the case at bar. It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.[24] A distinction is to be made as to the manner of proving a written and an unwritten law. The former falls under Section 24, Rule 132 of the Rules of Court, as amended, the entire provision of which is quoted hereunder. Where the foreign law sought to be proved is "unwritten," the oral testimony of expert witnesses is admissible, as are printed and published books of reports of decisions of the courts of the country concerned if proved to be commonly admitted in such courts.[25] Section 24 of Rule 132 of the Rules of Court, as amended, provides:

417

"Sec. 24. Proof of official record. -- The record of public documents referred to in paragraph (a) of Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office." (Underscoring supplied) The court has interpreted Section 25 (now Section 24) to include competent evidence like the testimony of a witness to prove the existence of a written foreign law.[26] In the noted case of Willamette Iron & Steel Works vs. Muzzal,[27] it was held that: " Mr. Arthur W. Bolton, an attorney-at-law of San Francisco, California, since the year 1918 under oath, quoted verbatim section 322 of the California Civil Code and stated that said

418

section was in force at the time the obligations of defendant to the plaintiff were incurred, i.e. on November 5, 1928 and December 22, 1928. This evidence sufficiently established the fact that the section in question was the law of the State of California on the above dates. A reading of sections 300 and 301 of our Code of Civil Procedure will convince one that these sections do not exclude the presentation of other competent evidence to prove the existence of a foreign law. "`The foreign law is a matter of fact You ask the witness what the law is; he may, from his recollection, or on producing and referring to books, say what it is.' (Lord Campbell concurring in an opinion of Lord Chief Justice Denman in a well-known English case where a witness was called upon to prove the Roman laws of marriage and was permitted to testify, though he referred to a book containing the decrees of the Council of Trent as controlling, Jones on Evidence, Second Edition, Volume 4, pages 3148-3152.) x x x. We do not dispute the competency of Capt. Oscar Leon Monzon, the Assistant Harbor Master and Chief of Pilots at Puerto Ordaz, Venezuela,[28] to testify on the existence of the Reglamento General de la Ley de

419

Pilotaje (pilotage law of Venezuela)[29] and the Reglamento Para la Zona de Pilotaje No 1 del Orinoco (rules governing the navigation of the Orinoco River). Captain Monzon has held the aforementioned posts for eight years.[30] As such he is in charge of designating the pilots for maneuvering and navigating the Orinoco River. He is also in charge of the documents that come into the office of the harbour masters.[31] Nevertheless, we take note that these written laws were not proven in the manner provided by Section 24 of Rule 132 of the Rules of Court. The Reglamento General de la Ley de Pilotaje was published in the Gaceta Oficial[32]of the Republic of Venezuela. A photocopy of the Gaceta Oficial was presented in evidence as an official publication of the Republic of Venezuela. The Reglamento Para la Zona de Pilotaje No 1 del Orinoco is published in a book issued by the Ministerio de Comunicaciones of Venezuela.[33] Only a photocopy of the said rules was likewise presented as evidence. Both of these documents are considered in Philippine

420

jurisprudence to be public documents for they are the written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers of Venezuela.[34] For a copy of a foreign public document to be admissible, the following requisites are mandatory: (1) It must be attested by the officer having legal custody of the records or by his deputy; and (2) It must be accompanied by a certificate by a secretary of the embassy or legation, consul general, consul, vice consular or consular agent or foreign service officer, and with the seal of his office.[35] The latter requirement is not a mere technicality but is intended to justify the giving of full faith and credit to the genuineness of a document in a foreign country.[36] It is not enough that the Gaceta Oficial, or a book published by the Ministerio de Comunicaciones of Venezuela, was presented as evidence with Captain Monzon attesting it. It is also required by Section 24 of Rule 132 of the Rules of Court that a certificate that Captain Monzon, who attested the documents, is the officer who had legal custody of those records made by a secretary of the embassy or legation, consul general,

421

consul, vice consul or consular agent or by any officer in the foreign service of the Philippines stationed in Venezuela, and authenticated by the seal of his office accompanying the copy of the public document. No such certificate could be found in the records of the case. With respect to proof of written laws, parol proof is objectionable, for the written law itself is the best evidence. According to the weight of authority, when a foreign statute is involved, the best evidence rule requires that it be proved by a duly authenticated copy of the statute.[37] At this juncture, we have to point out that the Venezuelan law was not pleaded before the lower court. A foreign law is considered to be pleaded if there is an allegation in the pleading about the existence of the foreign law, its import and legal consequence on the event or transaction in issue.[38] A review of the Complaint[39] revealed that it was never alleged or invoked despite the fact that the grounding of the M/V Philippine Roxas occurred within the

422

territorial jurisdiction of Venezuela. We reiterate that under the rules of private international law, a foreign law must be properly pleaded and proved as a fact. In the absence of pleading and proof, the laws of a foreign country, or state, will be presumed to be the same as our own local or domestic law and this is known as processual presumption.[40] Having cleared this point, we now proceed to a thorough study of the errors assigned by the petitioner. Petitioner alleges that there was negligence on the part of the private respondent that would warrant the award of damages. There being no contractual obligation, the private respondent is obliged to give only the diligence required of a good father of a family in accordance with the provisions of Article 1173 of the New Civil Code, thus: Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows

423

bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. The diligence of a good father of a family requires only that diligence which an ordinary prudent man would exercise with regard to his own property. This we have found private respondent to have exercised when the vessel sailed only after the "main engine, machineries, and other auxiliaries" were checked and found to be in good running condition;[41] when the master left a competent officer, the officer on watch on the bridge with a pilot who is experienced in navigating the Orinoco River; when the master ordered the inspection of the vessel's double bottom tanks when the vibrations occurred anew.[42] The Philippine rules on pilotage, embodied in Philippine Ports Authority Administrative Order No. 03-85, otherwise known as the Rules and Regulations Governing Pilotage Services, the Conduct of Pilots and Pilotage

424

Fees in Philippine Ports enunciate the duties and responsibilities of a master of a vessel and its pilot, among other things. The pertinent provisions of the said administrative order governing these persons are quoted hereunder: Sec. 11. Control of Vessels and Liability for Damage. -- On compulsory pilotage grounds, the Harbor Pilot providing the service to a vessel shall be responsible for the damage caused to a vessel or to life and property at ports due to his negligence or fault. He can be absolved from liability if the accident is caused by force majeure or natural calamities provided he has exercised prudence and extra diligence to prevent or minimize the damage. The Master shall retain overall command of the vessel even on pilotage grounds whereby he can countermand or overrule the order or command of the Harbor Pilot on board. In such event, any damage caused to a vessel or to life and property at ports by reason of the fault or negligence of the Master shall be the responsibility and liability of the registered owner of the vessel concerned without prejudice to recourse against said Master.

425

Such liability of the owner or Master of the vessel or its pilots shall be determined by competent authority in appropriate proceedings in the light of the facts and circumstances of each particular case. x x x Sec. 32. Duties and Responsibilities of the Pilots or Pilots Association. -- The duties and responsibilities of the Harbor Pilot shall be as follows: x x x f) A pilot shall be held responsible for the direction of a vessel from the time he assumes his work as a pilot thereof until he leaves it anchored or berthed safely; Provided, however, that his responsibility shall cease at the moment the Master neglects or refuses to carry out his order." The Code of Commerce likewise provides for the obligations expected of a captain of a vessel, to wit: Art. 612. The following obligations shall be inherent in the office of captain:

426

x x x "7. To be on deck on reaching land and to take command on entering and leaving ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. x x x. The law is very explicit. The master remains the overall commander of the vessel even when there is a pilot on board. He remains in control of the ship as he can still perform the duties conferred upon him by law[43] despite the presence of a pilot who is temporarily in charge of the vessel. It is not required of him to be on the bridge while the vessel is being navigated by a pilot. However, Section 8 of PPA Administrative Order No. 03-85, provides: Sec. 8. Compulsory Pilotage Service - For entering a harbor and anchoring thereat, or passing through rivers or straits within a pilotage district, as well as docking and undocking at any pier/wharf, or shifting from one berth or another, every vessel engaged in coastwise and foreign trade shall be under compulsory pilotage.

427

xxx. The Orinoco River being a compulsory pilotage channel necessitated the engaging of a pilot who was presumed to be knowledgeable of every shoal, bank, deep and shallow ends of the river. In his deposition, pilot Ezzar Solarzano Vasquez testified that he is an official pilot in the Harbour at Port Ordaz, Venezuela,[44] and that he had been a pilot for twelve (12) years.[45] He also had experience in navigating the waters of the Orinoco River.[46] The law does provide that the master can countermand or overrule the order or command of the harbor pilot on board. The master of the Philippine Roxas deemed it best not to order him (the pilot) to stop the vessel,[47] mayhap, because the latter had assured him that they were navigating normally before the grounding of the vessel.[48] Moreover, the pilot had admitted that on account of his experience he was very familiar with the configuration of the river as well as the course headings, and that he does not even refer to river charts when navigating the Orinoco River.[49]

428

Based on these declarations, it comes as no surprise to us that the master chose not to regain control of the ship. Admitting his limited knowledge of the Orinoco River, Captain Colon relied on the knowledge and experience of pilot Vasquez to guide the vessel safely. Licensed pilots, enjoying the emoluments of compulsory pilotage, are in a different class from ordinary employees, for they assume to have a skill and a knowledge of navigation in the particular waters over which their licenses extend superior to that of the master; pilots are bound to use due diligence and reasonable care and skill. A pilot's ordinary skill is in proportion to the pilot's responsibilities, and implies a knowledge and observance of the usual rules of navigation, acquaintance with the waters piloted in their ordinary condition, and nautical skill in avoiding all known obstructions. The character of the skill and knowledge required of a pilot in charge of a vessel on the rivers of a country is very different from that which enables a navigator to carry a vessel safely in the ocean. On the ocean, a knowledge of the rules of navigation, with charts that disclose the places of hidden rocks, dangerous shores, or other dangers of the way, are the main elements of a pilot's knowledge and skill. But the pilot of a river vessel, like the harbor pilot, is

429

selected for the individual's personal knowledge of the topography through which the vessel is steered."[50] We find that the grounding of the vessel is attributable to the pilot. When the vibrations were first felt the watch officer asked him what was going on, and pilot Vasquez replied that "(they) were in the middle of the channel and that the vibration was as (sic) a result of the shallowness of the channel."[51] Pilot Ezzar Solarzano Vasquez was assigned to pilot the vessel Philippine Roxas as well as other vessels on the Orinoco River due to his knowledge of the same. In his experience as a pilot, he should have been aware of the portions which are shallow and which are not. His failure to determine the depth of the said river and his decision to plod on his set course, in all probability, caused damage to the vessel. Thus, we hold him as negligent and liable for its grounding. In the case of Homer Ramsdell Transportation Company vs. La Compagnie Generale Transatlantique, 182 U.S. 406, it was held that:

430

x x x The master of a ship, and the owner also, is liable for any injury done by the negligence of the crew employed in the ship. The same doctrine will apply to the case of a pilot employed by the master or owner, by whose negligence any injury happens to a third person or his property: as, for example, by a collision with another ship, occasioned by his negligence. And it will make no difference in the case that the pilot, if any is employed, is required to be a licensed pilot; provided the master is at liberty to take a pilot, or not, at his pleasure, for in such a case the master acts voluntarily, although he is necessarily required to select from a particular class. On the other hand, if it is compulsive upon the master to take a pilot, and, a fortiori, if he is bound to do so under penalty, then, and in such case, neither he nor the owner will be liable for injuries occasioned by the negligence of the pilot; for in such a case the pilot cannot be deemed properly the servant of the master or the owner, but is forced upon them, and the maxim Qui facit per alium facit per se does not apply." (Underscoring supplied) Anent the river passage plan, we find that, while there was none,[52] the voyage has been sufficiently planned and
monitored as shown by the following actions undertaken by the pilot, Ezzar Solarzano Vasquez, to wit: contacting the radio marina via VHF for information regarding the channel, river traffic,[53] soundings of the

431

river, depth of the river, bulletin on the buoys.[54] The officer on watch also monitored the voyage.[55]

We, therefore, do not find the absence of a river passage plan to be the cause for the grounding of the vessel. The doctrine of res ipsa loquitur does not apply to the case at bar because the circumstances surrounding the injury do not clearly indicate negligence on the part of the private respondent. For the said doctrine to apply, the following conditions must be met: (1) the accident was of such character as to warrant an inference that it would not have happened except for defendant's negligence; (2) the accident must have been caused by an agency or instrumentality within the exclusive management or control of the person charged with the negligence complained of; and (3) the accident must not have been due to any voluntary action or contribution on the part of the person injured.[56] As has already been held above, there was a temporary shift of control over the ship from the master of the vessel to the pilot on a compulsory pilotage channel. Thus, two of the requisites necessary for the doctrine to

432

apply, i.e., negligence and control, to render the respondent liable, are absent. As to the claim that the ship was unseaworthy, we hold that it is not. The Lloyds Register of Shipping confirmed the vessels seaworthiness in a Confirmation of Class issued on February 16, 1988 by finding that "the above named ship (Philippine Roxas) maintained the class "+100A1 Strengthened for Ore Cargoes, Nos. 2 and 8 Holds may be empty (CC) and +LMC" from 31/12/87 up until the time of casualty on or about 12/2/88."[57] The same would not have been issued had not the vessel been built according to the standards set by Lloyd's. Samuel Lim, a marine surveyor, at Lloyd's Register of Shipping testified thus:
"Q Now, in your opinion, as a surveyor, did top side tank have any bearing at all to the seaworthiness of the vessel? "A Well, judging on this particular vessel, and also basing on the class record of the vessel, wherein recommendations were made on the top side tank,

433

and it was given sufficient time to be repaired, it means that the vessel is fit to travel even with those defects on the ship. "COURT What do you mean by that? You explain. The vessel is fit to travel even with defects? Is that what you mean? Explain. "WITNESS "A Yes, your Honor. Because the class society which register (sic) is the third party looking into the condition of the vessel and as far as their record states, the vessel was class or maintained, and she is fit to travel during that voyage." x x x "ATTY. MISA Before we proceed to other matter, will you kindly tell us what is (sic) the 'class +100A1 Strengthened for Ore Cargoes', mean? "WITNESS

434

"A Plus 100A1 means that the vessel was built according to Lloyd's rules and she is capable of carrying ore bulk cargoes, but she is particularly capable of carrying Ore Cargoes with No. 2 and No. 8 holds empty. x x x "COURT The vessel is classed, meaning? "A Meaning she is fit to travel, your Honor, or seaworthy."[58]

It is not required that the vessel must be perfect. To be seaworthy, a ship must be reasonably fit to perform the services, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy.[59] As further evidence that the vessel was seaworthy, we quote the deposition of pilot Vasquez:
"Q Was there any instance when your orders or directions were not complied with because of the inability of the vessel to do so? "A No.

435

"Q. Was the vessel able to respond to all your commands and orders? "A. The vessel was navigating normally.[60]

Eduardo P. Mata, Second Engineer of the Philippine Roxas submitted an accident report wherein he stated that on February 11, 1988, he checked and prepared the main engine, machineries and all other auxiliaries and found them all to be in good running condition and ready for maneuvering. That same day the main engine, bridge and engine telegraph and steering gear motor were also tested.[61] Engineer Mata also prepared the fuel for consumption for maneuvering and checked the engine generators.[62] Finally, we find the award of attorneys fee justified. Article 2208 of the New Civil Code provides that: "Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: x x x

436

"(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. x x x Due to the unfounded filing of this case, the private respondent was unjustifiably forced to litigate, thus the award of attorneys fees was proper. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DENIED and the decision of the Court of Appeals in CA G.R. CV No. 36821 is AFFIRMED. SO ORDERED.
In re Estate of Suntay Dumez Company v. NLRC

Really long. Check transcript!

Petitioners are correct. The POEA Administrator, in finding petitioners liable to private respondent for medical benefits accruing to the latter under the Social Insurance Law of Saudi Arabia, took judicial notice of the said law. To this extent, the POEA Administrator's actuations are legally defensible. We have earlier ruled in Norse Management Co. (PTE) vs. National Seamen Board 12 that evidence is usually a
matter of procedure of which a mere quasi-judicial body is not strict about. Although in a long line of cases, we have ruled that a foreign

437

law, being a matter of evidence, must be alleged and proved, in order to be recognized and applied in a particular controversy involving conflicts of laws, jurisprudence on this matter was not meant to apply to cases before administrative or quasi-judicial bodies in the light of the well-settled rule that administrative and quasi-judicial bodies are not bound strictly by technical rules. 13 Nonetheless, only to this extent were the acts of the POEA Administrator amply supported by the law. Her actual application thereof, however, is starkly erroneous.

Section 6(a) of the Overseas Employment Agreement entered into and signed by the private parties herein, provides and "Workmen's Compensation insurance benefits will be provided within the limits of the compensation law of the host country." 14 That compensation
for disability was to be provided in accordance with the law of the host country, Saudi Arabia, is a necessary consequence of the compulsory coverage under the General Organization for Social Insurance Law of Saudi Arabia (hereafter, "GOSI Law of Saudi Arabia"), upon all workers, regardless of nationality, sex or age, who render their within the territory of Saudi Arabia by virtue of a labor contract.

Article 49 of the GOSI Law of Saudi Arabia provides that the General Organization shall pay to the beneficiaries the insurance compensation, the employer being under no obligation to pay any allowance to the insured or to his heirs unless the injury has been intentionally caused by the employer or the injury has occurred by reason of the latter's gross error or failure to abide by the GOSI Law or the rules relating to occupational health and safety. 15

438

Under the GOSI Law of Saudi Arabia as pleaded by petitioners clearly the obligation to pay medical benefits as compensation for work-related injury or illness, devolves upon the General Organization and not upon petitioners. Furthermore, after taking judicial notice of the GOSI Law of Saudi Arabia, the POEA Administrator considered the said law as one of a similar nature as that of our own compensation laws. Thus, in awarding the medical benefits to private respondent, she rationalized the same by quoting Article 166 of the Labor Code of the Philippines which provides that "the State shall promote and develop a tax-exempt employees' compensation program whereby employees . . . in the event of work-connected disability or death, may promptly secure adequate income benefit and medical or related benefits." Indeed, we may postulate further that the policies underlying our compensation laws and the GOSI Law of Saudi Arabia being similar, the nature thereof could not be so dissimilar. Suffice it to say that our own compensation program imposes on the employer nothing more than the obligation to remit monthly premiums to the State Insurance and it is the latter, not the employer, on which is laid the burden of compensating the employee for any disability; in fact, once the employer pays his share to the fund, all obligation on his part to his employees is ended. 16 No showing at all has
there been that petitioners had failed to comply with its obligations as employer under the GOSI Law of Saudi Arabia.

WHEREFORE, the petitioner for certiorari is GRANTED. The decision of the POEA Administrator and of the NLRC are hereby

439

ANNULLED and SET ASIDE. No pronouncement as to costs. SO ORDERED.

Asiavest v. CA Benedicto v. CA

Same
On the first issue, petitioners assail the jurisdiction of the Regional Trial Court. They aver that the dollar-salting charges filed against them were violations of the Anti-Graft Law or Republic Act No. 3019, and the Sandiganbayan has original and exclusive jurisdiction over their cases. Settled is the rule that the jurisdiction of a court to try a criminal case is determined by the law in force at the time the action is instituted.10 The 25 cases were filed in 1991-92. The applicable law on jurisdiction then was Presidential Decree 1601.11 Under P.D. No. 1606, offenses punishable by imprisonment of not more than six years fall within the jurisdiction of the regular trial courts, not the Sandiganbayan.12 In the instant case, all the Informations are for violations of Circular No. 960 in relation to Section 34 of the Central Bank Act and not, as petitioners insist, for transgressions of Republic Act No. 3019. Pursuant to Section 34 of Republic Act No. 265, violations of Circular No. 960 are punishable by imprisonment of not more than five years and a fine of not more than P20,000.00. Since under P.D. No. 1606 the Sandiganbayan has no jurisdiction to try criminal cases where the imposable penalty is less than six

440

years of imprisonment, the cases against petitioners for violations of Circular No. 960 are, therefore cognizable by the trial court. No error may thus be charged to the Court of Appeals when it held that the RTC of Manila had jurisdiction to hear and try the dollarsalting cases. Still on the first issue, petitioners next contend that the filing of the cases for violations of Circular No. 960 before the RTC of Manila Constitutes forum shopping. Petitioners argue that the prosecution, in an attempt to seek a favorable verdict from more than one tribunal, filed separate cases involving virtually the same offenses before the regular trial courts and the Sandiganbayan. They fault the prosecution with splitting the cases. Petitioners maintain that while the RTC cases refer only to the failure to report interest earnings on Treasury Notes, the Sandiganbayan cases seek to penalize the act of receiving the same interest earnings on Treasury Notes in violation of the Anti-Graft Laws provisions on prohibited transactions. Petitioners aver that the violation of Circular No. 960 is but an element of the offense of prohibited transactions punished under Republic Act No. 3019 and should, thus, be deemed absorbed by the prohibited transactions cases pending before the Sandiganbayan. For the charge of forum shopping to prosper, there must exist between an action pending in one court and another action pending in one court and another action before another court: (a) identity of parties, or at least such parties as represent the same

441

interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.13 Here, we find that the single act of receiving unreported interest earnings on Treasury Notes held abroad constitutes an offense against two or more distinct and unrelated laws, Circular No. 960 and R.A. 3019. Said laws define distinct offenses, penalize different acts, and can be applied independently.14 Hence, no fault lies at the prosecutions door for having instituted separate cases before separate tribunals involving the same subject matter. With respect to the RTC cases, the receipt of the interest earnings violate Circular No. 960 in relation to Republic Act No. 265 because the same was unreported to the Central Bank. The act to be penalized here is the failure to report the interest earnings from the foreign exchange accounts to the proper authority. As to the anti-graft cases before the Sandiganbayan involving the same interest earnings from the same foreign exchange accounts, the receipt of the interest earnings transgresses Republic Act No. 3019 because the act of receiving such interest is a prohibited transaction prejudicial to the government. What the State seeks to punish in these anti-graft cases is the prohibited receipt of the interest earnings. In sum, there is no identity of offenses charged,

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and prosecution under one law is not an obstacle to a prosecution under the other law. There is no forum shopping. Finally, on the first issue, petitioners contend that the preliminary investigation by the Department of Justice was invalid and in violation of their rights to due process. Petitioners argue that governments ban on their travel effectively prevented them from returning home and personally appearing at the preliminary investigation. Benedicto and Rivera further point out that the joint preliminary investigation by the Department of Justice, resulted to the charges in one set of cases before the Sandiganbayan for violations of Republic Act No. 3019 and another set before the RTC for violation of Circular No. 960. Preliminary investigation is not part of the due process guaranteed by the Constitution.15 It is an inquiry to determine whether there is sufficient ground to engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof.16 Instead, the right to a preliminary investigation is personal. It is afforded to the accused by statute, and can be waived, either expressly or by implication.17 The waiver extends to any irregularity in the preliminary investigation, where one was conducted. The petition in the present case contains the following admissions: 1. Allowed to return to the Philippines on September 19, 1993

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on the condition that he face the criminal charges pending in courts, petitioner-appellant Benedicto, joined by his co-petitioner Rivera, lost no time in attending to the pending criminal charges by posting bail in the above-mentioned cases. 2. Not having been afforded a real opportunity of attending the preliminary investigation because of their forced absence from the Philippines then, petitioners-appellants invoked their right to due process thru motions for preliminary investigation Upon denial of their demands for preliminary investigation, the petitioners intended to elevate the matter to the Honorable Court of Appeals and actually caused the filing of a petition for certiorari/prohibition sometime before their arraignment but immediately caused the withdrawal thereof in view of the prosecutions willingness to go to pre-trial wherein petitioner would be allowed access to the records of preliminary investigation which they could use for purposes of filing a motion to quash if warranted. 3. Thus, instead of remanding the Informations to the Department of Justice respondent Judge set the case for pre-trial in order to afford all the accused access to the records of prosecution xxx 5. On the basis of disclosures at the pre-trial, the petitionersappellants Benedicto and Rivera moved for the quashing of the

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informations/cases18 The foregoing admissions lead us to conclude that petitioners have expressly waived their right to question any supposed irregularity in the preliminary investigation or to ask for a new preliminary investigation. Petitioners, in the above excerpts from this petition, admit posting bail immediately following their return to the country, entered their respective pleas to the charges, and filed various motions and pleadings. By so doing, without simultaneously demanding a proper preliminary investigation, they have waived any and all irregularities in the conduct of a preliminary investigation.19 The trial court did not err in denying the motion to quash the informations on the ground of want of or improperly conducted preliminary investigation. The absence of a preliminary investigation is not a ground to quash the information.20 On the second issue, petitioners contend that they are being prosecuted for acts punishable under laws that have already been repealed. They point to the express repeal of Central Bank Circular No. 960 by Circular Nos. 1318 and 1353 as well as the express repeal of Republic Act No. 265 by Republic Act No. 7653. Petitioners, relying on Article 22 of the Revised Penal Code,21 contend that repeal has the effect of extinguishing the right to prosecute or punish the offense committed under the old laws.22 As a rule, an absolute repeal of a penal law has the effect of

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depriving a court of its authority to punish a person charged with violation of the old law prior to its repeal.23 This is because an unqualified repeal of a penal law constitutes a legislative act of rendering legal what had been previously declared as illegal, such that the offense no longer exists and it is as if the person who committed it never did so. There are, however, exceptions to the rule. One is the inclusion of a saving clause in the repealing statute that provides that the repeal shall have no effect on pending actions.24 Another exception is where the repealing act reenacts the former statute and punishes the act previously penalized under the old law. In such instance, the act committed before the reenactment continues to be an offense in the statute books and pending cases are not affected, regardless of whether the new penalty to be imposed is more favorable to the accused.25 In the instant case, it must be noted that despite the repeal of Circular No. 960, Circular No. 1353 retained the same reportorial requirement for residents receiving earnings or profits from nontrade foreign exchange transactions.26 Second, even the most cursory glance at the repealing circulars, Circular Nos. 1318 and 1353 shows that both contain a saving clause, expressly providing that the repeal of Circular No. 960 shall have no effect on pending actions for violation of the latter Circular.27 A saving clause operates to except from the effect of the repealing law what would otherwise be lost under the new law.28 In the present case, the respective saving clauses of Circular Nos. 1318 and 1353 clearly

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manifest the intent to reserve the right of the State to prosecute and punish offenses for violations of the repealed Circular No. 960, where the cases are either pending or under investigation. Petitioners, however, insist that the repeal of Republic Act No. 265, particularly Section 34,29 by Republic Act No. 7653, removed the applicability of any special sanction for violations of any nontrade foreign exchange transactions previously penalized by Circular No. 960. Petitioners posit that a comparison of the two provisions shows that Section 3630 of Republic Act No. 7653 neither retained nor reinstated Section 34 of Republic Act No. 265. Since, in creating the Bangko Sentral ng Pilipinas, Congress did not include in its charter a clause providing for the application of Section 34 of Republic Act No. 265 to pending cases, petitioners pending dollar-salting cases are now bereft of statutory penalty, the saving clause in Circular No. 1353 notwithstanding. In other words, absent a provision in Republic Act No. 7653 expressly reviving the applicability of any penal sanction for the repealed mandatory foreign exchange reporting regulations formerly required under Circular No. 960, violations of aforesaid repealed Circular can no longer be prosecuted criminally. A comparison of the old Central Bank Act and the new Bangko Sentrals charter repealing the former show that in consonance with the general objective of the old law and the new law "to maintain internal and external monetary stability in the Philippines and preserve the international value of the peso,"31 both the

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repealed law and the repealing statute contain a penal cause which sought to penalize in general, violations of the law as well as orders, instructions, rules, or regulations issued by the Monetary Board. In the case of the Bangko Sentral, the scope of the penal clause was expanded to include violations of "other pertinent banking laws enforced or implemented by the Bangko Sentral." In the instant case, the acts of petitioners sought to be penalized are violations of rules and regulations issued by the Monetary Board. These acts are proscribed and penalized in the penal clause of the repealed law and this proviso for proscription and penalty was reenacted in the repealing law. We find, therefore, that while Section 34 of Republic Act No. 265 was repealed, it was nonetheless, simultaneously reenacted in Section 36 of Republic Act No. 7653. Where a clause or provision or a statute for the matter is simultaneously repealed and reenacted, there is no effect, upon the rights and liabilities which have accrued under the original statute, since the reenactment, in effect "neutralizes" the repeal and continues the law in force without interruption.32 The rule applies to penal laws and statutes with penal provisions. Thus, the repeal of a penal law or provision, under which a person is charged with violation thereof and its simultaneous reenactment penalizing the same act done by him under the old law, will neither preclude the accuseds prosecution nor deprive the court of its jurisdiction to hear and try his case.33 As pointed out earlier, the act penalized before the reenactment continues to remain an offense and pending cases are unaffected.

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Therefore, the repeal of Republic Act No. 265 by Republic Act No. 7653 did not extinguish the criminal liability of petitioners for transgressions of Circular No. 960 and cannot, under the circumstances of this case, be made a basis for quashing the indictments against petitioners. Petitioners, however, point out that Section 36 of Republic Act No. 7653, in reenacting Section 34 of the old Central Act, increased the penalty for violations of rules and regulations issued by the Monetary Board. They claim that such increase in the penalty would give Republic Act No. 7653 an ex post facto application, violating the Bill of Rights.34 Is Section 36 of Republic Act No. 7653 and ex post facto legislation? An ex post facto law is one which: (1) makes criminal an act done before the passage of the law and which was innocent when done, and punishes such an act; (2) aggravates a crime, or makes it greater than it was when committed; (3) changes the punishment and inflicts a greater punishment than the law annexed to the crime when committed; (4) alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense; (5) assuming to regulate civil rights, and remedies only, in effect imposes penalty or deprivation of a right for something which when done was lawful; and (6) deprives a person accused of a

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crime of some lawful protection to which he has become entitled such as the protection of a former conviction or acquittal, or a proclamation of amnesty.35 The test whether a penal law runs afoul of the ex post facto clause of the Constitution is: Does the law sought to be applied retroactively take "from an accused any right that was regarded at the time of the adoption of the constitution as vital for the protection of life and liberty and which he enjoyed at the time of the commission of the offense charged against him."36 The crucial words in the test are "vital for the protection of life and liberty."37 We find, however, the test inapplicable to the penal clause of Republic Act No. 7653. Penal laws and laws which, while not penal in nature, nonetheless have provisions defining offenses and prescribing penalties for their violation operate prospectively.38 Penal laws cannot be given retroactive effect, except when they are favorable to the accused.39 Nowhere in Republic Act No. 7653, and in particular Section 36, is there any indication that the increased penalties provided therein were intended to operate retroactively. There is, therefore, no ex post facto law in this case. On the third issue, petitioners ask us to note that the dollar interest earnings subject of the criminal cases instituted against them were remitted to foreign banks on various dates between 1983 to 1987. They maintain that given the considerable lapse of time from the

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dates of the commission of the offenses to the institution of the criminal actions in 1991 and 1992, the States right to prosecute them for said offenses has already prescribed. Petitioners assert that the Court of Appeals erred in computing the prescriptive period from February 1986. Petitioners theorize that since the remittances were made through the Central Bank as a regulatory authority, the dates of the alleged violations are known, and prescription should thus be counted from these dates. In ruling that the dollar-salting cases against petitioners have not yet prescribed, the court a quo quoted with approval the trial courts finding that: [T]he alleged violations of law were discovered only after the EDSA Revolution in 1986 when the dictatorship was toppled down. The date of the discovery of the offense, therefore, should be the basis in computing the prescriptive period. Since (the) offenses charged are punishable by imprisonment of not more than five (5) years, they prescribe in eight (8) years. Thus, only a little more than four (4) years had elapsed from the date of discovery in 1986 when the cases were filed in 1991.40 The offenses for which petitioners are charged are penalized by Section 34 of Republic Act No. 265 "by a fine of not more than Twenty Thousand Pesos (P20,000.00) and by imprisonment of not more than five years." Pursuant to Act No. 3326, which mandates the periods of prescription for violations of special laws, the

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prescriptive period for violations of Circular No. 960 is eight (8) years.41 The period shall commence "to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and institution of judicial proceedings for its investigation and punishment."42 In the instant case, the indictments against petitioners charged them with having conspired with the late President Ferdinand E. Marcos in transgressing Circular No. 960. Petitioners contention that the dates of the commission of the alleged violations were known and prescription should be counted from these dates must be viewed in the context of the political realities then prevailing. Petitioners, as close associates of Mrs. Marcos, were not only protected from investigation by their influence and connections, but also by the power and authority of a Chief Executive exercising strong-arm rule. This Court has taken judicial notice of the fact that Mr. Marcos, his family, relations, and close associates "resorted to all sorts of clever schemes and manipulations to disguise and hide their illicit acquisitions."43 In the instant case, prescription cannot, therefore, be made to run from the dates of the commission of those offenses were not known as of those dates. It was only after the EDSA Revolution of February, 1986, that the recovery of illgotten wealth became a highly prioritized state policy,44 pursuant to the explicit command of the Provisional Constitution.45 To ascertain the relevant facts to recover "ill-gotten properties amassed by the leaders and supporters of the (Marcos) regime"46 various government agencies were tasked by the Aquino

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administration to investigate, and as the evidence on hand may reveal, file and prosecute the proper cases. Applying the presumption "that official duty has been regularly performed",47 we are more inclined to believe that the violations for which petitioners are charged were discovered only during the post-February 1986 investigations and the tolling of the prescriptive period should be counted from the dates of discovery of their commission. The criminal actions against petitioners, which gave rise to the instant case, were filed in 1991 and 1992, or well within the eight-year prescriptive period counted from February 1986. The fourth issue involves petitioners claim that they incurred no criminal liability for violations of Circular No. 960 since they were exempted from its coverage. Petitioners postulate that since the purchases of treasury notes were done through the Central Banks Securities Servicing Department and payments of the interest were coursed through its Securities Servicing Department/Foreign Exchange Department, their filing of reports would be surplusage, since the requisite information were already with the Central Bank. Furthermore, they contend that the foreign currency investment accounts in the Swiss banks were subject to absolute confidentiality as provided for by Republic Act No. 6426,48 as amended by Presidential Decree Nos. 1035, 1246, and 1453, and fell outside the ambit of the reporting requirements imposed by Circular No. 960. Petitioners further rely on the exemption from reporting provided

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for in Section 10(q),49 Circular No. 960, and the confidentiality granted to Swiss bank accounts by the laws of Switzerland. Petitioners correctly point out that Section 10(q) of Circular No. 960 exempts from the reporting requirement foreign currency eligible for deposit under the Philippine Foreign Exchange Currency Deposit System, pursuant to Republic Act No. 6426, as amended. But, in order to avail of the aforesaid exemption, petitioners must show that they fall within its scope. Petitioners must satisfy the requirements for eligibility imposed by Section 2, Republic Act No. 6426.50 Not only do we find the record bare of any proof to support petitioners claim of falling within the coverage of Republic Act No. 6426, we likewise find from a reading of Section 2 of the Foreign Currency Deposit Act that said law is inapplicable to the foreign currency accounts in question. Section 2, Republic Act No. 6426 speaks of "deposit with such Philippine banks in good standing, as maybe designated by the Central Bank for the purpose."51 The criminal cases filed against petitioners for violation of Circular No. 960 involve foreign currency accounts maintained in foreign banks, not Philippine banks. By invoking the confidentiality guarantees provided for by Swiss banking laws, petitioners admit such reports made. The rule is that exceptions are strictly construed and apply only so far as their language fairly warrants, with all doubts being resolved in favor of the general proviso rather than the exception.52 Hence, petitioners may not claim exemption under Section 10(q).

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With respect to the banking laws of Switzerland cited by petitioners, the rule is that Philippine courts cannot take judicial notice of foreign laws.53 Laws of foreign jurisdictions must be alleged and proved.54 Petitioners failed to prove the Swiss law relied upon, either by: (1) an official publication thereof; or (2) a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied by a certification from the secretary of the Philippine embassy or legation in such country or by the Philippine consul general, consul, vice-consul, or consular agent stationed in such country, or by any other authorized officer in the Philippine foreign service assigned to said country that such officer has custody.55 Absent such evidence, this Court cannot take judicial cognizance of the foreign law invoked by Benedicto and Rivera. Anent the fifth issue, petitioners insist that the government granted them absolute immunity under the Compromise Agreement they entered into with the government on November 3, 1990. Petitioners cite our decision in Republic v. Sandiganbayan, 226 SCRA 314 (1993), upholding the validity of the said Agreement and directing the various government agencies to be consistent with it. Benedicto and Rivera now insist that the absolute immunity from criminal investigation or prosecution granted to petitioner Benedicto, his family, as well as to officers and employees of firms owned or controlled by Benedicto under the aforesaid Agreement covers the suits filed for violations of Circular No. 960, which gave

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rise to the present case. The pertinent provisions of the Compromise Agreement read: WHEREAS, this Compromise Agreement covers the remaining claims and the cases of the Philippine Government against Roberto S. Benedicto including his associates and nominees, namely, Julita C. Benedicto, Hector T. Rivera, x x x WHEREAS, specifically these claims are the subject matter of the following cases (stress supplied): 1. Sandiganbayan Civil Case No. 9 2. Sandiganbayan Civil Case No. 24 3. Sandiganbayan Civil Case No. 34 4. Tanodbayan (Phil-Asia) 5. PCGG I.S. No. 1. xxx WHEREAS, following the termination of the United States and Swiss cases, and also without admitting the merits of their respective claims and counterclaims presently involved in uncertain, protracted and expensive litigation, the Republic of the

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Philippines, solely motivated by the desire for the immediate accomplishment of its recovery mission and Mr. Benedicto being interested to lead a peaceful and normal pursuit of his endeavors, the parties have decided to withdraw and/or dismiss their mutual claims and counterclaims under the cases pending in the Philippines, earlier referred to (underscoring supplied); xxx II. Lifting of Sequestrations, Extension of Absolute Immunity and Recognition of the Freedom to Travel a) The Government hereby lifts the sequestrations over the assets listed in Annex "C" hereof, the same being within the capacity of Mr. Benedicto to acquire from the exercise of his profession and conduct of business, as well as all the haciendas listed in his name in Negro Occidental, all of which were inherited by him or acquired with income from his inheritanceand all the other sequestered assets that belong to Benedicto and his corporation/nominees which are not listed in Annex "A" as ceded or to be ceded to the Government. Provided, however, (that) any asset(s) not otherwise settled or covered by this Compromise Agreement, hereinafter found and clearly established with finality by proper competent court as being held by Mr. Roberto S. Benedicto in trust for the family of the late Ferdinand E. Marcos, shall be returned or surrendered to the

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Government for appropriate custody and disposition. b) The Government hereby extends absolute immunity, as authorized under the pertinent provisions of Executive Orders Nos. 1, 2, 14 and 14-A, to Benedicto, the members of his family, officers and employees of his corporations above mentioned, who are included in past, present and future cases and investigations of the Philippine Government, such that there shall be no criminal investigation or prosecution against said persons for acts (or) omissions committed prior to February 25, 1986, that may be alleged to have violated any laws, including but not limited to Republic Act No. 3019, in relation to the acquisition of any asset treated, mentioned or included in this Agreement.
lawphil.net

x x x56 In construing contracts, it is important to ascertain the intent of the parties by looking at the words employed to project their intention. In the instant case, the parties clearly listed and limited the applicability of the Compromise Agreement to the cases listed or identified therein. We have ruled in another case involving the same Compromise Agreement that: [T]he subject matters of the disputed compromise agreement are Sandiganbayan Civil Case No. 0009, Civil Case No. 00234, Civil Case No. 0034, the Phil-Asia case before the Tanodbayan and PCGG I.S. No. 1. The cases arose from complaints for

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reconveyance, reversion, accounting, restitution, and damages against former President Ferdinand E. Marcos, members of his family, and alleged cronies, one of whom was respondent Roberto S. Benedicto.57 Nowhere is there a mention of the criminal cases filed against petitioners for violations of Circular No. 960. Conformably with Article 1370 of the Civil Code,58 the Agreement relied upon by petitioners should include only cases specifically mentioned therein. Applying the parol evidence rule,59 where the parties have reduced their agreement into writing, the contents of the writing constitute the sole repository of the terms of the agreement between the parties.60 Whatever is not found in the text of the Agreement should thus be construed as waived and abandoned.61 Scrutiny of the Compromise Agreement will reveal that it does not include all cases filed by the government against Benedicto, his family, and associates. Additionally, the immunity covers only "criminal investigation or prosecution against said persons for acts (or) omissions committed prior to February 25, 1986 that may be alleged to have violated any penal laws, including but not limited to Republic Act No. 3019, in relation to the acquisition of any asset treated, mentioned, or included in this Agreement."62 It is only when the criminal investigation or case involves the acquisition of any illgotten wealth "treated mentioned, or included in this Agreement"63 that petitioners may invoke immunity. The record is bereft of any

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showing that the interest earnings from foreign exchange deposits in banks abroad, which is the subject matter of the present case, are "treated, mentioned, or included" in the Compromise Agreement. The phraseology of the grant of absolute immunity in the Agreement precludes us from applying the same to the criminal charges faced by petitioners for violations of Circular No. 960. A contract cannot be construed to include matters distinct from those with respect to which the parties intended to contract.64 In sum, we find that no reversible error of law may be attributed to the Court of Appeals in upholding the orders of the trial court denying petitioners Motion to Quash the Informations in Criminal Case Nos. 91-101879 to 91-101883, 91-101884 to 91-101892, and 92-101959 to 92-101969. In our view, none of the grounds provided for in the Rules of Court65 upon which petitioners rely, finds applications in this case. On final matter. During the pendency of this petition, counsel for petitioner Roberto S. Benedicto gave formal notice to the Court that said petitioner died on May 15, 2000. The death of an accused prior to final judgment terminates his criminal liability as well as the civil liability based solely thereon.66 WHEREFORE, the instant petition is DISMISSED. The assailed consolidated Decision of the Court of Appeals dated May 23, 1996, in CA-G.R. SP No. 35928 and CA G.R. SP No. 35719, is AFFIRMED WITH MODIFICATION that the charges against

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deceased petitioner, Roberto S. Benedicto, particularly in Criminal Cases Nos. 91-101879 to 91-101883, 91-101884 to 101892, and 92-101959 to 92-101969, pending before the Regional Trial Court of Manila, Branch 26, are ordered dropped and that any criminal as well as civil liability ex delicto that might be attributable to him in the aforesaid cases are declared extinguished by reason of his death on May 15, 2000. No pronouncement as to costs.
lawphil.net

Manufacturers Hanover v. Guerrero

SO ORDERED. First, the Bank argues that in moving for partial summary judgment, it was entitled to use the Walden affidavit to prove that the stipulated foreign law bars the claims for consequential, moral, temperate, nominal and exemplary damages and attorneys fees. Consequently, outright dismissal by summary judgment of these claims is warranted. Second, the Bank claims that the Court of Appeals mixed up the requirements of Rule 35 on summary judgments and those of a trial on the merits in considering the Walden affidavit as "hearsay." The Bank points out that the Walden affidavit is not hearsay since Rule 35 expressly permits the use of affidavits. Lastly, the Bank argues that since Guerrero did not submit any opposing affidavit to refute the facts contained in the Walden affidavit, he failed to show the need for a trial on his claims for damages other than actual.

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The Courts Ruling The petition is devoid of merit. The Bank filed its motion for partial summary judgment pursuant to Section 2, Rule 34 of the old Rules of Court which reads: "Section 2. Summary judgment for defending party. A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits for a summary judgment in his favor as to all or any part thereof." A court may grant a summary judgment to settle expeditiously a case if, on motion of either party, there appears from the pleadings, depositions, admissions, and affidavits that no important issues of fact are involved, except the amount of damages. In such event, the moving party is entitled to a judgment as a matter of law.4 In a motion for summary judgment, the crucial question is: are the issues raised in the pleadings genuine, sham or fictitious, as shown by affidavits, depositions or admissions accompanying the motion?5 A genuine issue means an issue of fact which calls for the presentation of evidence as distinguished from an issue which is

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fictitious or contrived so as not to constitute a genuine issue for trial.6 A perusal of the parties respective pleadings would show that there are genuine issues of fact that necessitate formal trial. Guerreros complaint before the RTC contains a statement of the ultimate facts on which he relies for his claim for damages. He is seeking damages for what he asserts as "illegally withheld taxes charged against interests on his checking account with the Bank, a returned check worth US$18,000.00 due to signature verification problems, and unauthorized conversion of his account." In its Answer, the Bank set up its defense that the agreed foreign law to govern their contractual relation bars the recovery of damages other than actual. Apparently, facts are asserted in Guerreros complaint while specific denials and affirmative defenses are set out in the Banks answer. True, the court can determine whether there are genuine issues in a case based merely on the affidavits or counter-affidavits submitted by the parties to the court. However, as correctly ruled by the Court of Appeals, the Banks motion for partial summary judgment as supported by the Walden affidavit does not demonstrate that Guerreros claims are sham, fictitious or contrived. On the contrary, the Walden affidavit shows that the facts and material allegations as pleaded by the parties are disputed and there are substantial triable issues necessitating a

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formal trial. There can be no summary judgment where questions of fact are in issue or where material allegations of the pleadings are in dispute.7 The resolution of whether a foreign law allows only the recovery of actual damages is a question of fact as far as the trial court is concerned since foreign laws do not prove themselves in our courts.8 Foreign laws are not a matter of judicial notice.9 Like any other fact, they must be alleged and proven. Certainly, the conflicting allegations as to whether New York law or Philippine law applies to Guerreros claims present a clear dispute on material allegations which can be resolved only by a trial on the merits. Under Section 24 of Rule 132, the record of public documents of a sovereign authority or tribunal may be proved by (1) an official publication thereof or (2) a copy attested by the officer having the legal custody thereof. Such official publication or copy must be accompanied, if the record is not kept in the Philippines, with a certificate that the attesting officer has the legal custody thereof. The certificate may be issued by any of the authorized Philippine embassy or consular officials stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. The attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be, and must be under the official seal of the attesting officer.

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Certain exceptions to this rule were recognized in Asiavest Limited v. Court of Appeals10 which held that: "x x x: Although it is desirable that foreign law be proved in accordance with the above rule, however, the Supreme Court held in the case of Willamette Iron and Steel Works v. Muzzal, that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does not exclude the presentation of other competent evidence to prove the existence of a foreign law. In that case, the Supreme Court considered the testimony under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a section of California Civil Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish the existence of said law. Accordingly, in line with this view, the Supreme Court in the Collector of Internal Revenue v. Fisher et al., upheld the Tax Court in considering the pertinent law of California as proved by the respondents witness. In that case, the counsel for respondent "testified that as an active member of the California Bar since 1951, he is familiar with the revenue and taxation laws of the State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue Code as published in Derrings California Code, a publication of BancroftWhitney Co., Inc. And as part of his testimony, a full quotation of

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the cited section was offered in evidence by respondents." Likewise, in several naturalization cases, it was held by the Court that evidence of the law of a foreign country on reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is "satisfied of the authenticity of the written proof offered." Thus, in a number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese Consulate General of Manila was held to be competent proof of that law." (Emphasis supplied) The Bank, however, cannot rely on Willamette Iron and Steel Works v. Muzzal or Collector of Internal Revenue v. Fisher to support its cause. These cases involved attorneys testifying in open court during the trial in the Philippines and quoting the particular foreign laws sought to be established. On the other hand, the Walden affidavit was taken abroad ex parte and the affiant never testified in open court. The Walden affidavit cannot be considered as proof of New York law on damages not only because it is self-serving but also because it does not state the specific New York law on damages. We reproduce portions of the Walden affidavit as follows:
1a\^/phi 1.net

"3. In New York, "[n]ominal damages are damages in name only, trivial sums such as six cents or $1. Such damages are awarded both in tort and contract cases when the plaintiff establishes a cause of action against the defendant, but is unable to prove"

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actual damages. Dobbs, Law of Remedies, 3.32 at 294 (1993). Since Guerrero is claiming for actual damages, he cannot ask for nominal damages. 4. There is no concept of temperate damages in New York law. I have reviewed Dobbs, a well-respected treatise, which does not use the phrase "temperate damages" in its index. I have also done a computerized search for the phrase in all published New York cases, and have found no cases that use it. I have never heard the phrase used in American law. 5. The Uniform Commercial Code ("UCC") governs many aspects of a Banks relationship with its depositors. In this case, it governs Guerreros claim arising out of the non-payment of the $18,000 check. Guerrero claims that this was a wrongful dishonor. However, the UCC states that "justifiable refusal to pay or accept" as opposed to dishonor, occurs when a bank refuses to pay a check for reasons such as a missing indorsement, a missing or illegible signature or a forgery, 3-510, Official Comment 2. .. to the Complaint, MHT returned the check because it had no signature card on . and could not verify Guerreros signature. In my opinion, consistent with the UCC, that is a legitimate and justifiable reason not to pay. 6. Consequential damages are not available in the ordinary case of a justifiable refusal to pay. UCC 1-106 provides that "neither consequential or special or punitive damages may be had except

467

as specifically provided in the Act or by other rule of law". UCC 4103 further provides that consequential damages can be recovered only where there is bad faith. This is more restrictive than the New York common law, which may allow consequential damages in a breach of contract case (as does the UCC where there is a wrongful dishonor). 7. Under New York law, requests for lost profits, damage to reputation and mental distress are considered consequential damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif Construction Corp. v. Buffalo Savings Bank, 50 A.D.2d 718, 374 N.Y.S..2d 868, 869-70 (4th Dept 1975) damage to reputation); Dobbs, Law of Remedies 12.4(1) at 63 (emotional distress). 8. As a matter of New York law, a claim for emotional distress cannot be recovered for a breach of contract. Geler v. National Westminster Bank U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y. 1991); Pitcherello v. Moray Homes, Ltd., 150 A.D.2d 860,540 N.Y.S.2d 387, 390 (3d Dept 1989) Martin v. Donald Park Acres, 54 A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dept 1976). Damage to reputation is also not recoverable for a contract. Motif Construction Corp. v. Buffalo Savings Bank, 374 N.Y.S.2d at 869-70.
1a\^/phi 1.net

9. In cases where the issue is the breach of a contract to purchase stock, New York courts will not take into consideration the performance of the stock after the breach. Rather, damages will

468

be based on the value of the stock at the time of the breach, Aroneck v. Atkin, 90 A.D.2d 966, 456 N.Y.S.2d 558, 559 (4th Dept 1982), app. den. 59 N.Y.2d 601, 449 N.E.2d 1276, 463 N.Y.S.2d 1023 (1983). 10. Under New York law, a party can only get consequential damages if they were the type that would naturally arise from the breach and if they were "brought within the contemplation of parties as the probable result of the breach at the time of or prior to contracting." Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman v. Fargo, 223 N.Y. 32, 36 (1918). 11. Under New York law, a plaintiff is not entitled to attorneys fees unless they are provided by contract or statute. E.g., Geler v. National Westminster Bank, 770 F. Supp. 210, 213 (S.D.N.Y. 1991); Camatron Sewing Mach, Inc. v. F.M. Ring Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d 396 (1st Dept 1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577 N.Y.S.2d 280, 281 (1st Dept 1991). There is no statute that permits attorneys fees in a case of this type. 12. Exemplary, or punitive damages are not allowed for a breach of contract, even where the plaintiff claims the defendant acted with malice. Geler v. National Westminster Bank, 770 F.Supp. 210, 215 (S.D.N.Y. 1991); Catalogue Service of chester11_v. Insurance Co. of North America, 74 A.D.2d 837, 838, 425

469

N.Y.S.2d 635, 637 (2d Dept 1980); Senior v. Manufacturers Hanover Trust Co., 110 A.D.2d 833, 488 N.Y.S.2d 241, 242 (2d Dept 1985). 13. Exemplary or punitive damages may be recovered only where it is alleged and proven that the wrong supposedly committed by defendant amounts to a fraud aimed at the public generally and involves a high moral culpability. Walker v. Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223 N.Y.S.2d 488 (1961). 14. Furthermore, it has been consistently held under New York law that exemplary damages are not available for a mere breach of contract for in such a case, as a matter of law, only a private wrong and not a public right is involved. Thaler v. The North Insurance Company, 63 A.D.2d 921, 406 N.Y.S.2d 66 (1st Dept 1978)."12 The Walden affidavit states conclusions from the affiants personal interpretation and opinion of the facts of the case vis a vis the alleged laws and jurisprudence without citing any law in particular. The citations in the Walden affidavit of various U.S. court decisions do not constitute proof of the official records or decisions of the U.S. courts. While the Bank attached copies of some of the U.S. court decisions cited in the Walden affidavit, these copies do not comply with Section 24 of Rule 132 on proof of official records or decisions of foreign courts.

470

The Banks intention in presenting the Walden affidavit is to prove New York law and jurisprudence. However, because of the failure to comply with Section 24 of Rule 132 on how to prove a foreign law and decisions of foreign courts, the Walden affidavit did not prove the current state of New York law and jurisprudence. Thus, the Bank has only alleged, but has not proved, what New York law and jurisprudence are on the matters at issue. Next, the Bank makes much of Guerreros failure to submit an opposing affidavit to the Walden affidavit. However, the pertinent provision of Section 3, Rule 35 of the old Rules of Court did not make the submission of an opposing affidavit mandatory, thus: "SEC. 3. Motion and proceedings thereon. The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse party prior to the day of hearing may serve opposing affidavits. After the hearing, the judgment sought shall be rendered forthwith if the pleadings, depositions and admissions on file, together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Emphasis supplied) It is axiomatic that the term "may" as used in remedial law, is only permissive and not mandatory.13 Guerrero cannot be said to have admitted the averments in the

471

Banks motion for partial summary judgment and the Walden affidavit just because he failed to file an opposing affidavit. Guerrero opposed the motion for partial summary judgment, although he did not present an opposing affidavit. Guerrero may not have presented an opposing affidavit, as there was no need for one, because the Walden affidavit did not establish what the Bank intended to prove. Certainly, Guerrero did not admit, expressly or impliedly, the veracity of the statements in the Walden affidavit. The Bank still had the burden of proving New York law and jurisprudence even if Guerrero did not present an opposing affidavit. As the party moving for summary judgment, the Bank has the burden of clearly demonstrating the absence of any genuine issue of fact and that any doubt as to the existence of such issue is resolved against the movant.14 Moreover, it would have been redundant and pointless for Guerrero to submit an opposing affidavit considering that what the Bank seeks to be opposed is the very subject matter of the complaint. Guerrero need not file an opposing affidavit to the Walden affidavit because his complaint itself controverts the matters set forth in the Banks motion and the Walden affidavit. A party should not be made to deny matters already averred in his complaint. There being substantial triable issues between the parties, the courts a quo correctly denied the Banks motion for partial summary judgment. There is a need to determine by presentation

472

of evidence in a regular trial if the Bank is guilty of any wrongdoing and if it is liable for damages under the applicable laws. This case has been delayed long enough by the Banks resort to a motion for partial summary judgment. Ironically, the Bank has successfully defeated the very purpose for which summary judgments were devised in our rules, which is, to aid parties in avoiding the expense and loss of time involved in a trial. WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 24, 1998 and the Resolution dated December 14, 1998 of the Court of Appeals in CA-G.R. SP No. 42310 is AFFIRMED. SO ORDERED.
ATCI v. Echin Processual presumption Northwest Airlines v. CA Laureano v. CA Philippine Export v. Eusebio EDI-Staffbuilders v. NLRC

Same same Same Same

The Court's Ruling The petition lacks merit except with respect to Gran's failure to

473

furnish EDI with his Appeal Memorandum filed with the NLRC. First Issue: NLRC's Duty is to Require Respondent to Provide Petitioner a Copy of the Appeal Petitioner EDI claims that Gran's failure to furnish it a copy of the Appeal Memorandum constitutes a jurisdictional defect and a deprivation of due process that would warrant a rejection of the appeal. This position is devoid of merit. In a catena of cases, it was ruled that failure of appellant to furnish a copy of the appeal to the adverse party is not fatal to the appeal. In Estrada v. National Labor Relations Commission,24 this Court set aside the order of the NLRC which dismissed an appeal on the sole ground that the appellant did not furnish the appellee a memorandum of appeal contrary to the requirements of Article 223 of the New Labor Code and Section 9, Rule XIII of its Implementing Rules and Regulations. Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an appeal to the NLRC based on the ground that "there is no showing whatsoever that a copy of the appeal was served by the appellant on the appellee"25 was annulled. The

474

Court ratiocinated as follows: The failure to give a copy of the appeal to the adverse party was a mere formal lapse, an excusable neglect. Time and again We have acted on petitions to review decisions of the Court of Appeals even in the absence of proof of service of a copy thereof to the Court of Appeals as required by Section 1 of Rule 45, Rules of Court. We act on the petitions and simply require the petitioners to comply with the rule.26 (Emphasis supplied.) The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor Union-FFW v. National Labor Relations Commission,27 Pagdonsalan v. NLRC,28 and in Sunrise Manning Agency, Inc. v. NLRC.29 Thus, the doctrine that evolved from these cases is that failure to furnish the adverse party with a copy of the appeal is treated only as a formal lapse, an excusable neglect, and hence, not a jurisdictional defect. Accordingly, in such a situation, the appeal should not be dismissed; however, it should not be given due course either. As enunciated in J.D. Magpayo, the duty that is imposed on the NLRC, in such a case, is to require the appellant to comply with the rule that the opposing party should be provided with a copy of the appeal memorandum. While Gran's failure to furnish EDI with a copy of the Appeal Memorandum is excusable, the abject failure of the NLRC to order

475

Gran to furnish EDI with the Appeal Memorandum constitutes grave abuse of discretion. The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of the Appeal Memorandum. The NLRC then ordered Gran to present proof of service. In compliance with the order, Gran submitted a copy of Camp Crame Post Office's list of mail/parcels sent on April 7, 1998.30 The post office's list shows that private respondent Gran sent two pieces of mail on the same date: one addressed to a certain Dan O. de Guzman of Legaspi Village, Makati; and the other appears to be addressed to Neil B. Garcia (or Gran),31 of Ermita, Manilaboth of whom are not connected with petitioner. This mailing list, however, is not a conclusive proof that EDI indeed received a copy of the Appeal Memorandum. Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness of service in proceedings before the NLRC: Section 5.32 Proof and completeness of service.The return is prima facie proof of the facts indicated therein. Service by registered mail is complete upon receipt by the addressee or his agent; but if the addressee fails to claim his mail from the post office within five (5) days from the date of first notice of the postmaster, service shall take effect after such time. (Emphasis

476

supplied.) Hence, if the service is done through registered mail, it is only deemed complete when the addressee or his agent received the mail or after five (5) days from the date of first notice of the postmaster. However, the NLRC Rules do not state what would constitute proper proof of service. Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service: Section 13. Proof of service.Proof of personal service shall consist of a written admission of the party served or the official return of the server, or the affidavit of the party serving, containing a full statement of the date, place and manner of service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of the person mailing of facts showing compliance with section 7 of this Rule. If service is made by registered mail, proof shall be made by such affidavit and registry receipt issued by the mailing office. The registry return card shall be filed immediately upon its receipt by the sender, or in lieu thereof the unclaimed letter together with the certified or sworn copy of the notice given by the postmaster to the addressee (emphasis supplied). Based on the foregoing provision, it is obvious that the list submitted by Gran is not conclusive proof that he had served a

477

copy of his appeal memorandum to EDI, nor is it conclusive proof that EDI received its copy of the Appeal Memorandum. He should have submitted an affidavit proving that he mailed the Appeal Memorandum together with the registry receipt issued by the post office; afterwards, Gran should have immediately filed the registry return card. Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not have simply accepted the post office's list of mail and parcels sent; but it should have required Gran to properly furnish the opposing parties with copies of his Appeal Memorandum as prescribed in J.D. Magpayo and the other cases. The NLRC should not have proceeded with the adjudication of the case, as this constitutes grave abuse of discretion. The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a copy of the Appeal Memorandum before rendering judgment reversing the dismissal of Gran's complaint constitutes an evasion of the pertinent NLRC Rules and established jurisprudence. Worse, this failure deprived EDI of procedural due process guaranteed by the Constitution which can serve as basis for the nullification of proceedings in the appeal before the NLRC. One can only surmise the shock and dismay that OAB, EDI, and ESI experienced when they thought that the dismissal of Gran's complaint became final, only to receive a copy of Gran's Motion for Execution of Judgment which also informed

478

them that Gran had obtained a favorable NLRC Decision. This is not level playing field and absolutely unfair and discriminatory against the employer and the job recruiters. The rights of the employers to procedural due process cannot be cavalierly disregarded for they too have rights assured under the Constitution. However, instead of annulling the dispositions of the NLRC and remanding the case for further proceedings we will resolve the petition based on the records before us to avoid a protracted litigation.33 The second and third issues have a common matterwhether there was just cause for Gran's dismissalhence, they will be discussed jointly. Second and Third Issues: Whether Gran's dismissal is justifiable by reason of incompetence, insubordination, and disobedience In cases involving OFWs, the rights and obligations among and between the OFW, the local recruiter/agent, and the foreign employer/principal are governed by the employment contract. A contract freely entered into is considered law between the parties; and hence, should be respected. In formulating the contract, the parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not

479

contrary to law, morals, good customs, public order, or public policy.34 In the present case, the employment contract signed by Gran specifically states that Saudi Labor Laws will govern matters not provided for in the contract (e.g. specific causes for termination, termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern all matters relating to the termination of the employment of Gran. In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving the foreign law. The foreign law is treated as a question of fact to be properly pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is presumed to know only domestic or forum law.35 Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the International Law doctrine of presumed-identity approach or processual presumption comes into play.36 Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours.37 Thus, we apply Philippine labor laws in determining the issues presented before us. Petitioner EDI claims that it had proven that Gran was legally

480

dismissed due disobedience.

to

incompetence

and

insubordination

or

This claim has no merit. In illegal dismissal cases, it has been established by Philippine law and jurisprudence that the employer should prove that the dismissal of employees or personnel is legal and just. Section 33 of Article 277 of the Labor Code38 states that: ART. 277. MISCELLANEOUS PROVISIONS39 (b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the workers to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations

481

Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. x x x In many cases, it has been held that in termination disputes or illegal dismissal cases, the employer has the burden of proving that the dismissal is for just and valid causes; and failure to do so would necessarily mean that the dismissal was not justified and therefore illegal.40 Taking into account the character of the charges and the penalty meted to an employee, the employer is bound to adduce clear, accurate, consistent, and convincing evidence to prove that the dismissal is valid and legal.41 This is consistent with the principle of security of tenure as guaranteed by the Constitution and reinforced by Article 277 (b) of the Labor Code of the Philippines.42 In the instant case, petitioner claims that private respondent Gran was validly dismissed for just cause, due to incompetence and insubordination or disobedience. To prove its allegations, EDI submitted two letters as evidence. The first is the July 9, 1994 termination letter,43 addressed to Gran, from Andrea E. Nicolaou, Managing Director of OAB. The second is an unsigned April 11, 1995 letter44 from OAB addressed to EDI and ESI, which outlined the reasons why OAB had terminated Gran's employment. Petitioner claims that Gran was incompetent for the Computer Specialist position because he had "insufficient knowledge in

482

programming and zero knowledge of [the] ACAD system."45 Petitioner also claims that Gran was justifiably dismissed due to insubordination or disobedience because he continually failed to submit the required "Daily Activity Reports."46 However, other than the abovementioned letters, no other evidence was presented to show how and why Gran was considered incompetent, insubordinate, or disobedient. Petitioner EDI had clearly failed to overcome the burden of proving that Gran was validly dismissed. Petitioner's imputation of incompetence on private respondent due to his "insufficient knowledge in programming and zero knowledge of the ACAD system" based only on the above mentioned letters, without any other evidence, cannot be given credence. An allegation of incompetence should have a factual foundation. Incompetence may be shown by weighing it against a standard, benchmark, or criterion. However, EDI failed to establish any such bases to show how petitioner found Gran incompetent. In addition, the elements that must concur for the charge of insubordination or willful disobedience to prosper were not present. In Micro Sales Operation Network v. NLRC, we held that: For willful disobedience to be a valid cause for dismissal, the following twin elements must concur: (1) the employee's assailed

483

conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge.47 EDI failed to discharge the burden of proving Gran's insubordination or willful disobedience. As indicated by the second requirement provided for in Micro Sales Operation Network, in order to justify willful disobedience, we must determine whether the order violated by the employee is reasonable, lawful, made known to the employee, and pertains to the duties which he had been engaged to discharge. In the case at bar, petitioner failed to show that the order of the company which was violatedthe submission of "Daily Activity Reports"was part of Gran's duties as a Computer Specialist. Before the Labor Arbiter, EDI should have provided a copy of the company policy, Gran's job description, or any other document that would show that the "Daily Activity Reports" were required for submission by the employees, more particularly by a Computer Specialist. Even though EDI and/or ESI were merely the local employment or recruitment agencies and not the foreign employer, they should have adduced additional evidence to convincingly show that Gran's employment was validly and legally terminated. The burden devolves not only upon the foreign-based employer but also on the employment or recruitment agency for the latter is not

484

only an agent of the former, but is also solidarily liable with the foreign principal for any claims or liabilities arising from the dismissal of the worker.48 Thus, petitioner failed to prove that Gran was justifiably dismissed due to incompetence, insubordination, or willful disobedience. Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision, is not applicable to the present case. In Prieto, this Court ruled that "[i]t is presumed that before their deployment, the petitioners were subjected to trade tests required by law to be conducted by the recruiting agency to insure employment of only technically qualified workers for the foreign principal."50 The CA, using the ruling in the said case, ruled that Gran must have passed the test; otherwise, he would not have been hired. Therefore, EDI was at fault when it deployed Gran who was allegedly "incompetent" for the job. According to petitioner, the Prieto ruling is not applicable because in the case at hand, Gran misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he was not qualified for the job for which he was hired. We disagree.

485

The CA is correct in applying Prieto. The purpose of the required trade test is to weed out incompetent applicants from the pool of available workers. It is supposed to reveal applicants with false educational backgrounds, and expose bogus qualifications. Since EDI deployed Gran to Riyadh, it can be presumed that Gran had passed the required trade test and that Gran is qualified for the job. Even if there was no objective trade test done by EDI, it was still EDI's responsibility to subject Gran to a trade test; and its failure to do so only weakened its position but should not in any way prejudice Gran. In any case, the issue is rendered moot and academic because Gran's incompetency is unproved. Fourth Issue: Gran was not Afforded Due Process As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and regulations shall govern the relationship between Gran and EDI. Thus, our laws and rules on the requisites of due process relating to termination of employment shall apply. Petitioner EDI claims that private respondent Gran was afforded due process, since he was allowed to work and improve his capabilities for five months prior to his termination.51 EDI also claims that the requirements of due process, as enunciated in Santos, Jr. v. NLRC,52 and Malaya Shipping Services, Inc. v. NLRC,53 cited by the CA in its Decision, were properly observed in the present case.

486

This position is untenable. In Agabon v. NLRC,54 this Court held that: Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. Under the twin notice requirement, the employees must be given two (2) notices before their employment could be terminated: (1) a first notice to apprise the employees of their fault, and (2) a second notice to communicate to the employees that their employment is being terminated. In between the first and second notice, the employees should be given a hearing or opportunity to defend themselves personally or by counsel of their choice.55 A careful examination of the records revealed that, indeed, OAB's manner of dismissing Gran fell short of the two notice requirement. While it furnished Gran the written notice informing him of his

487

dismissal, it failed to furnish Gran the written notice apprising him of the charges against him, as prescribed by the Labor Code.56 Consequently, he was denied the opportunity to respond to said notice. In addition, OAB did not schedule a hearing or conference with Gran to defend himself and adduce evidence in support of his defenses. Moreover, the July 9, 1994 termination letter was effective on the same day. This shows that OAB had already condemned Gran to dismissal, even before Gran was furnished the termination letter. It should also be pointed out that OAB failed to give Gran the chance to be heard and to defend himself with the assistance of a representative in accordance with Article 277 of the Labor Code. Clearly, there was no intention to provide Gran with due process. Summing up, Gran was notified and his employment arbitrarily terminated on the same day, through the same letter, and for unjustified grounds. Obviously, Gran was not afforded due process. Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal damages as indemnity for violating the employee's right to statutory due process. Since OAB was in breach of the due process requirements under the Labor Code and its regulations, OAB, ESI, and EDI, jointly and solidarily, are liable to Gran in the amount of PhP 30,000.00 as indemnity. Fifth and Last Issue: Gran is Entitled to Backwages We reiterate the rule that with regard to employees hired for a

488

fixed period of employment, in cases arising before the effectivity of R.A. No. 804258 (Migrant Workers and Overseas Filipinos Act) on August 25, 1995, that when the contract is for a fixed term and the employees are dismissed without just cause, they are entitled to the payment of their salaries corresponding to the unexpired portion of their contract.59 On the other hand, for cases arising after the effectivity of R.A. No. 8042, when the termination of employment is without just, valid or authorized cause as defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term whichever is less.60 In the present case, the employment contract provides that the employment contract shall be valid for a period of two (2) years from the date the employee starts to work with the employer.61 Gran arrived in Riyadh, Saudi Arabia and started to work on February 7, 1994;62 hence, his employment contract is until February 7, 1996. Since he was illegally dismissed on July 9, 1994, before the effectivity of R.A. No. 8042, he is therefore entitled to backwages corresponding to the unexpired portion of his contract, which was equivalent to USD 16,150. Petitioner EDI questions the legality of the award of backwages and mainly relies on the Declaration which is claimed to have been freely and voluntarily executed by Gran. The relevant

489

portions of the Declaration are as follows: I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL SETTLEMENT ON THIS DATE THE AMOUNT OF: S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE HUNDRED FORTY EIGHT ONLY) REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I RENDERED TO OAB ESTABLISHMENT. I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY FAVOUR AFTER RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH. I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN WHATEVER FORM. I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY SIGNATURE VOLUNTARILY. SIGNED. ELEAZAR GRAN Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more particularly those executed by

490

employees. This requirement was clearly articulated by Chief Justice Artemio V. Panganiban in Land and Housing Development Corporation v. Esquillo: Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of workers should be strictly scrutinized to protect the weak and the disadvantaged. The waivers should be carefully examined, in regard not only to the words and terms used, but also the factual circumstances under which they have been executed.63 (Emphasis supplied.) This Court had also outlined in Land and Housing Development Corporation, citing Periquet v. NLRC,64 the parameters for valid compromise agreements, waivers, and quitclaims: Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized

491

as a valid and binding undertaking. (Emphasis supplied.) Is the waiver and quitclaim labeled a Declaration valid? It is not. The Court finds the waiver and quitclaim null and void for the following reasons: 1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is unreasonably low. As correctly pointed out by the court a quo, the payment of SR 2,948.00 is even lower than his monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less than the USD 16,150.00 which is the amount Gran is legally entitled to get from petitioner EDI as backwages. 2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for Gran's salary for the services he rendered to OAB as Computer Specialist. If the Declaration is a quitclaim, then the consideration should be much much more than the monthly salary of SR 3,190.00 (USD 850.00)although possibly less than the estimated Gran's salaries for the remaining duration of his contract and other benefits as employee of OAB. A quitclaim will understandably be lower than the sum total of the amounts and benefits that can possibly be awarded to employees or to be earned for the remainder of the contract period since it is a compromise where the employees will have to forfeit a certain portion of the amounts they are claiming in exchange for the early payment of a compromise amount. The court may however step in

492

when such amount is unconscionably low or unreasonable although the employee voluntarily agreed to it. In the case of the Declaration, the amount is unreasonably small compared to the future wages of Gran. 3. The factual circumstances surrounding the execution of the Declaration would show that Gran did not voluntarily and freely execute the document. Consider the following chronology of events: a. On July 9, 1994, Gran received a copy of his letter of termination; b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his plane ticket;65 c. On July 11, 1994, he signed the Declaration; d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and e. On July 21, 1994, Gran filed the Complaint before the NLRC. The foregoing events readily reveal that Gran was "forced" to sign the Declaration and constrained to receive the amount of SR 2,948.00 even if it was against his willsince he was told on July 10, 1994 to leave Riyadh on July 12, 1994. He had no other

493

choice but to sign the Declaration as he needed the amount of SR 2,948.00 for the payment of his ticket. He could have entertained some apprehensions as to the status of his stay or safety in Saudi Arabia if he would not sign the quitclaim. 4. The court a quo is correct in its finding that the Declaration is a contract of adhesion which should be construed against the employer, OAB. An adhesion contract is contrary to public policy as it leaves the weaker partythe employeein a "take-it-orleave-it" situation. Certainly, the employer is being unjust to the employee as there is no meaningful choice on the part of the employee while the terms are unreasonably favorable to the employer.66 Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under Philippine laws in the absence of proof of the applicable law of Saudi Arabia. In order to prevent disputes on the validity and enforceability of quitclaims and waivers of employees under Philippine laws, said agreements should contain the following: 1. A fixed amount as full and final compromise settlement; 2. The benefits of the employees if possible with the corresponding amounts, which the employees are giving up in

494

consideration of the fixed compromise amount; 3. A statement that the employer has clearly explained to the employee in English, Filipino, or in the dialect known to the employeesthat by signing the waiver or quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are due them under the law; and 4. A statement that the employees signed and executed the document voluntarily, and had fully understood the contents of the document and that their consent was freely given without any threat, violence, duress, intimidation, or undue influence exerted on their person. It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the employee. There should be two (2) witnesses to the execution of the quitclaim who must also sign the quitclaim. The document should be subscribed and sworn to under oath preferably before any administering official of the Department of Labor and Employment or its regional office, the Bureau of Labor Relations, the NLRC or a labor attach in a foreign country. Such official shall assist the parties regarding the execution of the quitclaim and waiver.67 This compromise settlement becomes final and binding under Article 227 of the Labor Code which provides that: [A]ny compromise settlement voluntarily agreed upon with the

495

assistance of the Bureau of Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties and the NLRC or any court "shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion. It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon to govern said contracts. Otherwise, the foreign laws shall apply. WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No. 56120 of the Court of Appeals affirming the January 15, 1999 Decision and September 30, 1999 Resolution of the NLRC is AFFIRMED with the MODIFICATION that petitioner EDIStaffbuilders International, Inc. shall pay the amount of PhP 30,000.00 to respondent Gran as nominal damages for noncompliance with statutory due process. No costs. SO ORDERED.

496

IV. Recognition and Enforcement of Foreign Judgments Won to enforce foreign judgment
Nagarmull v. Binalbagan The main issue to be resolved is whether or not the decision of the Tribunal of Arbitration of the Bengal Chamber of Commerce, as affirmed by the High Court of Judicature of Calcutta, is enforceable in the Philippines. For the purpose of this decision We shall assume that appellee contrary to appellant's contention has the right to sue in Philippine courts and that, as far as the instant case is concerned, it is not guilty of laches. This notwithstanding, We are constrained to reverse the appealed decision upon the ground that it is based upon a clear mistake of law and its enforcement will give rise to a patent injustice. It is true that under the provisions of Section 50 of Rule 39, Rules of Court, a judgment for a sum of money rendered by a foreign court "is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title", but when suit for its enforcement is brought in a Philippine court, said judgment "may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law

497

or fact" (Emphasis supplied.) Upon the facts of record, We are constrained to hold that the decision sought to be enforced was rendered upon a "clear mistake of law" and because of that it makes appellant an innocent party suffer the consequences of the default or breach of contract committed by appellee. There is no question at all that appellee was guilty of a breach of contract when it failed to deliver one-hundred fifty-four Hessian bales which, according to the contract entered into with appellant, should have been delivered to the latter in the months of July, August and September, all of the year 1949. It is equally clear beyond doubt that had these one-hundred fifty-four bales been delivered in accordance with the contract aforesaid, the increase in the export tax due upon them would not have been imposed because said increased export tax became effective only on October 1, 1949. To avoid its liability for the aforesaid increase in the export tax, appellee claims that appellant should be held liable therefor on the strength of its letter of September 29, 1949 asking appellee to ship the shortage. This argument is unavailing because it is not only illogical but contrary to known principles of fairness and justice. When appellant demanded that appellee deliver the shortage of 154 bales it did nothing more than to demand that to which it was entitled as a matter of right. The breach of contract committed by

498

appellee gave appellant, under the law and even under general principles of fairness, the right to rescind the contract or to ask for its specific performance, in either case with right to demand damages. Part of the damages appellant was clearly entitled to recover from appellee growing out of the latter's breach of the contract consists precisely of the amount of the increase decreed in the export tax due on the shortage which, because of appellee's fault, had to be delivered after the effectivity of the increased export tax. To the extent, therefore, that the decisions of the Tribunal of Arbitration of the Bengal Chamber of Commerce and of the High Court of Judicature of Calcutta fail to apply to the facts of this case fundamental principles of contract, the same may be impeached, as they have been sufficiently impeached by appellant, on the ground of "clear mistake of law". We agree in this regard with the majority opinion in Ingenohl vs. Walter E. Olsen & Co. (47 Phil. 189), although its view was reversed by the Supreme Court of the United States (273 U.S. 541, 71 L. ed. 762) which at that time had jurisdiction to review by certiorari decisions of this Court. We can not sanction a clear mistake of law that would work an obvious injustice upon appellant. WHEREFORE, the appealed judgment is reversed and set aside, with costs.

499

500

Northwest Airlines v. CA Philsec Investment v. CA Asiavest v. CA Philippine Aluminum v. FASGI

Same Same Same

Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a complaint for "enforcement of foreign judgment" in February 1983, before the Regional Trial Court, Branch 61, of Makati, Philippines. The Makati court, however, in an order of 11 September 1990, dismissed the case, thereby denying the enforcement of the foreign judgment within Philippine jurisdiction, on the ground that the decree was tainted with collusion, fraud, and clear mistake of law and fact.[11] The lower court ruled that the foreign judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered the return by PAWI of the purchase amount, no similar order was made requiring FASGI to return to PAWI the third and fourth containers of wheels.[12] This situation, the trial court maintained, amounted to an unjust enrichment on the part of FASGI. Furthermore, the trial court said, the supplemental settlement agreement and the subsequent

501

motion for entry of judgment upon which the California court had based its judgment were a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latter's authorization. FASGI appealed the decision of the trial court to the Court of Appeals. In a decision,[13] dated 30 July 1997, the appellate court reversed the decision of the trial court and ordered the full enforcement of the California judgment. Hence this appeal. Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of another country;[14] however, the rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.[15] In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the

502

immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment.[16] A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. Rule 39, section 48 of the Rules of Court of the Philippines provides: Sec. 48. Effect of foreign judgments or final orders - The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows:
xxxx

503

(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. In either case, the judgment or final order may be repelled by evidence a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc.,[17] one of the early Philippine cases on the enforcement of foreign judgments, this Court has ruled that a judgment for a sum of money rendered in a foreign court is presumptive evidence of a right between the parties and their successors-in-interest by subsequent title, but when suit for its enforcement is brought in a Philippine court, such judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. In Northwest Orient Airlines, Inc., vs. Court of Appeals,[18] the Court has said that a party attacking a foreign judgment is tasked with the burden of overcoming its presumptive validity.

504

PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle the action or subject matter of the litigation even when he honestly believes that such a settlement will best serve his client's interest.[19] In the instant case, the supplemental settlement agreement was signed by the parties, including Mr. Thomas Ready, on 06 October 1980. The agreement was lodged in the California case on 26 November 1980 or two (2) days after the pre-trial conference held on 24 November 1980. If Mr. Ready was indeed not authorized by PAWI to enter into the supplemental settlement agreement, PAWI could have forthwith signified to FASGI a disclaimer of the settlement. Instead, more than a year after the execution of the supplemental settlement agreement, particularly on 09 October 1981, PAWI President Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of the agreement when Mr. Rojas sought forbearance for the impending delay in the

505

opening of the first letter of credit under the schedule stipulated in the agreement. It is an accepted rule that when a client, upon becoming aware of the compromise and the judgment thereon, fails to promptly repudiate the action of his attorney, he will not afterwards be heard to complain about it.[20] Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly paying FASGI substantial amounts of damages and incurring heavy litigation expenses normally generated in a fullblown trial. PAWI, under the agreement was afforded time to reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its opportunity to enjoy the benefits of the agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations. PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental Settlement Agreement but denounced likewise his authority to enter into a stipulation for judgment before the California court on 06 August

506

1982 on the ground that it had by then already terminated the former's services. For his part, Mr. Ready admitted that while he did receive a request from Manuel Singson of PAWI to withdraw from the motion of judgment, the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr. Singson that under American Judicial Procedures when a motion for judgment had already been filed a counsel would not be permitted to withdraw unilaterally without a court order. From the time the stipulation for judgment was entered into on 26 April 1982 until the certificate of finality of judgment was issued by the California court on 07 September 1982, no notification was issued by PAWI to FASGI regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by Mr. Ready who purportedly acted in collusion with FASGI, it should have aptly raised the issue before the forum which issued the judgment in line with the principle of international comity that a court of another jurisdiction should refrain, as a matter of propriety and fairness, from so assuming the power of passing judgment on the correctness of the application of law and the evaluation of the facts of the judgment issued by

507

another tribunal.[21] Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where judgment is rendered,[22] or that which would go to the jurisdiction of the court or would deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious case or defense. In fine, intrinsic fraud, that is, fraud which goes to the very existence of the cause of action - such as fraud in obtaining the consent to a contract - is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment.[23] Even while the US judgment was against both FPS and PAWI, FASGI had every right to seek enforcement of the judgment solely against PAWI or, for that matter, only against FPS. FASGI, in its complaint, explained: "17. There exists, and at all times relevant herein there existed, a unity of interest and ownership between defendant PAWI and defendant FPS, in that they are owned and controlled by the same shareholders and managers, such that any individuality

508

and separateness between these defendants has ceased, if it ever existed, and defendant FPS is the alter ego of defendant PAWI. The two entities are used interchangeably by their shareholders and managers, and plaintiff has found it impossible to ascertain with which entity it is dealing at any one time. Adherence to the fiction of separate existence of these defendant corporations would permit an abuse of the corporate privilege and would promote injustice against this plaintiff because assets can easily be shifted between the two companies thereby frustrating plaintiff's attempts to collect on any judgment rendered by this Court."[24] Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and FPS to be "joint and several" or solidary. The enforcement of the judgment against PAWI alone would not, of course, preclude it from pursuing and recovering whatever contributory liability FPS might have pursuant to their own agreement. PAWI would argue that it was incumbent upon FASGI to first return the second and the third containers of defective wheels before it could be required to return to FASGI the purchase price therefor,[25] relying on their original agreement (the "Transaction").[26] Unfortunately,

509

PAWI defaulted on its covenants thereunder that thereby occasioned the subsequent execution of the supplemental settlement agreement. This time the parties agreed, under paragraph 3.4(e)[27] thereof, that any further default by PAWI would release FASGI from any obligation to maintain, store or deliver the rejected wheels. The supplemental settlement agreement evidently superseded, at the very least on this point, the previous arrangements made by the parties. PAWI cannot, by this petition for review, seek refuge over a business dealing and decision gone awry. Neither do the courts function to relieve a party from the effects of an unwise or unfavorable contract freely entered into. As has so aptly been explained by the appellate court, the over-all picture might, indeed, appear to be onerous to PAWI but it should bear emphasis that the settlement which has become the basis for the foreign judgment has not been the start of a business venture but the end of a failed one, and each party, naturally, has had to negotiate from either position of strength or weakness depending on its own perception of who might have to bear the blame for the failure and the consequence of loss.[28]

510

Altogether, the Court finds no reversible error on the part of the appellate court in its appealed judgment. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No costs.
SO ORDERED.

511

Manufacturers Hanover v. Guerrero St. Aviation v. Grand Air Korea Technologies v. Lerma

same Same The Courts Ruling The petition is partly meritorious. Before we delve into the substantive issues, we shall first tackle the procedural issues. The rules on the payment of docket fees for counterclaims and cross claims were amended effective August 16, 2004 KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect. We disagree with KOGIES. As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, "A compulsory counterclaim or

512

a cross-claim that a defending party has at the time he files his answer shall be contained therein." On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims. As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an initiatory pleading which requires a certification against forum shopping under Sec. 524 of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit reversible error in denying KOGIES motion to dismiss PGSMCs compulsory counterclaims. Interlocutory orders proper subject of certiorari Citing Gamboa v. Cruz,25 the CA also pronounced that "certiorari and Prohibition are neither the remedies to question the propriety of an interlocutory order of the trial court."26 The CA erred on its reliance on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal case which was not assailable in an action for certiorari since the denial of a motion to quash required the accused to plead and to continue with the trial, and whatever

513

objections the accused had in his motion to quash can then be used as part of his defense and subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The general rule is that interlocutory orders cannot be challenged by an appeal.27 Thus, in Yamaoka v. Pescarich Manufacturing Corporation, we held: The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits, incorporating in said appeal the grounds for assailing the interlocutory orders. Allowing appeals from interlocutory orders would result in the sorry spectacle of a case being subject of a counterproductive ping-pong to and from the appellate court as often as a trial court is perceived to have made an error in any of its interlocutory rulings. However, where the assailed interlocutory order was issued with grave abuse of discretion or patently erroneous and the remedy of appeal would not afford adequate and expeditious relief, the Court allows certiorari as a mode of redress.28 Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions. Thus, where the interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion, the remedy is certiorari.29 The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two assailed orders coupled with the fact that there is no plain, speedy, and

514

adequate remedy in the ordinary course of law amply provides the basis for allowing the resort to a petition for certiorari under Rule 65. Prematurity of the petition before the CA Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note that KOGIES motion for reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Thus, KOGIES only remedy was to assail the RTCs interlocutory order via a petition for certiorari under Rule 65. While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating to the inspection of things, and the allowance of the compulsory counterclaims has not yet been resolved, the circumstances in this case would allow an exception to the rule that before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said motion should have been first resolved by the court a quo. The reason behind the rule is "to enable the lower court, in the first instance, to pass upon and correct its mistakes without the intervention of the higher court."30 The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities when he is not competent and knowledgeable on said matters is evidently flawed

515

and devoid of any legal support. Moreover, there is an urgent necessity to resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KOGIES. Indeed, there is real and imminent threat of irreparable destruction or substantial damage to KOGIES equipment and machineries. We find the resort to certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2, 1998 motion for reconsideration to be proper. The Core Issue: Article 15 of the Contract We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It provides: Article 15. Arbitration.All disputes, controversies, or differences which may arise between the parties, out of or in relation to or in connection with this Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award rendered by the arbitration(s) shall be final and binding upon both parties concerned. (Emphasis supplied.) Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.

516

Petitioner is correct. Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040." (Emphasis supplied.) Arts. 2038,31 2039,32 and 204033 abovecited refer to instances where a compromise or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043,34 may be voided, rescinded, or annulled, but these would not denigrate the finality of the arbitral award. The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been shown to be contrary to any law, or against morals, good customs, public order, or public policy. There has been no showing that the parties have not dealt with each other on equal footing. We find no reason why the arbitration clause should not be respected and complied with by both parties. In Gonzales v. Climax Mining Ltd.,35 we held that submission to arbitration is a contract and that a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract.36 Again in Del Monte Corporation-USA v.

517

Court of Appeals, we likewise ruled that "[t]he provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract."37 Arbitration clause not contrary to public policy The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,38 this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this jurisdiction, arbitration has been held valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on arbitration."39 And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we declared that: Being an inexpensive, speedy and amicable method of settling disputes, arbitrationalong with mediation, conciliation and negotiationis encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution

518

of disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward. Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.40 Having said that the instant arbitration clause is not against public policy, we come to the question on what governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award shall be final and binding. RA 9285 incorporated the UNCITRAL Model law to which we are a signatory For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules of the UNCITRAL Model Law on

519

International Commercial Arbitration41 of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itself to be bound by the Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions: CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION SEC. 19. Adoption of the Model Law on International Commercial Arbitration.International commercial arbitration shall be governed by the Model Law on International Commercial Arbitration (the "Model Law") adopted by the United Nations Commission on International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto attached as Appendix "A". SEC. 20. Interpretation of Model Law.In interpreting the Model Law, regard shall be had to its international origin and to the need for uniformity in its interpretation and resort may be made to the

520

travaux preparatories and the report of the Secretary General of the United Nations Commission on International Trade Law dated March 25, 1985 entitled, "International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264." While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law which has a retroactive effect. Likewise, KOGIES filed its application for arbitration before the KCAB on July 1, 1998 and it is still pending because no arbitral award has yet been rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive application of procedural laws does not violate any personal rights because no vested right has yet attached nor arisen from them.42 Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following: (1) The RTC must refer to arbitration in proper cases Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such

521

cases, thus: SEC. 24. Referral to Arbitration.A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. (2) Foreign arbitral awards must be confirmed by the RTC Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are not immediately enforceable or cannot be implemented immediately. Sec. 3543 of the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus: SEC. 42. Application of the New York Convention.The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. The recognition and enforcement of such arbitral awards shall be

522

filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages. The applicant shall establish that the country in which foreign arbitration award was made in party to the New York Convention. xxxx SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention.The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity, recognize and enforce a nonconvention award as a convention award. SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court.

523

A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines xxxx SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an arbitration agreement or for vacations, setting aside, correction or modification of an arbitral award, and any application with a court for arbitration assistance and supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at the option of the applicant. SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and enforcement of an arbitral award, the Court shall send notice to the parties at their address of record in the arbitration, or if any part cannot be served notice at such address, at such partys last known address. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing of the application. It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign court but as a

524

foreign arbitral award, and when confirmed, are enforced as final and executory decisions of our courts of law. Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by some of our quasi-judicial bodies, like the National Labor Relations Commission and Mines Adjudication Board, whose final judgments are stipulated to be final and binding, but not immediately executory in the sense that they may still be judicially reviewed, upon the instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the RTC. (3) The RTC has jurisdiction to review foreign arbitral awards Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide: SEC. 42. Application of the New York Convention.The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said

525

procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages. The applicant shall establish that the country in which foreign arbitration award was made is party to the New York Convention. If the application for rejection or suspension of enforcement of an award has been made, the Regional Trial Court may, if it considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security. xxxx SEC. 45. Rejection of a Foreign Arbitral Award.A party to a foreign arbitration proceeding may oppose an application for recognition and enforcement of the arbitral award in accordance with the procedures and rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised shall be disregarded by the Regional Trial Court. Thus, while the RTC does not have jurisdiction over disputes

526

governed by arbitration mutually agreed upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to judicial review on specific grounds provided for. (4) Grounds for judicial review different in domestic and foreign arbitral awards The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards. For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law. For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 87644 and shall be recognized as final and executory decisions of the RTC,45 they

527

may only be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.46 (5) RTC decision of assailed foreign arbitral award appealable Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus: SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme Court. The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court. Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of the Rules of Court. PGSMC has remedies to protect its interests

528

Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the subject contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced. With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285. Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause. Unilateral rescission improper and illegal Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary to public policy; consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or terminate the contract for whatever

529

cause without first resorting to arbitration. What this Court held in University of the Philippines v. De Los Angeles47 and reiterated in succeeding cases,48 that the act of treating a contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be judicially assailed, is not applicable to the instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial action. The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and installed were properly installed and operational in the plant in Carmona, Cavite; the ownership of equipment and payment of the contract price; and whether there was substantial compliance by KOGIES in the production of the samples, given the alleged fact that PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are matters proper for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.

530

Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for Inspection of Things on September 21, 1998, as the subject matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body, the KCAB in Korea. In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual status of the equipment and machineries as installed in the plant. For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant of the inspection of the equipment and machineries have to be recalled and nullified. Issue on ownership of plant proper for arbitration Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a Petition for Certiorari. Petitioners position is untenable. It is settled that questions of fact cannot be raised in an original action for certiorari.49 Whether or not there was full payment for the machineries and equipment and installation is indeed a factual

531

issue prohibited by Rule 65. However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue. The RTCs determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside. RTC has interim jurisdiction to protect the rights of the parties Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the equipment and machineries, we find it to be in order considering the factual milieu of the instant case. Firstly, while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties. Sec. 28 pertinently provides: SEC. 28. Grant of interim Measure of Protection.(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court to grant such measure. After constitution of the arbitral tribunal and

532

during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the arbitral or to the extent that the arbitral tribunal has no power to act or is unable to act effectivity, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request. (b) The following rules on interim or provisional relief shall be observed: Any party may request that provisional relief be granted against the adverse party. Such relief may be granted: (i) to prevent irreparable loss or injury; (ii) to provide security for the performance of any obligation; (iii) to produce or preserve any evidence; or (iv) to compel any other appropriate act or omission. (c) The order granting provisional relief may be conditioned upon

533

the provision of security or any act or omission specified in the order. (d) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief, the party against whom the relief is requested, the grounds for the relief, and the evidence supporting the request. (e) The order shall be binding upon the parties. (f) Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an arbitral tribunal. (g) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all expenses, and reasonable attorney's fees, paid in obtaining the orders judicial enforcement. (Emphasis ours.) Art. 17(2) of the UNCITRAL Model Law on ICA defines an "interim measure" of protection as: Article 17. Power of arbitral tribunal to order interim measures

534

xxx xxx xxx (2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to: (a) Maintain or restore the status quo pending determination of the dispute; (b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or (d) Preserve evidence that may be relevant and material to the resolution of the dispute. Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures: Article 17 J. Court-ordered interim measures A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their

535

place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration. In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even "the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs." We explicated this way: As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, allows the application of a party to a judicial authority for interim or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the "Alternative Dispute Resolution Act of 2004," allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively.50 It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection. Secondly, considering that the equipment and machineries are in

536

the possession of PGSMC, it has the right to protect and preserve the equipment and machineries in the best way it can. Considering that the LPG plant was non-operational, PGSMC has the right to dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make good use of them which is ineluctably within the management discretion of PGSMC. Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worths property is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant. Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged. Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our

537

jurisdiction through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES. PGSMC to preserve the subject equipment and machineries Finally, while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, it does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family51 until final resolution of the arbitral proceedings and enforcement of the award, if any. WHEREFORE, this petition is PARTLY GRANTED, in that: (1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE; (2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117 are REVERSED and SET ASIDE; (3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and differences arising from the subject Contract before the KCAB; and

538

(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had not done so, and ORDERED to preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings. No pronouncement as to costs. SO ORDERED.

539

Corpus v. Sto. Tomas

THE PETITION From the RTCs ruling,12 Gerbert filed the present petition.13 Gerbert asserts that his petition before the RTC is essentially for declaratory relief, similar to that filed in Orbecido; he, thus, similarly asks for a determination of his rights under the second paragraph of Article 26 of the Family Code. Taking into account the rationale behind the second paragraph of Article 26 of the Family Code, he contends that the provision applies as well to the benefit of the alien spouse. He claims that the RTC ruling unduly stretched the doctrine in Orbecido by limiting the standing to file the petition only to the Filipino spouse an interpretation he claims to be contrary to the essence of the second paragraph of Article 26 of the Family Code. He considers himself as a proper party, vested with sufficient legal interest, to institute the case, as there is a possibility that he might be prosecuted for bigamy if he marries his Filipina fiance in the Philippines since two marriage certificates, involving him, would be on file with the Civil Registry Office. The Office of the Solicitor General and Daisylyn, in their respective Comments,14 both support Gerberts position. Essentially, the petition raises the issue of whether the second paragraph of Article 26 of the Family Code extends to aliens the right to petition a court of this jurisdiction for the recognition of a foreign divorce decree.

540

THE COURTS RULING The alien spouse can claim no right under the second paragraph of Article 26 of the Family Code as the substantive right it establishes is in favor of the Filipino spouse The resolution of the issue requires a review of the legislative history and intent behind the second paragraph of Article 26 of the Family Code. The Family Code recognizes only two types of defective marriages void15 and voidable16 marriages. In both cases, the basis for the judicial declaration of absolute nullity or annulment of the marriage exists before or at the time of the marriage. Divorce, on the other hand, contemplates the dissolution of the lawful union for cause arising after the marriage.17 Our family laws do not recognize absolute divorce between Filipino citizens.18 Recognizing the reality that divorce is a possibility in marriages between a Filipino and an alien, President Corazon C. Aquino, in the exercise of her legislative powers under the Freedom Constitution,19 enacted Executive Order No. (EO) 227, amending Article 26 of the Family Code to its present wording, as follows: Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this

541

country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38. Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law. Through the second paragraph of Article 26 of the Family Code, EO 227 effectively incorporated into the law this Courts holding in Van Dorn v. Romillo, Jr.20 and Pilapil v. Ibay-Somera.21 In both cases, the Court refused to acknowledge the alien spouses assertion of marital rights after a foreign courts divorce decree between the alien and the Filipino. The Court, thus, recognized that the foreign divorce had already severed the marital bond between the spouses. The Court reasoned in Van Dorn v. Romillo that: To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still married to [the alien spouse] and still subject to a wife's obligations x x x cannot be just. [The Filipino spouse] should not be obliged to live together with, observe respect and fidelity, and render support to [the alien spouse]. The latter should not continue to be one of her heirs with possible rights to conjugal property. She should not be discriminated against in her own

542

country if the ends of justice are to be served.22 As the RTC correctly stated, the provision was included in the law "to avoid the absurd situation where the Filipino spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino spouse."23 The legislative intent is for the benefit of the Filipino spouse, by clarifying his or her marital status, settling the doubts created by the divorce decree. Essentially, the second paragraph of Article 26 of the Family Code provided the Filipino spouse a substantive right to have his or her marriage to the alien spouse considered as dissolved, capacitating him or her to remarry.24 Without the second paragraph of Article 26 of the Family Code, the judicial recognition of the foreign decree of divorce, whether in a proceeding instituted precisely for that purpose or as a related issue in another proceeding, would be of no significance to the Filipino spouse since our laws do not recognize divorce as a mode of severing the marital bond;25 Article 17 of the Civil Code provides that the policy against absolute divorces cannot be subverted by judgments promulgated in a foreign country. The inclusion of the second paragraph in Article 26 of the Family Code provides the direct exception to this rule and serves as basis for recognizing the dissolution of the marriage between the Filipino spouse and his or her alien spouse. Additionally, an action based on the second paragraph of Article 26 of the Family Code is not limited to the recognition of the foreign divorce decree. If the court finds that the decree

543

capacitated the alien spouse to remarry, the courts can declare that the Filipino spouse is likewise capacitated to contract another marriage. No court in this jurisdiction, however, can make a similar declaration for the alien spouse (other than that already established by the decree), whose status and legal capacity are generally governed by his national law.26 Given the rationale and intent behind the enactment, and the purpose of the second paragraph of Article 26 of the Family Code, the RTC was correct in limiting the applicability of the provision for the benefit of the Filipino spouse. In other words, only the Filipino spouse can invoke the second paragraph of Article 26 of the Family Code; the alien spouse can claim no right under this provision. The foreign divorce decree is presumptive evidence of a right that clothes the party with legal interest to petition for its recognition in this jurisdiction We qualify our above conclusion i.e., that the second paragraph of Article 26 of the Family Code bestows no rights in favor of aliens with the complementary statement that this conclusion is not sufficient basis to dismiss Gerberts petition before the RTC. In other words, the unavailability of the second paragraph of Article 26 of the Family Code to aliens does not necessarily strip Gerbert of legal interest to petition the RTC for the recognition of his foreign divorce decree. The foreign divorce decree itself, after its

544

authenticity and conformity with the aliens national law have been duly proven according to our rules of evidence, serves as a presumptive evidence of right in favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments. This Section states: SEC. 48. Effect of foreign judgments or final orders.The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: (a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title of the thing; and (b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. To our mind, direct involvement or being the subject of the foreign judgment is sufficient to clothe a party with the requisite interest to institute an action before our courts for the recognition of the foreign judgment. In a divorce situation, we have declared, no less, that the divorce obtained by an alien abroad may be

545

recognized in the Philippines, provided the divorce is valid according to his or her national law.27 The starting point in any recognition of a foreign divorce judgment is the acknowledgment that our courts do not take judicial notice of foreign judgments and laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of another country."28 This means that the foreign judgment and its authenticity must be proven as facts under our rules on evidence, together with the aliens applicable national law to show the effect of the judgment on the alien himself or herself.29 The recognition may be made in an action instituted specifically for the purpose or in another action where a party invokes the foreign decree as an integral aspect of his claim or defense. In Gerberts case, since both the foreign divorce decree and the national law of the alien, recognizing his or her capacity to obtain a divorce, purport to be official acts of a sovereign authority, Section 24, Rule 132 of the Rules of Court comes into play. This Section requires proof, either by (1) official publications or (2) copies attested by the officer having legal custody of the documents. If the copies of official records are not kept in the Philippines, these must be (a) accompanied by a certificate issued by the proper diplomatic or consular officer in the Philippine foreign service stationed in the foreign country in which the record is kept and (b)

546

authenticated by the seal of his office. The records show that Gerbert attached to his petition a copy of the divorce decree, as well as the required certificates proving its authenticity,30 but failed to include a copy of the Canadian law on divorce.31 Under this situation, we can, at this point, simply dismiss the petition for insufficiency of supporting evidence, unless we deem it more appropriate to remand the case to the RTC to determine whether the divorce decree is consistent with the Canadian divorce law. We deem it more appropriate to take this latter course of action, given the Article 26 interests that will be served and the Filipina wifes (Daisylyns) obvious conformity with the petition. A remand, at the same time, will allow other interested parties to oppose the foreign judgment and overcome a petitioners presumptive evidence of a right by proving want of jurisdiction, want of notice to a party, collusion, fraud, or clear mistake of law or fact. Needless to state, every precaution must be taken to ensure conformity with our laws before a recognition is made, as the foreign judgment, once recognized, shall have the effect of res judicata32 between the parties, as provided in Section 48, Rule 39 of the Rules of Court.33 In fact, more than the principle of comity that is served by the practice of reciprocal recognition of foreign judgments between nations, the res judicata effect of the foreign judgments of divorce

547

serves as the deeper basis for extending judicial recognition and for considering the alien spouse bound by its terms. This same effect, as discussed above, will not obtain for the Filipino spouse were it not for the substantive rule that the second paragraph of Article 26 of the Family Code provides. Considerations beyond the recognition of the foreign divorce decree As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has already recorded the divorce decree on Gerbert and Daisylyns marriage certificate based on the mere presentation of the decree.34 We consider the recording to be legally improper; hence, the need to draw attention of the bench and the bar to what had been done. Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the civil status of persons shall be recorded in the civil register." The law requires the entry in the civil registry of judicial decrees that produce legal consequences touching upon a persons legal capacity and status, i.e., those affecting "all his personal qualities and relations, more or less permanent in nature, not ordinarily terminable at his own will, such as his being legitimate or illegitimate, or his being married or not."35 A judgment of divorce is a judicial decree, although a foreign one, affecting a persons legal capacity and status that must be

548

recorded. In fact, Act No. 3753 or the Law on Registry of Civil Status specifically requires the registration of divorce decrees in the civil registry: Sec. 1. Civil Register. A civil register is established for recording the civil status of persons, in which shall be entered: (a) births; (b) deaths; (c) marriages; (d) annulments of marriages; (e) divorces; (f) legitimations; (g) adoptions; (h) acknowledgment of natural children; (i) naturalization; and (j) changes of name.

549

xxxx Sec. 4. Civil Register Books. The local registrars shall keep and preserve in their offices the following books, in which they shall, respectively make the proper entries concerning the civil status of persons: (1) Birth and death register; (2) Marriage register, in which shall be entered not only the marriages solemnized but also divorces and dissolved marriages. (3) Legitimation, acknowledgment, adoption, change of name and naturalization register. But while the law requires the entry of the divorce decree in the civil registry, the law and the submission of the decree by themselves do not ipso facto authorize the decrees registration. The law should be read in relation with the requirement of a judicial recognition of the foreign judgment before it can be given res judicata effect. In the context of the present case, no judicial order as yet exists recognizing the foreign divorce decree. Thus, the Pasig City Civil Registry Office acted totally out of turn and without authority of law when it annotated the Canadian divorce decree on Gerbert and Daisylyns marriage certificate, on the strength alone of the foreign decree presented by Gerbert.

550

Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court recognition, as it cited NSO Circular No. 4, series of 1982,36 and Department of Justice Opinion No. 181, series of 198237 both of which required a final order from a competent Philippine court before a foreign judgment, dissolving a marriage, can be registered in the civil registry, but it, nonetheless, allowed the registration of the decree. For being contrary to law, the registration of the foreign divorce decree without the requisite judicial recognition is patently void and cannot produce any legal effect.
1avvphi1

Another point we wish to draw attention to is that the recognition that the RTC may extend to the Canadian divorce decree does not, by itself, authorize the cancellation of the entry in the civil registry. A petition for recognition of a foreign judgment is not the proper proceeding, contemplated under the Rules of Court, for the cancellation of entries in the civil registry. Article 412 of the Civil Code declares that "no entry in a civil register shall be changed or corrected, without judicial order." The Rules of Court supplements Article 412 of the Civil Code by specifically providing for a special remedial proceeding by which entries in the civil registry may be judicially cancelled or corrected. Rule 108 of the Rules of Court sets in detail the jurisdictional and procedural requirements that must be complied with before a judgment, authorizing the cancellation or correction, may be annotated in the civil registry. It also requires, among others, that

551

the verified petition must be filed with the RTC of the province where the corresponding civil registry is located;38 that the civil registrar and all persons who have or claim any interest must be made parties to the proceedings;39 and that the time and place for hearing must be published in a newspaper of general circulation.40 As these basic jurisdictional requirements have not been met in the present case, we cannot consider the petition Gerbert filed with the RTC as one filed under Rule 108 of the Rules of Court. We hasten to point out, however, that this ruling should not be construed as requiring two separate proceedings for the registration of a foreign divorce decree in the civil registry one for recognition of the foreign decree and another specifically for cancellation of the entry under Rule 108 of the Rules of Court. The recognition of the foreign divorce decree may be made in a Rule 108 proceeding itself, as the object of special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to establish the status or right of a party or a particular fact. Moreover, Rule 108 of the Rules of Court can serve as the appropriate adversarial proceeding41 by which the applicability of the foreign judgment can be measured and tested in terms of jurisdictional infirmities, want of notice to the party, collusion, fraud, or clear mistake of law or fact. WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the October 30, 2008 decision of the Regional Trial Court of Laoag City, Branch 11, as well as its February 17,

552

2009 order. We order the REMAND of the case to the trial court for further proceedings in accordance with our ruling above. Let a copy of this Decision be furnished the Civil Registrar General. No costs.

553

Landoil v. Al Rabiah

In resolving the main issue of whether the RTC can validly set aside the foreign arbitral award rendered against petitioner and defendant CCI on the bases of the defenses raised in the parties respective Answers, the RTC ruled in the negative. The RTC found that petitioner and CCI were estopped from claiming that they were not parties to the Sub-Contract Agreement. Petitioner's Answer alleged that it admitted the existence of the sub-contract agreement, although claimed that it has no knowledge as to its genuineness and due execution; that such lack of knowledge was belied or negated by petitioner's own allegations in its Answer acknowledging indebtedness to respondent. The RTC found that petitioner's letter dated September 12, 1982 to respondent confirmed that it owed respondent the sum of KD 21,930,317 and anticipated that payment would be made in early October 1982, together with the other due accounts. This letter was submitted as respondent's Exhibit C

554

and the RTC noted that this letter was among the documents submitted by respondent to the foreign arbitrator in support of its claim against petitioner and CCI. The RTC said that while it appeared in the SubContract Agreement that the contracting parties were CCI and respondent, however, in paragraph VIII thereof, petitioner Landoil appeared together with CCI as the First Party to whom notices shall be sent. The RTC then concluded that the inclusion of petitioner as first party to whom the notices shall be sent and the conduct exhibited by petitioner led to the inevitable conclusion that the two defendants, petitioner and CCI, were the parties with whom respondent entered into the sub-contract agreement; and that this conclusion was even strengthened by the fact that as between the two defendants, petitioner and CCI, there existed a pooling agreement for

555

undertaking projects abroad pursuant to Presidential Decree (PD) 929. Since petitioner and CCI were the parties with whom respondent contracted, they were bound by the terms of the agreement, including the referral of their dispute to arbitration in accordance with the Rules and Regulations of the State of Kuwait. Dissatisfied, petitioner appealed the RTC Decision to the CA. After the submission of the parties' respective briefs, the case was submitted for resolution. On August 14, 2003, the CA issued its assailed Decision which dismissed the appeal and affirmed the RTC decision. The CA ruled, among others, that petitioner was already estopped from claiming that it was not a

556

party to the Sub-Contract Agreement as the agreement itself mentioned petitioner Landoil as one of the contracting parties and that petitioner had made representations in the past, binding itself for the overdue accounts in favor of respondent. Petitioner's motion for reconsideration was denied in a Resolution dated August 29, 2006. Hence, this petition wherein petitioner raises the following issues: (a) whether a Philippine Court, in
enforcing a foreign judgment that has become final and executory, has the jurisdiction to alter, amend or expand such final foreign judgment; (b) Whether a foreign judgment may be enforced against a party other than the party decreed and held liable therein; and

557

(c) Whether Estoppel was properly appreciated in this case.[15]

Petitioner contends that as appearing in the dispositive portion of the foreign arbitral award, there is only one defendant adjudged liable to respondent, i.e., Land Oil Resources Company (Construction Consortium Incorporation); thus, the party against whom the Writ of Execution may be directed. Petitioner claims that it is not the same as Land Oil Resources Company (Construction Consortium Incorporation) as its Articles of Incorporation does not indicate any such appellation; that it was not a party to the proceedings before the foreign arbitrator as it is a different entity. Thus, enforcing an award against a non-party such as petitioner would be executing on properties owned by a third person other than the judgment debtor; and that to allow the same

558

would amount to a deprivation of property without due process of law. Petitioner avers that the RTC and the CA erred and committed grave abuse of discretion in amending and modifying the foreign arbitral award so as to include petitioner which is a corporation different from the entity adjudged liable in the foreign arbitral award. We are not convinced. As correctly found by the CA, petitioners argument that the party adjudged liable under the foreign arbitral award was a different entity from it was only raised for the first time in petitioner's motion for reconsideration filed with it; thus, could not be entertained. We quote with approval what the CA said when it denied petitioners motion for reconsideration in this wise:

559

The defendant mainly argues that it was never a party to the subcontract agreement. We find its argument meritless, because it is now too late for the defendant to claim that the party adjudged liable under the foreign arbitral award was a different entity. Moreover, we note that this is the first time that the defendant raises such defense. It is settled in jurisprudence that an issue cannot be raised for the first time on appeal. With more reason should we disallow and disregard the issue if it is initially raised in a motion for reconsideration of the decision of the appellate court. From the outset of the case, the defendant's stance has always been to deny any participation in the subcontract agreement between Construction Consortium Inc. and the plaintiff and, in the alternative, to bewail the failure of the arbitral award to spell out the factual distinctions between its liability and that of the Construction Consortium Inc. for they were separate and distinct entities. Thus, this is the first time that it asserts that it was not the defendant in the case before the Commercial Kully Court of the State of Kuwait. The

560

defendant thus asserts the existence of a third corporation against whom the arbitral award was supposedly rendered, Landoil Resources Company (Construction Consortium Incorporated). Not only is the Court precluded from entertaining such first-time issue but we also frown upon the apparent self-contradiction. We note that the defendant had, in the course of this case, repeatedly affirmed that it was the same party as the defendant against whom the foreign judgment had been rendered. In its Answer to the Complaint, it stated that: 12. The award directs the Landoil to pay and makes Construction Consortium Incorporated liable. x x x Likewise, in its appeal brief, it also acknowledged being the defendant against whom the arbitral award was being enforced, thuswise: x x x the foreign judgment subject of the case before the court a quo is an arbitral award rendered by the Commercial Kully Court of the

561

State of Kuwait on April 14, 1984, compelling defendant CCI and defendant appellant to pay the sum of KD 108,368.860 in settlement of the contract allegedly concluded between them and plaintiff-appellee, which included a 10% contractual interest until the time of said award.[16]

Indeed, petitioner had never claimed in the RTC that it was not the party referred to in the foreign arbitral award. On the contrary, petitioner's Answer with Counterclaim filed in the RTC even established its knowledge and participation in the Sub-Contract Agreement. Under the heading of Special and Affirmative Defenses, petitioner alleged, among others that:
6. plaintiff's claims have been paid, set-off, or extinguished.

562

xxxx 14. That under the Sub-Contract, Annex A of the complaint, it is provided as follows: 14.1 FIRST PARTY agrees to pay SECOND PARTY at monthly intervals based on actual monthly progress accomplishment, plus 50% on material on Site less 5% retention and less advance payments, to be paid within 15 days of FIRST PARTY'S receipt from Client subject to any changes imposed by the Client in approving the monthly Valuation Certificate. Details of any such modifications will be available to the Sub-Contractor insofar as they affect his previously agreed valuation amount. Defendant has not been paid by its principal contractor the payment/value of the corresponding accomplishments done by plaintiff and that, therefore, plaintiff's cause of action against answering defendant has not accrued;

563

15. That in any event, the alleged claim was discharged on September 12, 1983 by assignment to plaintiff in the full amount of the true and actual measure and valuation calculated upon termination of the contract by the Primary Contractor;

16. In any event, the termination of the contract of the primary contractor occurred without the fault or negligence of the defendants; neither was it responsible for the force majeure under the terms of the contract.[17]

Moreover, in petitioner's Memorandum of Authorities on the Invalidity and Unenforceability of the Foreign Judgment[18] filed with the RTC, it again made admission that it was the party referred to in the foreign arbitral award, thus:
xxxx Likewise, the foreign arbitral award rendered judgment against both defendants by placing the name

564

of defendant LANDOIL RESOURCES COMPANY (sic corporation) and thereafter enclosed in parenthesis the name of the other defendant Construction Consortium, Inc. without however specifying the specific liabilities of either of the defendants. Being corporations, defendants have legal personalities separate and distinct from each other and as such must be taken distinctly and separately from one another x x x[19]

Section 4, Rule 129 of the Rules of Court provides:

Sec. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.

565

A party may make judicial admissions in (a) the pleadings; (b) during the trial, either by verbal or written manifestations or stipulations; or (c) in other stages of the judicial proceeding.[20] It is well-settled that judicial admissions cannot be contradicted by the admitter who is the party himself[21] and binds the person who makes the same, and absent any showing that this was made thru palpable mistake, no amount of rationalization can offset it.[22] Finally, we find no reversible error committed by the CA in affirming the RTC decision finding petitioner estopped from denying its participation and liability under the Sub-Contract Agreement and the enforcement of the foreign arbitral award against it. We find apropos what the CA said in this wise:
Defendant-appellant cannot deny its participation in the Subcontract. The agreement itself mentioned Landoil as one of the contracting parties. Specifically, a

566

perusal of the Subcontract Agreement reveals in Article 8, Section 1 thereof that: 8.1 All notices to a party hereto shall be sent as follows: FIRST PARTY: LANDOIL RESOURCES CORPORATION CONSTRUCTION CONSORTIUM INCORPORATED P.O. Box 49393 Omariyah, Kuwait For the attention of Or delivered To: K.O.C. Project Manager Project Office of Ahmadi SECONDARY PARTY: AL RABIAH LIGHTING COMPANY W.L. I. P.O. Box 22015 Sarat

567

Kuwait For the attention of Or delivered To:

Mr. Said Y. Al Imam

Further, it is of record that on September 12, 1982, Landoil, thru its Regional Marketing Director Robert J. Brown, wrote to plaintiff Al Rabiah confirming that Landoil owes Al Rabiah the sum of KD21,930.317 and that said sum was due on August 22, 1982. It was further acknowledged in said letter that inasmuch as the sum cannot be paid immediately, an interest at the rate of 12% on the overdue amount shall be paid until the principal amount can be satisfied. Landoil signified that it expected to pay such amount by October 1982 together with other due accounts. This letter is part of the evidence on record and was not refuted by defendant-appellant Landoil. The foregoing persuades this Court of Landoils participation in the Subcontract Agreement. It is

568

apparent that Landoil is named as a first party to the subject Agreement and it represented itself as an obligor in the September 12, 1982 letter acknowledging overdue accounts in favor of Al Rabiah. Moreover, notwithstanding its denial, defendantappellant did allege in Paragraph 14 of its Answer to the Complaint a quo that:

14. x x x x Defendant had not been paid by its principal contractor the payment/value of the corresponding accomplishments done by plaintiff and that therefore, plaintiffs cause of action against answering defendant has not accrued. (RTC Records, p. 43) Such statement impliedly admits defendant-appellants liability under the Subcontract Agreement, but raises as

569

a special defense that plaintiff-appellees action is allegedly premature, as Landoil itself had not received any payment from its principal contractor. Thus, Landoils argument, that it is a distinct corporation from CCI and cannot be accountable for breaches made by such other corporation, must fail. We find that Landoil itself is a party to the Subcontract Agreement and has made representations in the past binding itself to Al Rabiah for overdue accounts in favor of the latter. Under the doctrine of estoppels, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereof. (Ayala Corporation v. Ray Burton Development Corporation, 294 SCRA 48).[23]

Petitioner is indeed barred from adopting an inconsistent position, attitude, or course of conduct that would cause loss or injury to respondent.[24]

570

WHEREFORE, the petition for review is DENIED. The Decision dated August 14, 2003 and the Resolution dated August 29, 2006 of the Court of Appeals are hereby AFFIRMED. SO ORDERED.

571

Procedure Philippines International v. CA

In the instant Petition for Review, filed with this Court on 27 February 1987, petitioners allege that both the Default Judgment rendered by the U.S. District Court, Southern District of New York, in 83 Civil 290 (EW), and the Decision of the Regional Trial Court of Quezon City, in Civil Case No. Q-39927, are null and void essentially on jurisdictional grounds. In the first instance, petitioners contend that the U.S. District Court never acquired jurisdiction over their persons as they had not been served with summons and a copy of the Complaint in 83 Civil 290 (EW). In the second instance, petitioners contend that such jurisdictional ty effectively prevented the Regional Trial Court of Quezon City from taking cognizance of the Complaint in Civil Case No. Q-39927 and from enforcing the U.S. District Court's Default Judgment against them. Petitioners contend, finally, that assuming the validity of the disputed Default Judgment, the same may be enforced only against petitioner Philippine International Shipping Corporation (PISC) the other nine (9) petitioners not having been impleaded originally in the case filed in New York, U.S.A. The Petition must fail. 1. To begin with, the evidence of record clearly shows that the U.S. District Court had validly acquired jurisdiction over petitioner (PISC) under the procedural law applicable in that forum i.e., the U.S. Federal Rules on Civil Procedure. Copies of the Summons

572

and Complaint

16 in 83 Civil 290 (EW) which were in fact attached to the Petition for Review filed with this Court, were stamped "Received, 18 Jan 1983, PISC Manila." indicating that service thereof had been made upon and acknowledged by the (PISC) office in Manila on, 18 January 1983, and that (PISC) had actual notice of such Complaint and Summons. Moreover, copies of said Summons and Complaint had likewise been served upon PrenticeHall Corporation System, Inc. (New York), petitioner PISCs agent, expressly designated by it in the Master Equipment Leasing Agreement with respondent Interpool. "for the purpose of accepting service of any process within the State of New York, USA with respect to any claim or controversy arising out of or relating to directly or indirectly, this Lease." 17 The record also shows that petitioner PISC, without, however, assailing the jurisdiction of the U.S. District Court over the person of petitioner, had filed a Motion to Dismiss 18 the Complaint in 83 Civil 290 (EW) which Motion was denied. All of the foregoing matters, which were stated specifically in the U.S. District Court's disputed Default Judgement, 19 have not been disproven or otherwise overcome by petitioners, whose bare and unsubstantiated allegations cannot prevail over clear and convincing evidence of record to the contrary.

That foreign judgment-which had become final and executory, no appeal having been taken therefrom and perfected by petitioner PISC-is thus "presumptive evidence of a right as between the parties [i.e., PISC and Interpool] and their successors in interest by a subsequent title." 20 We note, further that there has been in this case no
showing by petitioners that the Default Judgment rendered by the U.S. District Court in 83 Civil 290 (EW) was vitiated by "want of notice to the party, collusion, fraud, or clear mistake of law or fact. " 21 In other words, the Default Judgment imposing upon petitioner PISC a liability of U.S.$94,456.28 in favor of respondent Interpool, is valid and may be enforced in this jurisdiction.

2. The existence of liability (i.e., in the amount of U.S.$94,456.28) on the part of petitioner PISC having been duly established in the U.S. case, it was not improper for respondent Interpool, in seeking enforcement in this jurisdiction of the foreign judgment imposing such liability, to have included the other nine (9) petitioners herein

573

(i.e., George Lim, Marcos Bautista, Carlos Laude,Tan Sing Lim, Antonio Liu Lao, Ong Teh Philippine Consortium Construction Corporation, Pacific Mills, Inc. and Universal Steel Smelting Co., Inc.) as defendants in Civil Case No. Q- 39927, filed with Branch 93 of the Regional Trial Court of Quezon City. With respect to the latter, Section 6, Rule 3 of the Revised Rules of Court expressly provides: Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. (Emphasis supplied) The record shows that said nine (9) petitioners had executed continuing guarantees" to secure performance by petitioner PISC of its contractual obligations, under the Membership Agreement and Hiring Conditions and Master Equipment Leasing Agreement with respondent Interpool. As guarantors, they had held themselves out as liable. "whether jointly, severally, or in the alternative," to respondent Interpool under their separate

574

"continuing guarantees" executed in the Philippines, for any breach of those Agreements on the part of (PISC) The liability of the nine (9) other petitioners was, in other words, not based upon the Membership Agreement and the Master Equipment Leasing Agreement to which they were not parties. The New York award of U.S.$94,456.28 is precisely premised upon a breach by PISC of its own obligations under those Agreements. We, therefore, consider the nine (9) other petitioners as persons 44 against whom [a] right to relief in respect to or arising out of the same transaction or series of transactions [has been] alleged to exist." as contemplated in the Rule quoted above and, consequently, properly impleaded as defendants in Civil Case No. Q-39927. There was, in other words, no need at all, in order that Civil Case No. Q-39927 would prosper, for respondent Interpool to have first impleaded the nine (9) other petitioners in the New York case and there obtain judgment against all ten (10) petitioners. 3. Petitioners' argument of lack or absence of jurisdiction on the part of the Quezon City Regional Trial Court, on the alleged ground of non-service of notice or summons in Civil Case No. Q39927, does not persuade. But we do not need to address this specific argument. For even assuming (though merely arguendo) that none of the ten (10) petitioner herein had been served with notice or summons below, the record shows, however, that they did in fact file with the Regional Trial Court a Motion for Extension of Time to file Answer 22 (dated 9 December 1983) as well as Motion for Bill of
Particulars 23 (dated 15 December 1983), both addressing respondent Interpool's .Complaint

575

in Civil Case No. Q-39927. In those pleadings, petitioners not only manifested their intention to controvert the allegations in the Complaint, but they neither questioned nor assailed the jurisdiction of the trial court, either over the case filed against them or over their individual persons, as defendants therein. There was here, in effect, voluntary submission to the jurisdiction of the Quezon City trial court by petitioners, who are thereby estopped from asserting otherwise before this Court. 24

ACCORDINGLY, the Petition for Review is DENIED and the Decision dated 12 December 1986 of the Court of Appeals in C.A.-G.R. SP No. 10614, is hereby AFFIRMED. This Resolution is immediately executory. Costs against petitioners. SO ORDERED.

576

Oil & Natural Gas v. CA

The threshold issue is whether or not the arbitrator had jurisdiction over the dispute between the petitioner and the private respondent under Clause 16 of the contract. To reiterate, Clause 16 provides as follows: Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions or otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference. 11 The dispute between the parties had its origin in the non-delivery of the 4,300 metric tons of oil well cement to the petitioner. The primary question that may be posed, therefore, is whether or not the non-delivery of the said cargo is a proper subject for arbitration

577

under the above-quoted Clause 16. The petitioner contends that the same was a matter within the purview of Clause 16, particularly the phrase, ". . . or as to any other questions, claim, right or thing whatsoever, in any way arising or relating to the supply order/contract, design, drawing, specification, instruction . . .". 12 It is argued that the foregoing phrase allows considerable latitude
so as to include non-delivery of the cargo which was a "claim, right or thing relating to the supply order/contract". The contention is bereft of merit. First of all, the petitioner has misquoted the said phrase, shrewdly inserting a comma between the words "supply order/contract" and "design" where none actually exists. An accurate reproduction of the phrase reads, ". . . or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions . . .". The absence of a comma between the words "supply order/contract" and "design" indicates that the former cannot be taken separately but should be viewed in conjunction with the words "design, drawing, specification, instruction or these conditions". It is thus clear that to fall within the purview of this phrase, the "claim, right or thing whatsoever" must arise out of or relate to the design, drawing, specification, or instruction of the supply order/contract. The petitioner also insists that the non-delivery of the cargo is not only covered by the foregoing phrase but also by the phrase, ". . . or otherwise concerning the materials or the execution or failure to execute the same during the stipulated/extended period or after completion/abandonment thereof . . .".

The doctrine of noscitur a sociis, although a rule in the

578

construction of statutes, is equally applicable in the ascertainment of the meaning and scope of vague contractual stipulations, such as the aforementioned phrase. According to the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of the words in which it is found or with which it is associated, or stated differently, its obscurity or doubt may be reviewed by reference to associated words. 13 A close examination of Clause 16
reveals that it covers three matters which may be submitted to arbitration namely,

(1) all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered; or (2) any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions; or (3) otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof. The first and second categories unmistakably refer to questions and disputes relating to the design, drawing, instructions,

579

specifications or quality of the materials of the supply/order contract. In the third category, the clause, "execution or failure to execute the same", may be read as "execution or failure to execute the supply order/contract". But in accordance with the doctrine of noscitur a sociis, this reference to the supply order/contract must be construed in the light of the preceding words with which it is associated, meaning to say, as being limited only to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract. The non-delivery of the oil well cement is definitely not in the nature of a dispute arising from the failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the materials. That Clause 16 should pertain only to matters involving the technical aspects of the contract is but a logical inference considering that the underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by a person possessed with the required skill and expertise which may be otherwise absent in the regular courts. This Court agrees with the appellate court in its ruling that the nondelivery of the oil well cement is a matter properly cognizable by the regular courts as stipulated by the parties in Clause 15 of their contract: All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the exclusive jurisdiction of the court, within the local limits of whose jurisdiction

580

and the place from which this supply order is situated. 14 The following fundamental principles in the interpretation of contracts and other instruments served as our guide in arriving at the foregoing conclusion: Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual. 15
Art. 1374. The various stipulations of a contract shall be interpreted together, attributing the doubtful ones that sense which may result from all of them taken jointly. 16 Sec. 11. Instrument construed so as to give effect to all provisions. In the construction of an instrument, where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all. 17

Thus, this Court has held that as in statutes, the provisions of a contract should not be read in isolation from the rest of the instrument but, on the contrary, interpreted in the light of the other related provisions. 18 The whole and every part of a contract must be
considered in fixing the meaning of any of its harmonious whole. Equally applicable is the canon of construction that in interpreting a statute (or a contract as in this case), care should be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge of conflicting provisions.

581

The rule is that a construction that would render a provision inoperative should be avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as parts of a coordinated and harmonious whole. 19

The petitioner's interpretation that Clause 16 is of such latitude as to contemplate even the non-delivery of the oil well cement would in effect render Clause 15 a mere superfluity. A perusal of Clause 16 shows that the parties did not intend arbitration to be the sole means of settling disputes. This is manifest from Clause 16 itself which is prefixed with the proviso, "Except where otherwise provided in the supply order/contract . . .", thus indicating that the jurisdiction of the arbitrator is not all encompassing, and admits of exceptions as may be provided elsewhere in the supply order/contract. We believe that the correct interpretation to give effect to both stipulations in the contract is for Clause 16 to be confined to all claims or disputes arising from or relating to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract, and for Clause 15 to cover all other claims or disputes. The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of the oil well cement is not a proper subject for arbitration, the failure of the replacement cement to conform to the specifications of the contract is a matter clearly falling within the ambit of Clause 16. In this contention, we find merit. When the 4,300 metric tons of oil well cement were not

582

delivered to the petitioner, an agreement was forged between the latter and the private respondent that Class "G" cement would be delivered to the petitioner as replacement. Upon inspection, however, the replacement cement was rejected as it did not conform to the specifications of the contract. Only after this latter circumstance was the matter brought before the arbitrator. Undoubtedly, what was referred to arbitration was no longer the mere non-delivery of the cargo at the first instance but also the failure of the replacement cargo to conform to the specifications of the contract, a matter clearly within the coverage of Clause 16. The private respondent posits that it was under no legal obligation to make replacement and that it undertook the latter only "in the spirit of liberality and to foster good business relationship". 20
Hence, the undertaking to deliver the replacement cement and its subsequent failure to conform to specifications are not anymore subject of the supply order/contract or any of the provisions thereof. We disagree.

As per Clause 7 of the supply order/contract, the private respondent undertook to deliver the 4,300 metric tons of oil well cement at "BOMBAY (INDIA) 2181 MT and CALCUTTA 2119 MT". 21 The failure of the private respondent to deliver the cargo to the
designated places remains undisputed. Likewise, the fact that the petitioner had already paid for the cost of the cement is not contested by the private respondent. The private respondent claims, however, that it never benefited from the transaction as it was not able to recover

583

the cargo that was unloaded at the port of Bangkok. 22 First of all, whether or not the private respondent was able to recover the cargo is immaterial to its subsisting duty to make good its promise to deliver the cargo at the stipulated place of delivery. Secondly, we find it difficult to believe this representation. In its Memorandum filed before this Court, the private respondent asserted that the Civil Court of Bangkok had already ruled that the non-delivery of the cargo was due solely to the fault of the carrier. 23 It is, therefore, but logical to assume that the necessary consequence of this finding is the eventual recovery by the private respondent of the cargo or the value thereof. What inspires credulity is not that the replacement was done in the spirit of liberality but that it was undertaken precisely because of the private respondent's recognition of its duty to do so under the supply order/contract, Clause 16 of which remains in force and effect until the full execution thereof.

We now go to the issue of whether or not the judgment of the foreign court is enforceable in this jurisdiction in view of the private respondent's allegation that it is bereft of any statement of facts and law upon which the award in favor of the petitioner was based. The pertinent portion of the judgment of the foreign court reads: ORDER Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall

584

also be entitled to get from defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven only) along with 9% interest per annum till the last date of realisation. 24 As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1 shall be a part of the decree". This is a categorical declaration that the foreign court adopted the findings of facts and law of the arbitrator as contained in the latter's Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the respective claims and defenses of the parties, and the arbitrator's evaluation of the same. Inasmuch as the foregoing is deemed to have been incorporated into the foreign court's judgment the appellate court was in error when it described the latter to be a "simplistic decision containing literally, only the dispositive portion". 25 The constitutional mandate that no decision shall be rendered by any court without expressing therein dearly and distinctly the facts and the law on which it is based does not preclude the validity of "memorandum decisions" which adopt by reference the findings of fact and conclusions of law contained in the decisions of inferior tribunals. In Francisco v. Permskul, 26 this Court held that the
following memorandum decision of the Regional Trial Court of Makati did not transgress the requirements of Section 14, Article VIII of the Constitution:

585

MEMORANDUM DECISION After a careful perusal, evaluation and study of the records of this case, this Court hereby adopts by reference the findings of fact and conclusions of law contained in the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch 63 and finds that there is no cogent reason to disturb the same. WHEREFORE, judgment appealed from is hereby affirmed in toto.
27

(Emphasis supplied.)

This Court had occasion to make a similar pronouncement in the earlier case of Romero v. Court of Appeals, 28 where the assailed
decision of the Court of Appeals adopted the findings and disposition of the Court of Agrarian Relations in this wise:

We have, therefore, carefully reviewed the evidence and made a re-assessment of the same, and We are persuaded, nay compelled, to affirm the correctness of the trial court's factual findings and the soundness of its conclusion. For judicial convenience and expediency, therefore, We hereby adopt by way of reference, the findings of facts and conclusions of the court a quo spread in its decision, as integral part of this Our decision. 29
(Emphasis supplied)

Hence, even in this jurisdiction, incorporation by reference is allowed if only to avoid the cumbersome reproduction of the

586

decision of the lower courts, or portions thereof, in the decision of the higher court. 30 This is particularly true when the decision sought to
be incorporated is a lengthy and thorough discussion of the facts and conclusions arrived at, as in this case, where Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages.

Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the country in which the judgment is relied on. 31 This Court has held that matters of remedy and procedure
are governed by the lex fori or the internal law of the forum. 32 Thus, if under the procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be rendered by adopting the arbitrator's findings, then the same must be accorded respect. In the same vein, if the procedure in the foreign court mandates that an Order of the Court becomes final and executory upon failure to pay the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order of the foreign court simply because our rules provide otherwise.

The private respondent claims that its right to due process had been blatantly violated, first by reason of the fact that the foreign court never answered its queries as to the amount of docket fees to be paid then refused to admit its objections for failure to pay the same, and second, because of the presumed bias on the part of the arbitrator who was a former employee of the petitioner.

587

Time and again this Court has held that the essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of one's defense 33 or stated otherwise, what is repugnant to due process is the
denial of opportunity to be heard. 34 Thus, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy and he waived his right to do so. 35

In the instant case, the private respondent does not deny the fact that it was notified by the foreign court to file its objections to the petition, and subsequently, to pay legal fees in order for its objections to be given consideration. Instead of paying the legal fees, however, the private respondent sent a communication to the foreign court inquiring about the correct amount of fees to be paid. On the pretext that it was yet awaiting the foreign court's reply, almost a year passed without the private respondent paying the legal fees. Thus, on February 2, 1990, the foreign court rejected the objections of the private respondent and proceeded to adjudicate upon the petitioner's claims. We cannot subscribe to the private respondent's claim that the foreign court violated its right to due process when it failed to reply to its queries nor when the latter rejected its objections for a clearly meritorious ground. The private respondent was afforded sufficient opportunity to be heard. It was not incumbent upon the foreign court to reply to the private respondent's written communication. On the contrary, a genuine concern for its cause should have prompted the private

588

respondent to ascertain with all due diligence the correct amount of legal fees to be paid. The private respondent did not act with prudence and diligence thus its plea that they were not accorded the right to procedural due process cannot elicit either approval or sympathy from this Court. 36 The private respondent bewails the presumed bias on the part of the arbitrator who was a former employee of the petitioner. This point deserves scant consideration in view of the following stipulation in the contract: . . . . It will be no objection any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference. 37 (Emphasis supplied.) Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient Airlines, Inc. v. Court of Appeals 38 that: A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein. Under Section 50, Rule 39 of the Rules of Court, a judgment in an

589

action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty.
39

Consequently, the party attacking a foreign judgment, the private respondent herein, had the burden of overcoming the presumption of its validity which it failed to do in the instant case. The foreign judgment being valid, there is nothing else left to be done than to order its enforcement, despite the fact that the petitioner merely prays for the remand of the case to the RTC for further proceedings. As this Court has ruled on the validity and enforceability of the said foreign judgment in this jurisdiction, further proceedings in the RTC for the reception of evidence to prove otherwise are no longer necessary. WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of Appeals sustaining the trial court's dismissal of the OIL AND NATURAL GAS COMMISSION's complaint in Civil Case No. 4006 before Branch 30 of the RTC of

590

Surigao City is REVERSED, and another in its stead is hereby rendered ORDERING private respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the amounts adjudged in the foreign judgment subject of said case. SO ORDERED.

591

Puyat v. Zabarte Mijares v. Ranada

Same
The institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of the US Federal Rules of Civil Procedure, the provisions of which were invoked by the plaintiffs. Subsequently, the US District Court certified the case as a class action and created three (3) sub-classes of torture, summary execution and disappearance victims.5 Trial ensued, and subsequently a jury rendered a verdict and an award of compensatory and exemplary damages in favor of the plaintiff class. Then, on 3 February 1995, the US District Court, presided by Judge Manuel L. Real, rendered a Final Judgment (Final Judgment) awarding the plaintiff class a total of One Billion Nine Hundred Sixty Four Million Five Thousand Eight Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). The Final Judgment was eventually affirmed by the US Court of Appeals for the Ninth Circuit, in a decision rendered on 17 December 1996.6 On 20 May 1997, the present petitioners filed Complaint with the Regional Trial Court, City of Makati (Makati RTC) for the enforcement of the Final Judgment. They alleged that they are members of the plaintiff class in whose favor the US District Court awarded damages.7 They argued that since the Marcos Estate failed to file a petition for certiorari with the US Supreme Court after the Ninth Circuit Court of Appeals had affirmed the Final Judgment, the decision of the US District Court had become final and executory, and hence should be recognized and enforced in

592

the Philippines, pursuant to Section 50, Rule 39 of the Rules of Court then in force.8 On 5 February 1998, the Marcos Estate filed a motion to dismiss, raising, among others, the non-payment of the correct filing fees. It alleged that petitioners had only paid Four Hundred Ten Pesos (P410.00) as docket and filing fees, notwithstanding the fact that they sought to enforce a monetary amount of damages in the amount of over Two and a Quarter Billion US Dollars (US$2.25 Billion). The Marcos Estate cited Supreme Court Circular No. 7, pertaining to the proper computation and payment of docket fees. In response, the petitioners claimed that an action for the enforcement of a foreign judgment is not capable of pecuniary estimation; hence, a filing fee of only Four Hundred Ten Pesos (P410.00) was proper, pursuant to Section 7(c) of Rule 141.9 On 9 September 1998, respondent Judge Santiago Javier Ranada10 of the Makati RTC issued the subject Order dismissing the complaint without prejudice. Respondent judge opined that contrary to the petitioners' submission, the subject matter of the complaint was indeed capable of pecuniary estimation, as it involved a judgment rendered by a foreign court ordering the payment of definite sums of money, allowing for easy determination of the value of the foreign judgment. On that score, Section 7(a) of Rule 141 of the Rules of Civil Procedure would find application, and the RTC estimated the proper amount of filing fees was approximately Four Hundred Seventy Two Million Pesos,

593

which obviously had not been paid. Not surprisingly, petitioners filed a Motion for Reconsideration, which Judge Ranada denied in an Order dated 28 July 1999. From this denial, petitioners filed a Petition for Certiorari under Rule 65 assailing the twin orders of respondent judge.11 They prayed for the annulment of the questioned orders, and an order directing the reinstatement of Civil Case No. 97-1052 and the conduct of appropriate proceedings thereon. Petitioners submit that their action is incapable of pecuniary estimation as the subject matter of the suit is the enforcement of a foreign judgment, and not an action for the collection of a sum of money or recovery of damages. They also point out that to require the class plaintiffs to pay Four Hundred Seventy Two Million Pesos (P472,000,000.00) in filing fees would negate and render inutile the liberal construction ordained by the Rules of Court, as required by Section 6, Rule 1 of the Rules of Civil Procedure, particularly the inexpensive disposition of every action. Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which provides that "Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty," a mandate which is essentially defeated by the required exorbitant filing fee. The adjudicated amount of the filing fee, as arrived at by the RTC, was

594

characterized as indisputably unfair, inequitable, and unjust. The Commission on Human Rights (CHR) was permitted to intervene in this case.12 It urged that the petition be granted and a judgment rendered, ordering the enforcement and execution of the District Court judgment in accordance with Section 48, Rule 39 of the 1997 Rules of Civil Procedure. For the CHR, the Makati RTC erred in interpreting the action for the execution of a foreign judgment as a new case, in violation of the principle that once a case has been decided between the same parties in one country on the same issue with finality, it can no longer be relitigated again in another country.13 The CHR likewise invokes the principle of comity, and of vested rights. The Court's disposition on the issue of filing fees will prove a useful jurisprudential guidepost for courts confronted with actions enforcing foreign judgments, particularly those lodged against an estate. There is no basis for the issuance a limited pro hac vice ruling based on the special circumstances of the petitioners as victims of martial law, or on the emotionally-charged allegation of human rights abuses. An examination of Rule 141 of the Rules of Court readily evinces that the respondent judge ignored the clear letter of the law when he concluded that the filing fee be computed based on the total sum claimed or the stated value of the property in litigation.

595

In dismissing the complaint, the respondent judge relied on Section 7(a), Rule 141 as basis for the computation of the filing fee of over P472 Million. The provision states: SEC. 7. Clerk of Regional Trial Court.(a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc., complaint, or a complaint in intervention, and for all clerical services in the same time, if the total sum claimed, exclusive of interest, or the started value of the property in litigation, is: 1. Less than P 100,00.00 2. P 100,000.00 or more but less than P 150,000.00 3. P 150,000.00 or more but less than P 200,000.00 P 500.00 P 800.00 P 1,000.0 0 P 1,500.0 0

4. P 200,000.00 or more but less than P 250,000.00

596

5. P 250,000.00 or more but less than P 300,00.00

P 1,750.0 0 P 2,000.0 0 P 2,250.0 0 P 10.00

6. P 300,000.00 or more but not more than P 400,000.00

7. P 350,000.00 or more but not more than P400,000.00

8. For each P 1,000.00 in excess of P 400,000.00 (Emphasis supplied)

Obviously, the above-quoted provision covers, on one hand, ordinary actions, permissive counterclaims, third-party, etc. complaints and complaints-in-interventions, and on the other, money claims against estates which are not based on judgment. Thus, the relevant question for purposes of the present petition is whether the action filed with the lower court is a "money claim against an estate not based on judgment." Petitioners' complaint may have been lodged against an estate, but it is clearly based on a judgment, the Final Judgment of the US

597

District Court. The provision does not make any distinction between a local judgment and a foreign judgment, and where the law does not distinguish, we shall not distinguish. A reading of Section 7 in its entirety reveals several instances wherein the filing fee is computed on the basis of the amount of the relief sought, or on the value of the property in litigation. The filing fee for requests for extrajudicial foreclosure of mortgage is based on the amount of indebtedness or the mortgagee's claim.14 In special proceedings involving properties such as for the allowance of wills, the filing fee is again based on the value of the property.15 The aforecited rules evidently have no application to petitioners' complaint. Petitioners rely on Section 7(b), particularly the proviso on actions where the value of the subject matter cannot be estimated. The provision reads in full: SEC. 7. Clerk of Regional Trial Court.(b) For filing 1. Actions where the value

of the subject matter

598

cannot be estimated 2.

---

P 600.00

Special civil actions except

judicial foreclosure which shall be governed by paragraph (a) above 3. --P 600.00

All other actions not --P 600.00

involving property

In a real action, the assessed value of the property, or if there is none, the estimated value, thereof shall be alleged by the claimant and shall be the basis in computing the fees. It is worth noting that the provision also provides that in real actions, the assessed value or estimated value of the property shall be alleged by the claimant and shall be the basis in computing the fees. Yet again, this provision does not apply in the case at bar. A real action is one where the plaintiff seeks the recovery of real property or an action affecting title to or recovery of possession of real property.16 Neither the complaint nor the award of damages adjudicated by the US District Court involves

599

any real property of the Marcos Estate. Thus, respondent judge was in clear and serious error when he concluded that the filing fees should be computed on the basis of the schematic table of Section 7(a), as the action involved pertains to a claim against an estate based on judgment. What provision, if any, then should apply in determining the filing fees for an action to enforce a foreign judgment? To resolve this question, a proper understanding is required on the nature and effects of a foreign judgment in this jurisdiction. The rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.17 This principle was prominently affirmed in the leading American case of Hilton v. Guyot18 and expressly recognized in our jurisprudence beginning with Ingenholl v. Walter E. Olsen & Co.19 The conditions required by the Philippines for recognition and enforcement of a foreign judgment were originally contained in Section 311 of the Code of Civil Procedure, which was taken from the California Code of Civil Procedure which, in turn, was derived from the California Act of March 11, 1872.20 Remarkably, the procedural rule now outlined in Section 48, Rule 39 of the Rules of Civil Procedure has remained unchanged down to the last word in nearly a century. Section 48

600

states: SEC. 48. Effect of foreign judgments. The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the judgment is as follows: (a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing; (b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title; In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. There is an evident distinction between a foreign judgment in an action in rem and one in personam. For an action in rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties and their successors in interest by a subsequent title.21 However, in both cases, the foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party,22 collusion, fraud,23 or clear mistake of law or fact.24 Thus, the party aggrieved by the foreign judgment is entitled to

601

defend against the enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment, in order for the court in this jurisdiction to properly determine its efficacy.25 It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment26, even if such judgment has conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the foreign judgment, and in order for the court to properly determine its efficacy.27 Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity.28 The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign judgment in the Philippines. But there is no question that the filing of a civil complaint is an appropriate measure for such purpose. A civil action is one by which a party sues another for the enforcement or protection of a right,29 and clearly an action to enforce a foreign judgment is in essence a vindication of a right prescinding either from a "conclusive judgment upon title" or the "presumptive evidence of a right."30 Absent perhaps a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be brought before the regular courts.31 There are distinctions, nuanced but discernible, between the

602

cause of action arising from the enforcement of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment. They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives that are sought to be vindicated. For example, in a complaint for damages against a tortfeasor, the cause of action emanates from the violation of the right of the complainant through the act or omission of the respondent. On the other hand, in a complaint for the enforcement of a foreign judgment awarding damages from the same tortfeasor, for the violation of the same right through the same manner of action, the cause of action derives not from the tortious act but from the foreign judgment itself. More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds. As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact

603

or law. The limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit repetitive litigation on claims and issues.32 Otherwise known as the policy of preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task of courts not be increased by never-ending litigation of the same disputes, and in a larger sense to promote what Lord Coke in the Ferrer's Case of 1599 stated to be the goal of all law: "rest and quietness."33 If every judgment of a foreign court were reviewable on the merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the previously concluded litigation.34 Petitioners appreciate this distinction, and rely upon it to support

estimation. Admittedly the proposition, as it applies in this case, is counter-intuitive, and thus deserves strict scrutiny. For in all practical intents and purposes, the matter at hand is capable of pecuniary estimation, down to the last cent. In the assailed Order, the respondent judge pounced upon this point without equivocation: The Rules use the term "where the value of the subject matter cannot be estimated." The subject matter of the present case is the judgment rendered by the foreign court ordering defendant to pay plaintiffs definite sums of money, as and for compensatory

604

damages. The Court finds that the value of the foreign judgment can be estimated; indeed, it can even be easily determined. The Court is not minded to distinguish between the enforcement of a judgment and the amount of said judgment, and separate the two, for purposes of determining the correct filing fees. Similarly, a plaintiff suing on promissory note for P1 million cannot be allowed to pay only P400 filing fees (sic), on the reasoning that the subject matter of his suit is not the P1 million, but the enforcement of the promissory note, and that the value of such "enforcement" cannot be estimated.35 The jurisprudential standard in gauging whether the subject matter of an action is capable of pecuniary estimation is well-entrenched. The Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of Appeals, which ruled: [I]n determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where

605

the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts). On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v. Scandia,36 from which the rule in Singsong and Raymundo actually derives, but which incorporates this additional nuance omitted in the latter cases: xxx However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of judgment or to foreclose a mortgage, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance.37 Petitioners go on to add that among the actions the Court has recognized as being incapable of pecuniary estimation include legality of conveyances and money deposits,38 validity of a mortgage,39 the right to support,40 validity of documents,41 rescission of contracts,42 specific performance,43 and validity or annulment of judgments.44 It is urged that an action for enforcement of a foreign judgment belongs to the same class.

606

This is an intriguing argument, but ultimately it is self-evident that while the subject matter of the action is undoubtedly the enforcement of a foreign judgment, the effect of a providential award would be the adjudication of a sum of money. Perhaps in theory, such an action is primarily for "the enforcement of the foreign judgment," but there is a certain obtuseness to that sort of argument since there is no denying that the enforcement of the foreign judgment will necessarily result in the award of a definite sum of money. But before we insist upon this conclusion past beyond the point of reckoning, we must examine its possible ramifications. Petitioners raise the point that a declaration that an action for enforcement of foreign judgment may be capable of pecuniary estimation might lead to an instance wherein a first level court such as the Municipal Trial Court would have jurisdiction to enforce a foreign judgment. But under the statute defining the jurisdiction of first level courts, B.P. 129, such courts are not vested with jurisdiction over actions for the enforcement of foreign judgments. Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in civil cases. Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise: (1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including the grant of

607

provisional remedies in proper cases, where the value of the personal property, estate, or amount of the demand does not exceed One hundred thousand pesos (P100,000.00) or, in Metro Manila where such personal property, estate, or amount of the demand does not exceed Two hundred thousand pesos (P200,000.00) exclusive of interest damages of whatever kind, attorney's fees, litigation expenses, and costs, the amount of which must be specifically alleged: Provided, That where there are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions; (2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when, in such cases, the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession. (3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest,

608

damages of whatever kind, attorney's fees, litigation expenses and costs: Provided, That value of such property shall be determined by the assessed value of the adjacent lots.45 Section 33 of B.P. 129 refers to instances wherein the cause of action or subject matter pertains to an assertion of rights and interests over property or a sum of money. But as earlier pointed out, the subject matter of an action to enforce a foreign judgment is the foreign judgment itself, and the cause of action arising from the adjudication of such judgment. An examination of Section 19(6), B.P. 129 reveals that the instant complaint for enforcement of a foreign judgment, even if capable of pecuniary estimation, would fall under the jurisdiction of the Regional Trial Courts, thus negating the fears of the petitioners. Indeed, an examination of the provision indicates that it can be relied upon as jurisdictional basis with respect to actions for enforcement of foreign judgments, provided that no other court or office is vested jurisdiction over such complaint: Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: xxx (6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising jurisdiction or any court,

609

tribunal, person or body exercising judicial or quasi-judicial functions. Thus, we are comfortable in asserting the obvious, that the complaint to enforce the US District Court judgment is one capable of pecuniary estimation. But at the same time, it is also an action based on judgment against an estate, thus placing it beyond the ambit of Section 7(a) of Rule 141. What provision then governs the proper computation of the filing fees over the instant complaint? For this case and other similarly situated instances, we find that it is covered by Section 7(b)(3), involving as it does, "other actions not involving property." Notably, the amount paid as docket fees by the petitioners on the premise that it was an action incapable of pecuniary estimation corresponds to the same amount required for "other actions not involving property." The petitioners thus paid the correct amount of filing fees, and it was a grave abuse of discretion for respondent judge to have applied instead a clearly inapplicable rule and dismissed the complaint. There is another consideration of supreme relevance in this case, one which should disabuse the notion that the doctrine affirmed in this decision is grounded solely on the letter of the procedural rule. We earlier adverted to the the internationally recognized policy of preclusion,46 as well as the principles of comity, utility and convenience of nations47 as the basis for the evolution of the rule

610

calling for the recognition and enforcement of foreign judgments. The US Supreme Court in Hilton v. Guyot48 relied heavily on the concept of comity, as especially derived from the landmark treatise of Justice Story in his Commentaries on the Conflict of Laws of 1834.49 Yet the notion of "comity" has since been criticized as one "of dim contours"50 or suffering from a number of fallacies.51 Other conceptual bases for the recognition of foreign judgments have evolved such as the vested rights theory or the modern doctrine of obligation.52 There have been attempts to codify through treaties or multilateral agreements the standards for the recognition and enforcement of foreign judgments, but these have not borne fruition. The members of the European Common Market accede to the Judgments Convention, signed in 1978, which eliminates as to participating countries all of such obstacles to recognition such as reciprocity and rvision au fond.53 The most ambitious of these attempts is the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, prepared in 1966 by the Hague Conference of International Law.54 While it has not received the ratifications needed to have it take effect,55 it is recognized as representing current scholarly thought on the topic.56 Neither the Philippines nor the United States are signatories to the Convention. Yet even if there is no unanimity as to the applicable theory behind the recognition and enforcement of foreign judgments or a

611

universal treaty rendering it obligatory force, there is consensus that the viability of such recognition and enforcement is essential. Steiner and Vagts note: . . . The notion of unconnected bodies of national law on private international law, each following a quite separate path, is not one conducive to the growth of a transnational community encouraging travel and commerce among its members. There is a contemporary resurgence of writing stressing the identity or similarity of the values that systems of public and private international law seek to further a community interest in common, or at least reasonable, rules on these matters in national legal systems. And such generic principles as reciprocity play an important role in both fields.57 Salonga, whose treatise on private international law is of worldwide renown, points out: Whatever be the theory as to the basis for recognizing foreign judgments, there can be little dispute that the end is to protect the reasonable expectations and demands of the parties. Where the parties have submitted a matter for adjudication in the court of one state, and proceedings there are not tainted with irregularity, they may fairly be expected to submit, within the state or elsewhere, to the enforcement of the judgment issued by the court.58 There is also consensus as to the requisites for recognition of a

612

foreign judgment and the defenses against the enforcement thereof. As earlier discussed, the exceptions enumerated in Section 48, Rule 39 have remain unchanged since the time they were adapted in this jurisdiction from long standing American rules. The requisites and exceptions as delineated under Section 48 are but a restatement of generally accepted principles of international law. Section 98 of The Restatement, Second, Conflict of Laws, states that "a valid judgment rendered in a foreign nation after a fair trial in a contested proceeding will be recognized in the United States," and on its face, the term "valid" brings into play requirements such notions as valid jurisdiction over the subject matter and parties.59 Similarly, the notion that fraud or collusion may preclude the enforcement of a foreign judgment finds affirmation with foreign jurisprudence and commentators,60 as well as the doctrine that the foreign judgment must not constitute "a clear mistake of law or fact."61 And finally, it has been recognized that "public policy" as a defense to the recognition of judgments serves as an umbrella for a variety of concerns in international practice which may lead to a denial of recognition.62 The viability of the public policy defense against the enforcement of a foreign judgment has been recognized in this jurisdiction.63 This defense allows for the application of local standards in reviewing the foreign judgment, especially when such judgment creates only a presumptive right, as it does in cases wherein the judgment is against a person.64 The defense is also recognized

613

within the international sphere, as many civil law nations adhere to a broad public policy exception which may result in a denial of recognition when the foreign court, in the light of the choice-of-law rules of the recognizing court, applied the wrong law to the case. 65 The public policy defense can safeguard against possible abuses to the easy resort to offshore litigation if it can be demonstrated that the original claim is noxious to our constitutional values. There is no obligatory rule derived from treaties or conventions that requires the Philippines to recognize foreign judgments, or allow a procedure for the enforcement thereof. However, generally accepted principles of international law, by virtue of the incorporation clause of the Constitution, form part of the laws of the land even if they do not derive from treaty obligations.66 The classical formulation in international law sees those customary rules accepted as binding result from the combination two elements: the established, widespread, and consistent practice on the part of States; and a psychological element known as the opinion juris sive necessitates (opinion as to law or necessity). Implicit in the latter element is a belief that the practice in question is rendered obligatory by the existence of a rule of law requiring it.67 While the definite conceptual parameters of the recognition and enforcement of foreign judgments have not been authoritatively established, the Court can assert with certainty that such an undertaking is among those generally accepted principles of

614

international law.68 As earlier demonstrated, there is a widespread practice among states accepting in principle the need for such recognition and enforcement, albeit subject to limitations of varying degrees. The fact that there is no binding universal treaty governing the practice is not indicative of a widespread rejection of the principle, but only a disagreement as to the imposable specific rules governing the procedure for recognition and enforcement. Aside from the widespread practice, it is indubitable that the procedure for recognition and enforcement is embodied in the rules of law, whether statutory or jurisprudential, adopted in various foreign jurisdictions. In the Philippines, this is evidenced primarily by Section 48, Rule 39 of the Rules of Court which has existed in its current form since the early 1900s. Certainly, the Philippine legal system has long ago accepted into its jurisprudence and procedural rules the viability of an action for enforcement of foreign judgment, as well as the requisites for such valid enforcement, as derived from internationally accepted doctrines. Again, there may be distinctions as to the rules adopted by each particular state,69 but they all prescind from the premise that there is a rule of law obliging states to allow for, however generally, the recognition and enforcement of a foreign judgment. The bare principle, to our mind, has attained the status of opinio juris in international practice. This is a significant proposition, as it acknowledges that the procedure and requisites outlined in Section 48, Rule 39 derive

615

their efficacy not merely from the procedural rule, but by virtue of the incorporation clause of the Constitution. Rules of procedure are promulgated by the Supreme Court,70 and could very well be abrogated or revised by the high court itself. Yet the Supreme Court is obliged, as are all State components, to obey the laws of the land, including generally accepted principles of international law which form part thereof, such as those ensuring the qualified recognition and enforcement of foreign judgments.71 Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that there is a general right recognized within our body of laws, and affirmed by the Constitution, to seek recognition and enforcement of foreign judgments, as well as a right to defend against such enforcement on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. The preclusion of an action for enforcement of a foreign judgment in this country merely due to an exhorbitant assessment of docket fees is alien to generally accepted practices and principles in international law. Indeed, there are grave concerns in conditioning the amount of the filing fee on the pecuniary award or the value of the property subject of the foreign decision. Such pecuniary award will almost certainly be in foreign denomination, computed in accordance with the applicable laws and standards of the forum.72 The vagaries of inflation, as well as the relative low-income capacity of the Filipino, to date may very well translate into an

616

award virtually unenforceable in this country, despite its integral validity, if the docket fees for the enforcement thereof were predicated on the amount of the award sought to be enforced. The theory adopted by respondent judge and the Marcos Estate may even lead to absurdities, such as if applied to an award involving real property situated in places such as the United States or Scandinavia where real property values are inexorably high. We cannot very well require that the filing fee be computed based on the value of the foreign property as determined by the standards of the country where it is located. As crafted, Rule 141 of the Rules of Civil Procedure avoids unreasonableness, as it recognizes that the subject matter of an action for enforcement of a foreign judgment is the foreign judgment itself, and not the right-duty correlatives that resulted in the foreign judgment. In this particular circumstance, given that the complaint is lodged against an estate and is based on the US District Court's Final Judgment, this foreign judgment may, for purposes of classification under the governing procedural rule, be deemed as subsumed under Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions not involving property." Thus, only the blanket filing fee of minimal amount is required. Finally, petitioners also invoke Section 11, Article III of the Constitution, which states that "[F]ree access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty." Since the provision is

617

among the guarantees ensured by the Bill of Rights, it certainly gives rise to a demandable right. However, now is not the occasion to elaborate on the parameters of this constitutional right. Given our preceding discussion, it is not necessary to utilize this provision in order to grant the relief sought by the petitioners. It is axiomatic that the constitutionality of an act will not be resolved by the courts if the controversy can be settled on other grounds73 or unless the resolution thereof is indispensable for the determination of the case.74 One more word. It bears noting that Section 48, Rule 39 acknowledges that the Final Judgment is not conclusive yet, but presumptive evidence of a right of the petitioners against the Marcos Estate. Moreover, the Marcos Estate is not precluded to present evidence, if any, of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. This ruling, decisive as it is on the question of filing fees and no other, does not render verdict on the enforceability of the Final Judgment before the courts under the jurisdiction of the Philippines, or for that matter any other issue which may legitimately be presented before the trial court. Such issues are to be litigated before the trial court, but within the confines of the matters for proof as laid down in Section 48, Rule 39. On the other hand, the speedy resolution of this claim by the trial court is encouraged, and contumacious delay of the decision on the merits will not be brooked by this Court.

618

WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED and SET ASIDE, and a new order REINSTATING Civil Case No. 97-1052 is hereby issued. No costs. SO ORDERED.

619

Dacasin v. Dacasin

The Ruling of the Court The trial court has jurisdiction to entertain petitioners suit but not to enforce the Agreement which is void. However, factual and equity considerations militate against the dismissal of petitioners suit and call for the remand of the case to settle the question of Stephanies custody. Regional Trial Courts Vested With Jurisdiction to Enforce Contracts Subject matter jurisdiction is conferred by law. At the time petitioner filed his suit in the trial court, statutory law vests on Regional Trial Courts exclusive original jurisdiction over civil actions incapable of pecuniary estimation.[9] An action for specific performance, such as petitioners suit to enforce the Agreement on joint child custody, belongs to this

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species of actions.[10] Thus, petitioner went to the right court.

jurisdiction-wise,

Indeed, the trial courts refusal to entertain petitioners suit was grounded not on its lack of power to do so but on its thinking that the Illinois courts divorce decree stripped it of jurisdiction. This conclusion is unfounded. What the Illinois court retained was jurisdiction x x x for the purpose of enforcing all and sundry the various provisions of [its] Judgment for Dissolution.[11] Petitioners suit seeks the enforcement not of the various provisions of the divorce decree but of the post-divorce Agreement on joint child custody. Thus, the action lies beyond the zone of the Illinois courts so-called retained jurisdiction. Petitioners Suit Lacks Cause of Action

621

The foregoing notwithstanding, the trial court cannot enforce the Agreement which is contrary to law. In this jurisdiction, parties to a contract are free to stipulate the terms of agreement subject to the minimum ban on stipulations contrary to law, morals, good customs, public order, or public policy.[12] Otherwise, the contract is denied legal existence, deemed inexistent and void from the beginning.[13] For lack of relevant stipulation in the Agreement, these and other ancillary Philippine substantive law serve as default parameters to test the validity of the Agreements joint child custody stipulations.[14] At the time the parties executed the Agreement on 28 January 2002, two facts are undisputed: (1) Stephanie was under seven years old (having

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been born on 21 September 1995); and (2) petitioner and respondent were no longer married under the laws of the United States because of the divorce decree. The relevant Philippine law on child custody for spouses separated in fact or in law[15] (under the second paragraph of Article 213 of the Family Code) is also undisputed: no child under seven years of age shall be separated from the mother x x x.[16] (This statutory awarding of sole parental custody[17] to the mother is mandatory,[18] grounded on sound policy consideration,[19] subject only to a narrow exception not alleged to obtain here.[20]) Clearly then, the Agreements object to establish a post-divorce joint custody regime between respondent and petitioner over their child under seven years old contravenes Philippine law. The Agreement is not only void ab initio for being contrary to law, it has also been repudiated by

623

the mother when she refused to allow joint custody by the father. The Agreement would be valid if the spouses have not divorced or separated because the law provides for joint parental authority when spouses live together.[21] However, upon separation of the spouses, the mother takes sole custody under the law if the child is below seven years old and any agreement to the contrary is void. Thus, the law suspends the joint custody regime for (1) children under seven of (2) separated or divorced spouses. Simply put, for a child within this age bracket (and for commonsensical reasons), the law decides for the separated or divorced parents how best to take care of the child and that is to give custody to the separated mother. Indeed, the separated parents cannot contract away the provision in the Family Code on the maternal custody of children below seven years anymore than they can privately agree that a mother who is unemployed, immoral,

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habitually drunk, drug addict, insane or afflicted with a communicable disease will have sole custody of a child under seven as these are reasons deemed compelling to preclude the application of the exclusive maternal custody regime under the second paragraph of Article 213.[22] It will not do to argue that the second paragraph of Article 213 of the Family Code applies only to judicial custodial agreements based on its text that No child under seven years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise. To limit this provisions enforceability to court sanctioned agreements while placing private agreements beyond its reach is to sanction a double standard in custody regulation of children under seven years old of separated parents. This effectively empowers separated parents, by the simple expedient of avoiding the courts, to subvert a

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legislative policy vesting to the separated mother sole custody of her children under seven years of age to avoid a tragedy where a mother has seen her baby torn away from her.[23] This ignores the legislative basis that [n]o man can sound the deep sorrows of a mother who is deprived of her child of tender age.[24] It could very well be that Article 213s bias favoring one separated parent (mother) over the other (father) encourages paternal neglect, presumes incapacity for joint parental custody, robs the parents of custodial options, or hijacks decision-making between the separated parents.[25] However, these are objections which question the laws wisdom not its validity or uniform enforceability. The forum to air and remedy these grievances is the legislature, not this Court. At any rate, the rules seeming harshness or undesirability is tempered by ancillary agreements

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the separated parents may wish to enter such as granting the father visitation and other privileges. These arrangements are not inconsistent with the regime of sole maternal custody under the second paragraph of Article 213 which merely grants to the mother final authority on the care and custody of the minor under seven years of age, in case of disagreements. Further, the imposed custodial regime under the second paragraph of Article 213 is limited in duration, lasting only until the childs seventh year. From the eighth year until the childs emancipation, the law gives the separated parents freedom, subject to the usual contractual limitations, to agree on custody regimes they see fit to adopt. Lastly, even supposing that petitioner and respondent are not barred from entering into the Agreement for the joint custody of Stephanie, respondent repudiated the

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Agreement by asserting sole custody over Stephanie. Respondents act effectively brought the parties back to ambit of the default custodial regime in the second paragraph of Article 213 of the Family Code vesting on respondent sole custody of Stephanie. Nor can petitioner rely on the divorce decrees alleged invalidity - not because the Illinois court lacked jurisdiction or that the divorce decree violated Illinois law, but because the divorce was obtained by his Filipino spouse[26] - to support the Agreements enforceability. The argument that foreigners in this jurisdiction are not bound by foreign divorce decrees is hardly novel. Van Dorn v. Romillo[27] settled the matter by holding that an alien spouse of a Filipino is bound by a divorce decree obtained abroad.[28] There, we dismissed the alien divorcees Philippine suit for accounting of alleged post-divorce conjugal property and rejected his submission that the foreign divorce

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(obtained by the Filipino spouse) is not valid in this jurisdiction in this wise:
There can be no question as to the validity of that Nevada divorce in any of the States of the United States. The decree is binding on private respondent as an American citizen. For instance, private respondent cannot sue petitioner, as her husband, in any State of the Union. What he is contending in this case is that the divorce is not valid and binding in this jurisdiction, the same being contrary to local law and public policy. It is true that owing to the nationality principle embodied in Article 15 of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces the same being considered contrary to our concept of public policy and morality. However, aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law. In this case, the divorce in Nevada released private respondent from the marriage from the standards of American law, under which divorce dissolves the marriage.

629

xxxx Thus, pursuant to his national law, private respondent is no longer the husband of petitioner. He would have no standing to sue in the case below as petitioners husband entitled to exercise control over conjugal assets. As he is bound by the Decision of his own countrys Court, which validly exercised jurisdiction over him, and whose decision he does not repudiate, he is estopped by his own representation before said Court from asserting his right over the alleged conjugal property. (Emphasis supplied)

We reiterated Van Dorn in Pilapil v. IbaySomera[29] to dismiss criminal complaints for adultery filed by the alien divorcee (who obtained the foreign divorce decree) against his former Filipino spouse because he no longer qualified as offended spouse entitled to file the complaints under Philippine procedural rules. Thus, it should be clear by now that

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a foreign divorce decree carries as much validity against the alien divorcee in this jurisdiction as it does in the jurisdiction of the aliens nationality, irrespective of who obtained the divorce. The Facts of the Case and Nature of Proceeding Justify Remand Instead of ordering the dismissal of petitioners suit, the logical end to its lack of cause of action, we remand the case for the trial court to settle the question of Stephanies custody. Stephanie is now nearly 15 years old, thus removing the case outside of the ambit of the mandatory maternal custody regime under Article 213 and bringing it within coverage of the default standard on child custody proceedings the best interest of the child.[30] As the question of custody is already before the trial court and the childs parents, by executing the Agreement,

631

initially showed inclination to share custody, it is in the interest of swift and efficient rendition of justice to allow the parties to take advantage of the courts jurisdiction, submit evidence on the custodial arrangement best serving Stephanies interest, and let the trial court render judgment. This disposition is consistent with the settled doctrine that in child custody proceedings, equity may be invoked to serve the childs best interest.[31] WHEREFORE, we REVERSE the Orders dated 1 March 2005 and 23 June 2005 of the Regional Trial Court of Makati City, Branch 60. The case is REMANDED for further proceedings consistent with this ruling. SO ORDERED.

632

Corpus v. Sto. Tomas

Same
For the purposes of this case, we shall consider the following facts as established by the evidence or the admissions of the parties: Allison D. Gibbs has been continuously, since the year 1902, a citizen of the State of California and domiciled therein; that he and Eva Johnson Gibbs were married at Columbus, Ohio, in July 1906; that there was no antenuptial marriage contract between the parties; that during the existence of said marriage the spouses acquired the following lands, among others, in the Philippine Islands, as conjugal property:
lawphil.net

V. Nature and Characterization of Conflicts Rules Gibbs v government

1. A parcel of land in the City of Manila represented by transfer certificate of title No. 20880, dated March 16, 1920, and registered in the name of "Allison D. Gibbs casado con Eva Johnson Gibbs". 2. A parcel of land in the City of Manila, represented by transfer certificate of title No. 28336, dated May 14, 1927, in which it is certified "that spouses Allison D. Gibbs and Eva Johnson Gibbs are the owners in fee simple" of the land therein described. 3. A parcel of land in the City of Manila, represented by transfer certificate of title No. 28331, dated April 6, 1927, which it states "that Allison D. Gibbs married to Eva Johnson Gibbs" is the owner of the land described therein; that said Eva Johnson Gibbs died

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intestate on November 28, 1929, living surviving her her husband, the appellee, and two sons, Allison J. Gibbs , now age 25 and Finley J. Gibbs, now aged 22, as her sole heirs of law. Article XI of Chapter 40 of the Administrative Code entitled "Tax on inheritances, legacies and other acquisitions mortis causa" provides in section 1536 that "Every transmission by virtue of inheritance ... of real property ... shall be subject to the following tax." It results that the question for determination in this case is as follows: Was Eva Johnson Gibbs at the time of her death the owner of a descendible interest in the Philippine lands abovementioned? The appellee contends that the law of California should determine the nature and extent of the title, if any, that vested in Eva Johnson Gibbs under the three certificates of title Nos. 20880, 28336 and 28331 above referred to, citing article 9 of the Civil Code. But that, even if the nature and extent of her title under said certificates be governed by the law of the Philippine Islands, the laws of California govern the succession to such title, citing the second paragraph of article 10 of the Civil Code. Article 9 of the Civil Code is as follows: The laws relating to family rights and duties, or to the status, condition, and legal capacity of persons, are binding upon Spaniards even though they reside in a foreign country." It is

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argued that the conjugal right of the California wife in community real estate in the Philippine Islands is a personal right and must, therefore, be settled by the law governing her personal status, that is, the law of California. But our attention has not been called to any law of California that incapacitates a married woman from acquiring or holding land in a foreign jurisdiction in accordance with the lex rei sitae. There is not the slightest doubt that a California married woman can acquire title to land in a common law jurisdiction like the State of Illinois or the District of Columbia, subject to the common-law estate by the courtesy which would vest in her husband. Nor is there any doubt that if a California husband acquired land in such a jurisdiction his wife would be vested with the common law right of dower, the prerequisite conditions obtaining. Article 9 of the Civil Code treats of purely personal relations and status and capacity for juristic acts, the rules relating to property, both personal and real, being governed by article 10 of the Civil Code. Furthermore, article 9, by its very terms, is applicable only to "Spaniards" (now, by construction, to citizens of the Philippine Islands). The Organic Act of the Philippine Islands (Act of Congress, August 29, 1916, known as the "Jones Law") as regards the determination of private rights, grants practical autonomy to the Government of the Philippine Islands. This Government, therefore, may apply the principles and rules of private international law (conflicts of laws) on the same footing as an organized territory or state of the United

635

States. We should, therefore, resort to the law of California, the nationality and domicile of Mrs. Gibbs, to ascertain the norm which would be applied here as law were there any question as to her status. But the appellant's chief argument and the sole basis of the lower court's decision rests upon the second paragraph of article 10 of the Civil Code which is as follows: Nevertheless, legal and testamentary successions, in respect to the order of succession as well as to the amount of the successional rights and the intrinsic validity of their provisions, shall be regulated by the national law of the person whose succession is in question, whatever may be the nature of the property or the country in which it may be situated. In construing the above language we are met at the outset with some difficulty by the expression "the national law of the person whose succession is in question", by reason of the rather anomalous political status of the Philippine Islands. (Cf. Manresa, vol. 1, Codigo Civil, pp. 103, 104.) We encountered no difficulty in applying article 10 in the case of a citizen of Turkey. (Miciano vs. Brimo, 50 Phil., 867.) Having regard to the practical autonomy of the Philippine Islands, as above stated, we have concluded that if article 10 is applicable and the estate in question is that of a deceased American citizen, the succession shall be regulated in accordance with the norms of the State of his domicile in the

636

United States. (Cf. Babcock Templeton vs. Rider Babcock, 52 Phil., 130, 137; In re Estate of Johnson, 39 Phil., 156, 166.) The trial court found that under the law of California, upon the death of the wife, the entire community property without administration belongs to the surviving husband; that he is the absolute owner of all the community property from the moment of the death of his wife, not by virtue of succession or by virtue of her death, but by virtue of the fact that when the death of the wife precedes that of the husband he acquires the community property, not as an heir or as the beneficiary of his deceased wife, but because she never had more than an inchoate interest or expentancy which is extinguished upon her death. Quoting the case of Estate of Klumpke (167 Cal., 415, 419), the court said: "The decisions under this section (1401 Civil Code of California) are uniform to the effect that the husband does not take the community property upon the death of the wife by succession, but that he holds it all from the moment of her death as though required by himself. ... It never belonged to the estate of the deceased wife." The argument of the appellee apparently leads to this dilemma: If he takes nothing by succession from his deceased wife, how can the second paragraph of article 10 be invoked? Can the appellee be heard to say that there is a legal succession under the law of the Philippine Islands and no legal succession under the law of California? It seems clear that the second paragraph of article 10

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applies only when a legal or testamentary succession has taken place in the Philippines and in accordance with the law of the Philippine Islands; and the foreign law is consulted only in regard to the order of succession or the extent of the successional rights; in other words, the second paragraph of article 10 can be invoked only when the deceased was vested with a descendible interest in property within the jurisdiction of the Philippine Islands. In the case of Clarke vs. Clarke (178 U. S., 186, 191; 44 Law ed., 1028, 1031), the court said: It is principle firmly established that to the law of the state in which the land is situated we must look for the rules which govern its descent, alienation, and transfer, and for the effect and construction of wills and other conveyances. (United States vs. Crosby, 7 Cranch, 115; 3 L. ed., 287; Clark vs. Graham, 6 Wheat., 577; 5 L. ed., 334; McGoon vs. Scales, 9 Wall., 23; 19 L. ed., 545; Brine vs. Hartford F. Ins. Co., 96 U. S., 627; 24 L. ed., 858.)" (See also Estate of Lloyd, 175 Cal., 704, 705.) This fundamental principle is stated in the first paragraph of article 10 of our Civil Code as follows: "Personal property is subject to the laws of the nation of the owner thereof; real property to the laws of the country in which it is situated. It is stated in 5 Cal. Jur., 478: In accord with the rule that real property is subject to the lex rei

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sitae, the respective rights of husband and wife in such property, in the absence of an antenuptial contract, are determined by the law of the place where the property is situated, irrespective of the domicile of the parties or to the place where the marriage was celebrated. (See also Saul vs. His Creditors, 5 Martin [N. S.], 569; 16 Am. Dec., 212 [La.]; Heidenheimer vs. Loring, 26 S. W., 99 [Texas].) Under this broad principle, the nature and extent of the title which vested in Mrs. Gibbs at the time of the acquisition of the community lands here in question must be determined in accordance with the lex rei sitae. It is admitted that the Philippine lands here in question were acquired as community property of the conjugal partnership of the appellee and his wife. Under the law of the Philippine Islands, she was vested of a title equal to that of her husband. Article 1407 of the Civil Code provides: All the property of the spouses shall be deemed partnership property in the absence of proof that it belongs exclusively to the husband or to the wife. Article 1395 provides: "The conjugal partnership shall be governed by the rules of law applicable to the contract of partnership in all matters in which such rules do not conflict with the express provisions of this chapter." Article 1414 provides that "the husband may dispose by

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will of his half only of the property of the conjugal partnership." Article 1426 provides that upon dissolution of the conjugal partnership and after inventory and liquidation, "the net remainder of the partnership property shall be divided share and share alike between the husband and wife, or their respective heirs." Under the provisions of the Civil Code and the jurisprudence prevailing here, the wife, upon the acquisition of any conjugal property, becomes immediately vested with an interest and title therein equal to that of her husband, subject to the power of management and disposition which the law vests in the husband. Immediately upon her death, if there are no obligations of the decedent, as is true in the present case, her share in the conjugal property is transmitted to her heirs by succession. (Articles 657, 659, 661, Civil Code; cf. also Coronel vs. Ona, 33 Phil., 456, 469.) It results that the wife of the appellee was, by the law of the Philippine Islands, vested of a descendible interest, equal to that of her husband, in the Philippine lands covered by certificates of title Nos. 20880, 28336 and 28331, from the date of their acquisition to the date of her death. That appellee himself believed that his wife was vested of such a title and interest in manifest from the second of said certificates, No. 28336, dated May 14, 1927, introduced by him in evidence, in which it is certified that "the spouses Allison D. Gibbs and Eva Johnson Gibbs are the owners in fee simple of the conjugal lands therein described." The descendible interest of Eva Johnson Gibbs in the lands

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aforesaid was transmitted to her heirs by virtue of inheritance and this transmission plainly falls within the language of section 1536 of Article XI of Chapter 40 of the Administrative Code which levies a tax on inheritances. (Cf. Re Estate of Majot, 199 N. Y., 29; 92 N. E., 402; 29 L. R. A. [N. S.], 780.) It is unnecessary in this proceeding to determine the "order of succession" or the "extent of the successional rights" (article 10, Civil Code, supra) which would be regulated by section 1386 of the Civil Code of California which was in effect at the time of the death of Mrs. Gibbs. The record does not show what the proper amount of the inheritance tax in this case would be nor that the appellee (petitioner below) in any way challenged the power of the Government to levy an inheritance tax or the validity of the statute under which the register of deeds refused to issue a certificate of transfer reciting that the appellee is the exclusive owner of the Philippine lands included in the three certificates of title here involved. The judgment of the court below of March 10, 1931, is reversed with directions to dismiss the petition, without special pronouncement as to the costs.

641