G.R. No.

128845

June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting
Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the
Superintendent of International School-Manila; and INTERNATIONAL SCHOOL,
INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private
respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are
paid more than their colleagues in other schools is, of course, beside the point. The point is
that employees should be given equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on fundamental notions of justice.
That is the principle we uphold today.1wphi1.nt
Private respondent International School, Inc. (the School, for short), pursuant to
Presidential Decree 732, is a domestic educational institution established primarily for
1
dependents of foreign diplomatic personnel and other temporary residents. To enable the
School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to employ its own
teaching and management personnel selected by it either locally or abroad, from Philippine
or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for
the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty,
classifying the same into two: (1) foreign-hires and (2) local-hires. The School employs four
tests to determine whether a faculty member should be classified as a foreign-hire or a
local hire:
a. What is one's domicile?
b. Where is one's home economy?

The School grants foreign-hires certain benefits not accorded local-hires.1avvphi1 These
include housing, transportation, shipping costs, taxes, and home leave travel allowance.
Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires.
The School justifies the difference on two "significant economic disadvantages" foreignhires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School
explains:
A foreign-hire would necessarily have to uproot himself from his home country,
leave his family and friends, and take the risk of deviating from a promising career
path all for the purpose of pursuing his profession as an educator, but this time
in a foreign land. The new foreign hire is faced with economic realities: decent
abode for oneself and/or for one's family, effective means of transportation,
allowance for the education of one's children, adequate insurance against illness
and death, and of course the primary benefit of a basic salary/retirement
compensation.
Because of a limited tenure, the foreign hire is confronted again with the same
economic reality after his term: that he will eventually and inevitably return to his
home country where he will have to confront the uncertainty of obtaining suitable
employment after along period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain
competitive on an international level in terms of attracting competent professionals
3
in the field of international education.
When negotiations for a new collective bargaining agreement were held on June 1995,
petitioner International School Alliance of Educators, "a legitimate labor union and the
4
collective bargaining representative of all faculty members" of the School, contested the
difference in salary rates between foreign and local-hires. This issue, as well as the
question of whether foreign-hires should be included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National
Conciliation and Mediation Board to bring the parties to a compromise prompted the
Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On
June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order
resolving the parity and representation issues in favor of the School. Then DOLE Secretary
Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an
Order dated March 19, 1997. Petitioner now seeks relief in this Court.

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the
2
School responsible for bringing that individual to the Philippines?
Should the answer to any of these queries point to the Philippines, the faculty member is
classified as a local hire; otherwise, he or she is deemed a foreign-hire.

Petitioner claims that the point-of-hire classification employed by the School is

discriminatory to Filipinos and that the grant of higher salaries to foreign-hires constitutes
racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members,
numbering 38 in all, with nationalities other than Filipino, who have been hired locally and

classified as local hires. The Acting Secretary of Labor found that these non-Filipino localhires received the same benefits as the Filipino local-hires.
The compensation package given to local-hires has been shown to apply to all,
regardless of race. Truth to tell, there are foreigners who have been hired locally
6
and who are paid equally as Filipino local hires.
The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:
The Principle "equal pay for equal work" does not find applications in the present
case. The international character of the School requires the hiring of foreign
personnel to deal with different nationalities and different cultures, among the
student population.
We also take cognizance of the existence of a system of salaries and benefits
accorded to foreign hired personnel which system is universally recognized. We
agree that certain amenities have to be provided to these people in order to entice
them to render their services in the Philippines and in the process remain
competitive in the international market.

The Union cannot also invoke the equal protection clause to justify its claim of
parity. It is an established principle of constitutional law that the guarantee of
equal protection of the laws is not violated by legislation or private covenants
based on reasonable classification. A classification is reasonable if it is based on
substantial distinctions and apply to all members of the same class. Verily, there is
a substantial distinction between foreign hires and local hires, the former enjoying
only a limited tenure, having no amenities of their own in the Philippines and have
to be given a good compensation package in order to attract them to join the
7
teaching faculty of the School.
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our
8
Constitution and laws reflect the policy against these evils. The Constitution in the Article
on Social Justice and Human Rights exhorts Congress to "give highest priority to the
enactment of measures that protect and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his rights and in the performance of his
duties, [to] act with justice, give everyone his due, and observe honesty and good faith.
9

Furthermore, we took note of the fact that foreign hires have limited contract of
employment unlike the local hires who enjoy security of tenure. To apply parity
therefore, in wages and other benefits would also require parity in other terms and
conditions of employment which include the employment which include the
employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions
for salary and professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in
accordance with Appendix C hereof provided that the Superintendent of
the School has the discretion to recruit and hire expatriate teachers from
abroad, under terms and conditions that are consistent with accepted
international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas
Recruited Staff (OSRS) salary schedule. The 25% differential is reflective
of the agreed value of system displacement and contracted status of the
OSRS as differentiated from the tenured status of Locally Recruited Staff
(LRS).
To our mind, these provisions demonstrate the parties' recognition of the
difference in the status of two types of employees, hence, the difference in their
salaries.

International law, which springs from general principles of law, likewise proscribes
10
discrimination. General principles of law include principles of equity, i.e., the general
11
principles of fairness and justice, based on the test of what is reasonable. The Universal
12
Declaration of Human Rights, the International Covenant on Economic, Social, and
13
Cultural Rights, the International Convention on the Elimination of All Forms of Racial
14
15
Discrimination, the Convention against Discrimination in Education, the Convention
16
(No. 111) Concerning Discrimination in Respect of Employment and Occupation all
embody the general principle against discrimination, the very antithesis of fairness and
justice. The Philippines, through its Constitution, has incorporated this principle as part of
its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor
of capital, inequality and discrimination by the employer are all the more reprehensible.
17

The Constitution specifically provides that labor is entitled to "humane conditions of

work." These conditions are not restricted to the physical workplace the factory, the
office or the field but include as well the manner by which employers treat their
employees.
18

The Constitution also directs the State to promote "equality of employment opportunities
19
for all." Similarly, the Labor Code provides that the State shall "ensure equal work
opportunities regardless of sex, race or creed." It would be an affront to both the spirit and
letter of these provisions if the State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to unequal and discriminatory
20
terms and conditions of employment.

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article
21
135, for example, prohibits and penalizes the payment of lesser compensation to a
female employee as against a male employee for work of equal value. Article 248 declares
it an unfair labor practice for an employer to discriminate in regard to wages in order to
encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in
Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the
enjoyment of just and favourable conditions of work, which ensure, in particular:
a. Remuneration which provides all workers, as a minimum, with:
(i) Fair wages and equal remuneration for work of equal value
without distinction of any kind, in particular women being
guaranteed conditions of work not inferior to those enjoyed by
men, with equal pay for equal work;
xxx

xxx

xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored
legal truism of "equal pay for equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar conditions, should be paid similar
22
salaries. This rule applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform
23
work equal to that of foreign-hires. The Court finds this argument a little cavalier. If an
employer accords employees the same position and rank, the presumption is that these
employees perform equal work. This presumption is borne by logic and human experience.
If the employer pays one employee less than the rest, it is not for that employee to explain
why he receives less or why the others receive more. That would be adding insult to injury.
The employer has discriminated against that employee; it is for the employer to explain why
the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here
that foreign-hires perform 25% more efficiently or effectively than the local-hires. Both
groups have similar functions and responsibilities, which they perform under similar working
conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to
rationalize the distinction in salary rates without violating the principle of equal work for
equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for
services performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the

"[c]onsideration paid at regular intervals for the rendering of services." In Songco

24
v. National Labor Relations Commission, we said that:
"salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more
fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental
idea of compensation for services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be
used as an enticement to the prejudice of local-hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same salaries as the latter. For the
same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation factor and limited tenure
affecting foreign-hires are adequately compensated by certain benefits accorded them
which are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes
and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their
25
26
welfare," "to afford labor full protection." The State, therefore, has the right and duty to
27
regulate the relations between labor and capital. These relations are not merely
contractual but are so impressed with public interest that labor contracts, collective
28
bargaining agreements included, must yield to the common good. Should such contracts
contain stipulations that are contrary to public policy, courts will not hesitate to strike down
these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to
justify the distinction in the salary rates of foreign-hires and local hires to be an invalid
classification. There is no reasonable distinction between the services rendered by foreignhires and local-hires. The practice of the School of according higher salaries to foreignhires contravenes public policy and, certainly, does not deserve the sympathy of this
Court.1avvphi1
We agree, however, that foreign-hires do not belong to the same bargaining unit as the
local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less
than all of the entire body of employees, consistent with equity to the employer, indicate to
be the best suited to serve the reciprocal rights and duties of the parties under the
29
collective bargaining provisions of the law." The factors in determining the appropriate
collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and
unity of the employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3)
30
prior collective bargaining history; and (4) similarity of employment status. The basic test
of an asserted bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their collective
31
bargaining rights.

It does not appear that foreign-hires have indicated their intention to be grouped together
with local-hires for purposes of collective bargaining. The collective bargaining history in the
School also shows that these groups were always treated separately. Foreign-hires have
limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreign-hires are accorded
certain benefits not granted to local-hires. These benefits, such as housing, transportation,
shipping costs, taxes, and home leave travel allowance, are reasonably related to their
status as foreign-hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either group the exercise
of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN
PART. The Orders of the Secretary of Labor and Employment dated June 10, 1996 and
March 19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the
practice of respondent School of according foreign-hires higher salaries than local-hires.
SO ORDERED.

G.R. No. 114974

June 16, 2004

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner,

vs.
The Honorable MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF
LABOR AND EMPLOYMENT; and the STANDARD CHARTERED BANK, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard
Chartered Bank Employees Union, seeking the nullification of the October 29, 1993
1
Order of then Secretary of Labor and Employment Nieves R. Confesor and her resolutions
dated December 16, 1993 and February 10, 1994.
The Antecedents
Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing
business in the Philippines. The exclusive bargaining agent of the rank and file employees
of the Bank is the Standard Chartered Bank Employees Union (the Union, for brevity).
In August of 1990, the Bank and the Union signed a five-year collective bargaining
agreement (CBA) with a provision to renegotiate the terms thereof on the third year. Prior to
2
the expiration of the three-year period but within the sixty-day freedom period, the Union
initiated the negotiations. On February 18, 1993, the Union, through its President, Eddie L.
3
4
5
Divinagracia, sent a letter containing its proposals covering political provisions and thirty6
four (34) economic provisions. Included therein was a list of the names of the members of
7
the Unions negotiating panel.

On March 12, 1993, the parties met and set the ground rules for the negotiation. Diokno
suggested that the negotiation be kept a "family affair." The proposed non-economic
13
provisions of the CBA were discussed first. Even during the final reading of the noneconomic provisions on May 4, 1993, there were still provisions on which the Union and the
Bank could not agree. Temporarily, the notation "DEFERRED" was placed therein.
Towards the end of the meeting, the Union manifested that the same should be changed to
"DEADLOCKED" to indicate that such items remained unresolved. Both parties agreed to
14
place the notation "DEFERRED/DEADLOCKED."
On May 18, 1993, the negotiation for economic provisions commenced. A presentation of
the basis of the Unions economic proposals was made. The next meeting, the Bank made
a similar presentation. Towards the end of the Banks presentation, Umali requested the
Bank to validate the Unions "guestimates," especially the figures for the rank and file
15
staff. In the succeeding meetings, Umali chided the Bank for the insufficiency of its
counter-proposal on the provisions on salary increase, group hospitalization, death
assistance and dental benefits. He reminded the Bank, how the Union got what it wanted in
1987, and stated that if need be, the Union would go through the same route to get what it
16
wanted.
Upon the Banks insistence, the parties agreed to tackle the economic package item by
item. Upon the Unions suggestion, the Bank indicated which provisions it would accept,
17
reject, retain and agree to discuss. The Bank suggested that the Union prioritize its
economic proposals, considering that many of such economic provisions remained
unresolved. The Union, however, demanded that the Bank make a revised itemized
proposal.
In the succeeding meetings, the Union made the following proposals:
Wage Increase:
1st Year Reduced from 45% to 40%

In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H.
Harris, took note of the Unions proposals. The Bank attached its counter-proposal to the
8
non-economic provisions proposed by the Union. The Bank posited that it would be in a
better position to present its counter-proposals on the economic items after the Union had
9
presented its justifications for the economic proposals. The Bank, likewise, listed the
10
members of its negotiating panel. The parties agreed to set meetings to settle their
differences on the proposed CBA.
Before the commencement of the negotiation, the Union, through Divinagracia, suggested
to the Banks Human Resource Manager and head of the negotiating panel, Cielito Diokno,
that the bank lawyers should be excluded from the negotiating team. The Bank
11
acceded. Meanwhile, Diokno suggested to Divinagracia that Jose P. Umali, Jr., the
President of the National Union of Bank Employees (NUBE), the federation to which the
12
Union was affiliated, be excluded from the Unions negotiating panel. However, Umali was
retained as a member thereof.

2nd Year - Retain at 20%

Total = 60%
Group Hospitalization Insurance:
Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness
annually
Death Assistance:
For the employee Reduced from P50,000.00 to P45,000.00
For Immediate Family Member Reduced from P30,000.00 to P25,000.00

18

Dental and all others No change from the original demand.

In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would
not make the necessary revisions on its counter-proposal, it would be best to seek a third
19
20
party assistance. After the break, the Bank presented its revised counter-proposal as
follows:
Wage Increase : 1st Year from P1,000 to P1,050.00

Permanent Filling 200.00

Prophylaxis 250.00
Root Canal From P2,000 per tooth
To: 1,800.00 per tooth
Death Assistance:

2nd Year P800.00 no change

For Employees: From P45,000.00 to P40,000.00

Group Hospitalization Insurance

For Immediate Family Member: From P25,000.00 to P20,000.00.

From: P35,000.00 per illness

22

The Unions original proposals, aside from the above-quoted, remained the same.

To : P35,000.00 per illness per year

Another set of counter-offer followed:

Death Assistance For employee

Management

From: P20,000.00

Union

Wage Increase

To : P25,000.00

1st Year P1,050.00 40%

Dental Retainer Original offer remains the same

21

2nd Year - 850.00

23

19.0%

The Union, for its part, made the following counter-proposal:

Wage Increase: 1st Year - 40%
2nd Year - 19.5%
Group Hospitalization Insurance
From: P60,000.00 per year
To : P50,000.00 per year

Diokno stated that, in order for the Bank to make a better offer, the Union should clearly
identify what it wanted to be included in the total economic package. Umali replied that it
was impossible to do so because the Banks counter-proposal was unacceptable. He
furthered asserted that it would have been easier to bargain if the atmosphere was the
same as before, where both panels trusted each other. Diokno requested the Union panel
24
to refrain from involving personalities and to instead focus on the negotiations. He
suggested that in order to break the impasse, the Union should prioritize the items it
wanted to iron out. Divinagracia stated that the Bank should make the first move and make
a list of items it wanted to be included in the economic package. Except for the provisions
on signing bonus and uniforms, the Union and the Bank failed to agree on the remaining
25
economic provisions of the CBA. The Union declared a deadlock and filed a Notice of
Strike before the National Conciliation and Mediation Board (NCMB) on June 21, 1993,
26
docketed as NCMB-NCR-NS-06-380-93.

Dental:
Temporary Filling/ P150.00
Tooth Extraction

On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and
Damages before the Arbitration Branch of the National Labor Relations Commission
(NLRC) in Manila, docketed as NLRC Case No. 00-06-04191-93 against the Union on June
28, 1993. The Bank alleged that the Union violated its duty to bargain, as it did not bargain
in good faith. It contended that the Union demanded "sky high economic demands,"

27

indicative ofblue-sky bargaining. Further, the Union violated its no strike- no lockout
clause by filing a notice of strike before the NCMB. Considering that the filing of notice of
strike was an illegal act, the Union officers should be dismissed. Finally, the Bank alleged
that as a consequence of the illegal act, the Bank suffered nominal and actual damages
28
and was forced to litigate and hire the services of the lawyer.
On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor,
pursuant to Article 263(g) of the Labor Code, issued an Order assuming jurisdiction over
the labor dispute at the Bank. The complaint for ULP filed by the Bank before the NLRC
was consolidated with the complaint over which the SOLE assumed jurisdiction. After the
parties submitted their respective position papers, the SOLE issued an Order on October
29, 1993, the dispositive portion of which is herein quoted:
WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank
Employees Union NUBE are hereby ordered to execute a collective bargaining
agreement incorporating the dispositions contained herein. The CBA shall be
retroactive to 01 April 1993 and shall remain effective for two years thereafter, or
until such time as a new CBA has superseded it. All provisions in the expired CBA
not expressly modified or not passed upon herein are deemed retained while all
new provisions which are being demanded by either party are deemed denied, but
without prejudice to such agreements as the parties may have arrived at in the
meantime.
The Banks charge for unfair labor practice which it originally filed with the NLRC
as NLRC-NCR Case No. 00-06-04191-93 but which is deemed consolidated
herein, is dismissed for lack of merit. On the other hand, the Unions charge for
unfair labor practice is similarly dismissed.

Fifth year : P400.00 per month

2. Group Insurance
a) Hospitalization : P45,000.00
b) Life : P130,000.00
c) Accident : P130,000.00
3. Medicine Allowance
Fourth year : P5,500.00
Fifth year : P6,000.00
4. Dental Benefits
Provision of dental retainer as proposed by the Bank, but without diminishing
existing benefits
5. Optical Allowance
Fourth year: P2,000.00
Fifth year : P2,500.00

Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR
29
Case No. 00-06-04191-93 is pending for his guidance and appropriate action.

6. Death Assistance
The SOLE gave the following economic awards:
a) Employee : P30,000.00
1. Wage Increase:
b) Immediate Family Member : P5,000.00
a) To be incorporated to present salary rates:
7. Emergency Leave Five (5) days for each contingency
Fourth year : 7% of basic monthly salary
8. Loans
Fifth year : 5% of basic monthly salary based on the 4th year adjusted
salary
b) Additional fixed amount:
Fourth year : P600.00 per month

a) Car Loan : P200,000.00

b) Housing Loan : It cannot be denied that the costs attendant to having
ones own home have tremendously gone up. The need, therefore, to
improve on this benefit cannot be overemphasized. Thus, the
management is urged to increase the existing and allowable housing

loan that the Bank extends to its employees to an amount that will give
30
meaning and substance to this CBA benefit.
The SOLE dismissed the charges of ULP of both the Union and the Bank, explaining that
both parties failed to substantiate their claims. Citing National Labor Union v. Insular31
Yebana Tobacco Corporation, the SOLE stated that ULP charges would prosper only if
shown to have directly prejudiced the public interest.
Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank
filed a motion for reconsideration. On December 16, 1993, the SOLE issued a Resolution
denying the motions. The Union filed a second motion for reconsideration, which was,
likewise, denied on February 10, 1994.
32

On March 22, 1994, the Bank and the Union signed the CBA. Immediately thereafter, the
wage increase was effected and the signing bonuses based on the increased wage were
distributed to the employees covered by the CBA.
The Present Petition
On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of the Rules of
Procedure alleging as follows:
A. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING
THE UNIONS CHARGE OF UNFAIR LABOR PRACTICE IN VIEW OF THE
CLEAR EVIDENCE OF RECORD AND ADMISSIONS PROVING THE UNFAIR
33
LABOR PRACTICES CHARGED.
B. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO
34
RULE ON OTHER UNFAIR LABOR PRACTICES CHARGED.
C. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING
THE CHARGES OF UNFAIR LABOR PRACTICES ON THE GROUND THAT NO
35
PROOF OF INJURY TO THE PUBLIC INTEREST WAS PRESENTED.
The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it found that the Bank did not commit unfair labor practice when
it interfered with the Unions choice of negotiator. It argued that, Dioknos suggestion that
the negotiation be limited as a "family affair" was tantamount to suggesting that Federation
President Jose Umali, Jr. be excluded from the Unions negotiating panel. It further argued
that contrary to the ruling of the public respondent, damage or injury to the public interest
need not be present in order for unfair labor practice to prosper.

The Union, likewise, pointed out that the public respondent failed to rule on the ULP
charges arising from the Banks surface bargaining. The Union contended that the Bank
merely went through the motions of collective bargaining without the intent to reach an
agreement, and made bad faith proposals when it announced that the parties should begin
from a clean slate. It argued that the Bank opened the political provisions "up for grabs,"
which had the effect of diminishing or obliterating the gains that the Union had made.
The Union also accused the Bank of refusing to disclose material and necessary data, even
after a request was made by the Union to validate its "guestimates."
In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped,
considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994. It
asserted that contrary to the Unions allegations, it was the Union that committed ULP
when negotiator Jose Umali, Jr. hurled invectives at the Banks head negotiator, Cielito
Diokno, and demanded that she be excluded from the Banks negotiating team. Moreover,
the Union engaged in blue-sky bargaining and isolated the no strike-no lockout clause of
the existing CBA.
The Office of the Solicitor General, in representation of the public respondent, prayed that
the petition be dismissed. It asserted that the Union failed to prove its ULP charges and
that the public respondent did not commit any grave abuse of discretion in issuing the
assailed order and resolutions.
The Issues
The issues presented for resolution are the following: (a) whether or not the Union was able
to substantiate its claim of unfair labor practice against the Bank arising from the latters
alleged "interference" with its choice of negotiator; surface bargaining; making bad faith
non-economic proposals; and refusal to furnish the Union with copies of the relevant data;
(b) whether or not the public respondent acted with grave abuse of discretion amounting to
lack or excess of jurisdiction when she issued the assailed order and resolutions; and, (c)
whether or not the petitioner is estopped from filing the instant action.
The Courts Ruling
The petition is bereft of merit.
"Interference" under Article
248 (a) of the Labor Code
The petitioner asserts that the private respondent committed ULP, i.e., interference in the
selection of the Unions negotiating panel, when Cielito Diokno, the Banks Human
Resource Manager, suggested to the Unions President Eddie L. Divinagracia that Jose P.
Umali, Jr., President of the NUBE, be excluded from the Unions negotiating panel. In
support of its claim, Divinagracia executed an affidavit, stating that prior to the

commencement of the negotiation, Diokno approached him and suggested the exclusion of
Umali from the Unions negotiating panel, and that during the first meeting, Diokno stated
that the negotiation be kept a "family affair."
36

37

Citing the cases of U.S. Postal Service and Harley Davidson Motor Co., Inc., AMF, the
Union claims that interference in the choice of the Unions bargaining panel is tantamount
to ULP.
In the aforecited cases, the alleged ULP was based on the employers violation of Section
38
8(a)(1) and (5) of the National Labor Relations Act (NLRA), which pertain to the
interference, restraint or coercion of the employer in the employees exercise of their rights
to self-organization and to bargain collectively through representatives of their own
choosing; and the refusal of the employer to bargain collectively with the employees
representatives. In both cases, the National Labor Relations Board held that upon the
employers refusal to engage in negotiations with the Union for collective-bargaining
contract when the Union includes a person who is not an employee, or one who is a
member or an official of other labororganizations, such employer is engaged in unfair labor
practice under Section 8(a)(1) and (5) of the NLRA.

2. In particular, acts which are designed to promote the establishment of workers

organizations under the domination of employers or employers organizations or to
support workers organizations by financial or other means, with the object of
placing such organizations under the control of employers or employers
organizations within the meaning of this Article.
The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article
243 thereof, which provides:
ART. 243. COVERAGE AND EMPLOYEES RIGHT TO SELF-ORGANIZATION.
All persons employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical or educational institutions whether operating for profit
or not, shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining.
Ambulant, intermittent and itinerant workers, self-employed people, rural workers
and those without any definite employers may form labor organizations for their
mutual aid and protection.
and Articles 248 and 249 respecting ULP of employers and labor organizations.

The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association
39
NATU vs. Insular Life Assurance Co. Ltd., wherein this Court said that the test of
whether an employer has interfered with and coerced employees in the exercise of their
right to self-organization within the meaning of subsection (a)(1) is whether the employer
has engaged in conduct which it may reasonably be said, tends to interfere with the free
40
exercise of employees rights under Section 3 of the Act. Further, it is not necessary that
there be direct evidence that any employee was in fact intimidated or coerced by
statements of threats of the employer if there is a reasonable inference that anti-union
conduct of the employer does have an adverse effect on self-organization and collective
41
bargaining.

The said ILO Conventions were ratified on December 29, 1953. However, even as early as
44
the 1935 Constitution, the State had already expressly bestowed protection to labor as
45
part of the general provisions. The 1973 Constitution, on the other hand, declared it as a
policy of the state to afford protection to labor, specifying that the workers rights to selforganization, collective bargaining, security of tenure, and just and humane conditions of
work would be assured. For its part, the 1987 Constitution, aside from making it a policy to
46
"protect the rights of workers and promote their welfare," devotes an entire section,
emphasizing its mandate to afford protection to labor, and highlights "the principle of shared
47
responsibility" between workers and employers to promote industrial peace.

Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF

ASSOCIATION AND PROTECTION OF THE RIGHT TO ORGANIZE to which the
Philippines is a signatory, "workers and employers, without distinction whatsoever, shall
have the right to establish and, subject only to the rules of the organization concerned, to
42
job organizations of their own choosing without previous authorization."

Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer
interferes, restrains or coerces employees in the exercise of their right to self-organization
or the right to form association. The right to self-organization necessarily includes the right
to collective bargaining.

Workers and employers organizations shall have the right to draw up their constitutions
and rules, to elect their representatives in full freedom to organize their administration and
43
activities and to formulate their programs. Article 2 of ILO Convention No. 98 pertaining to
the Right to Organize and Collective Bargaining, provides:

Parenthetically, if an employer interferes in the selection of its negotiators or coerces the

Union to exclude from its panel of negotiators a representative of the Union, and if it can be
inferred that the employer adopted the said act to yield adverse effects on the free exercise
to right to self-organization or on the right to collective bargaining of the employees, ULP
under Article 248(a) in connection with Article 243 of the Labor Code is committed.

Article 2
1. Workers and employers organizations shall enjoy adequate protection against
any acts or interference by each other or each others agents or members in their
establishment, functioning or administration.

In order to show that the employer committed ULP under the Labor Code, substantial
evidence is required to support the claim. Substantial evidence has been defined as such
relevant evidence as a reasonable mind might accept as adequate to support a
48
conclusion. In the case at bar, the Union bases its claim of interference on the alleged
suggestions of Diokno to exclude Umali from the Unions negotiating panel.

The circumstances that occurred during the negotiation do not show that the suggestion
made by Diokno to Divinagracia is an anti-union conduct from which it can be inferred that
the Bank consciously adopted such act to yield adverse effects on the free exercise of the
right to self-organization and collective bargaining of the employees, especially considering
that such was undertaken previous to the commencement of the negotiation and
simultaneously with Divinagracias suggestion that the bank lawyers be excluded from its
negotiating panel.
The records show that after the initiation of the collective bargaining process, with the
inclusion of Umali in the Unions negotiating panel, the negotiations pushed through. The
complaint was made only on August 16, 1993 after a deadlock was declared by the Union
on June 15, 1993.
It is clear that such ULP charge was merely an afterthought. The accusation occurred after
the arguments and differences over the economic provisions became heated and the
parties had become frustrated. It happened after the parties started to involve personalities.
As the public respondent noted, passions may rise, and as a result, suggestions given
49
under less adversarial situations may be colored with unintended meanings. Such is what
appears to have happened in this case.
The Duty to Bargain
Collectively
If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the
normal relations and innocent communications, which are all part of the friendly relations
between the Union and Bank.
The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under
Article 248(g) when it engaged in surface bargaining. It alleged that the Bank just went
through the motions of bargaining without any intent of reaching an agreement, as evident
in the Banks counter-proposals. It explained that of the 34 economic provisions it made,
the Bank only made 6 economic counterproposals. Further, as borne by the minutes of the
meetings, the Bank, after indicating the economic provisions it had rejected, accepted,
retained or were open for discussion, refused to make a list of items it agreed to include in
the economic package.
Surface bargaining is defined as "going through the motions of negotiating" without any
50
legal intent to reach an agreement. The resolution of surface bargaining allegations never
presents an easy issue. The determination of whether a party has engaged in unlawful
surface bargaining is usually a difficult one because it involves, at bottom, a question of the
intent of the party in question, and usually such intent can only be inferred from the totality
51
of the challenged partys conduct both at and away from the bargaining table. It involves
the question of whether an employers conduct demonstrates an unwillingness to bargain in
52
good faith or is merely hard bargaining.

The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank
had any intention of violating its duty to bargain with the Union. Records show that after the
Union sent its proposal to the Bank on February 17, 1993, the latter replied with a list of its
counter-proposals on February 24, 1993. Thereafter, meetings were set for the settlement
of their differences. The minutes of the meetings show that both the Bank and the Union
exchanged economic and non-economic proposals and counter-proposals.
The Union has not been able to show that the Bank had done acts, both at and away from
the bargaining table, which tend to show that it did not want to reach an agreement with the
Union or to settle the differences between it and the Union. Admittedly, the parties were not
able to agree and reached a deadlock. However, it is herein emphasized that the duty to
bargain "does not compel either party to agree to a proposal or require the making of a
53
concession." Hence, the parties failure to agree did not amount to ULP under Article
248(g) for violation of the duty to bargain.
We can hardly dispute this finding, for it finds support in the evidence. The inference that
respondents did not refuse to bargain collectively with the complaining union because they
accepted some of the demands while they refused the others even leaving open other
demands for future discussion is correct, especially so when those demands were
discussed at a meeting called by respondents themselves precisely in view of the letter
54
sent by the union on April 29, 1960
In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank
made bad-faith provisions has no leg to stand on. The records show that the Banks
counterproposals on the non-economic provisions or political provisions did not put "up for
grabs" the entire work of the Union and its predecessors. As can be gleaned from the
Banks counterproposal, there were many provisions which it proposed to be retained. The
revisions on the other provisions were made after the parties had come to an agreement.
Far from buttressing the Unions claim that the Bank made bad-faith proposals on the noneconomic provisions, all these, on the contrary, disprove such allegations.
We, likewise, find that the Union failed to substantiate its claim that the Bank refused to
furnish the information it needed.
While the refusal to furnish requested information is in itself an unfair labor practice, and
55
also supports the inference of surface bargaining, in the case at bar, Umali, in a meeting
dated May 18, 1993, requested the Bank to validate its guestimates on the data of the rank
and file. However, Umali failed to put his request in writing as provided for in Article 242(c)
of the Labor Code:
Article 242. Rights of Legitimate Labor Organization
(c) To be furnished by the employer, upon written request, with the annual audited
financial statements, including the balance sheet and the profit and loss
statement, within thirty (30) calendar days from the date of receipt of the request,
after the union has been duly recognized by the employer or certified as the sole
and exclusive bargaining representatives of the employees in the bargaining unit,

or within sixty (60) calendar days before the expiration of the existing collective
bargaining agreement, or during the collective negotiation;
The Union, did not, as the Labor Code requires, send a written request for the issuance of
a copy of the data about the Banks rank and file employees. Moreover, as alleged by the
Union, the fact that the Bank made use of the aforesaid guestimates, amounts to a
validation of the data it had used in its presentation.

In the case, however, the approval of the CBA and the release of signing bonus do not
necessarily mean that the Union waived its ULP claim against the Bank during the past
negotiations. After all, the conclusion of the CBA was included in the order of the SOLE,
while the signing bonus was included in the CBA itself. Moreover, the Union twice filed a
motion for reconsideration respecting its ULP charges against the Bank before the SOLE.
The Union Did Not Engage

No Grave Abuse of Discretion

In Blue-Sky Bargaining

On the Part of the Public Respondent

We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky
59
bargaining or making exaggerated or unreasonable proposals. The Bank failed to show
that the economic demands made by the Union were exaggerated or unreasonable. The
minutes of the meeting show that the Union based its economic proposals on data of rank
and file employees and the prevailing economic benefits received by bank employees from
other foreign banks doing business in the Philippines and other branches of the Bank in the
Asian region.

The special civil action for certiorari may be availed of when the tribunal, board, or officer
exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction
and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of
56
law for the purpose of annulling the proceeding. Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or
where the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility which must be so patent and gross as to amount to an invasion of positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of
57
law. Mere abuse of discretion is not enough.
While it is true that a showing of prejudice to public interest is not a requisite for ULP
charges to prosper, it cannot be said that the public respondent acted in capricious and
whimsical exercise of judgment, equivalent to lack of jurisdiction or excess thereof. Neither
was it shown that the public respondent exercised its power in an arbitrary and despotic
manner by reason of passion or personal hostility.
Estoppel not Applicable
In the Case at Bar
The respondent Bank argues that the petitioner is estopped from raising the issue of ULP
when it signed the new CBA.
Article 1431 of the Civil Code provides:
Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying
thereon.
A person, who by his deed or conduct has induced another to act in a particular
manner, is barred from adopting an inconsistent position, attitude or course of
58
conduct that thereby causes loss or injury to another.

In sum, we find that the public respondent did not act with grave abuse of discretion
amounting to lack or excess of jurisdiction when it issued the questioned order and
resolutions. While the approval of the CBA and the release of the signing bonus did not
estop the Union from pursuing its claims of ULP against the Bank, we find the latter did not
engage in ULP. We, likewise, hold that the Union is not guilty of ULP.
IN LIGHT OF THE FOREGOING, the October 29, 1993 Order and December 16, 1993 and
February 10, 1994 Resolutions of then Secretary of Labor Nieves R. Confesor
are AFFIRMED. The Petition is hereby DISMISSED.
SO ORDERED.

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,
vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial
Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES,
INC., respondents.
Padilla Law Office for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and
set aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial
Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in
Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion for
reconsideration of the June 20,1991 Order.
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy,
and is represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in
the real estate business.
This petition arose from a controversy over a parcel of land consisting of 6,000 square
meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of
Paraaque, Metro Manila and registered in the name of petitioner.
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates
of Title Nos. 271108 and 265388 respectively and registered in the name of the Philippine
Realty Corporation (PRC).
The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as
agent to the sellers. Later, Licup assigned his rights to the sale to private respondent.
In view of the refusal of the squatters to vacate the lots sold to private respondent, a
dispute arose as to who of the parties has the responsibility of evicting and clearing the
land of squatters. Complicating the relations of the parties was the sale by petitioner of Lot
5-A to Tropicana Properties and Development Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court,
Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land, and
specific performance and damages against petitioner, represented by the Papal Nuncio,
and three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana
(Civil Case No.
90-183).
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner
and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of
P1,240.00 per square meters; (2) the agreement to sell was made on the condition that
earnest money of P100,000.00 be paid by Licup to the sellers, and that the sellers clear the
said lots of squatters who were then occupying the same; (3) Licup paid the earnest money
to Msgr. Cirilos; (4) in the same month, Licup assigned his rights over the property to
private respondent and informed the sellers of the said assignment; (5) thereafter, private
respondent demanded from Msgr. Cirilos that the sellers fulfill their undertaking and clear
the property of squatters; however, Msgr. Cirilos informed private respondent of the
squatters' refusal to vacate the lots, proposing instead either that private respondent
undertake the eviction or that the earnest money be returned to the latter; (6) private
respondent counterproposed that if it would undertake the eviction of the squatters, the
purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per square
meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private
respondent giving it seven days from receipt of the letter to pay the original purchase price
in cash; (8) private respondent sent the earnest money back to the sellers, but later
discovered that on March 30, 1989, petitioner and the PRC, without notice to private
respondent, sold the lots to Tropicana, as evidenced by two separate Deeds of Sale, one
over Lot 5-A, and another over Lots 5-B and 5-D; and that the sellers' transfer certificate of
title over the lots were cancelled, transferred and registered in the name of Tropicana; (9)
Tropicana induced petitioner and the PRC to sell the lots to it and thus enriched itself at the
expense of private respondent; (10) private respondent demanded the rescission of the
sale to Tropicana and the reconveyance of the lots, to no avail; and (11) private respondent
is willing and able to comply with the terms of the contract to sell and has actually made
plans to develop the lots into a townhouse project, but in view of the sellers' breach, it lost
profits of not less than P30,000.000.00.
Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between
petitioner and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance
of the lots in question; (3) specific performance of the agreement to sell between it and the
owners of the lots; and (4) damages.
On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint
petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos
for being an improper party. An opposition to the motion was filed by private respondent.
On June 20, 1991, the trial court issued an order denying, among others, petitioner's
motion to dismiss after finding that petitioner "shed off [its] sovereign immunity by entering
into the business contract in question" (Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991,
petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual
Allegation for claim of Immunity as a Jurisdictional Defense." So as to facilitate the
determination of its defense of sovereign immunity, petitioner prayed that a hearing be
conducted to allow it to establish certain facts upon which the said defense is based.
Private respondent opposed this motion as well as the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the motion
for reconsideration until after trial on the merits and directing petitioner to file its answer
(Rollo, p. 22).
Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege
of sovereign immunity only on its own behalf and on behalf of its official representative, the
Papal Nuncio.
On December 9, 1991, a Motion for Intervention was filed before us by the Department of
Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards
the diplomatic immunity of petitioner, and that it "adopts by reference, the allegations
contained in the petition of the Holy See insofar as they refer to arguments relative to its
claim of sovereign immunity from suit" (Rollo, p. 87).
Private respondent opposed the intervention of the Department of Foreign Affairs. In
compliance with the resolution of this Court, both parties and the Department of Foreign
Affairs submitted their respective memoranda.
II
A preliminary matter to be threshed out is the procedural issue of whether the petition
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the
order denying petitioner's motion to dismiss. The general rule is that an order denying a
motion to dismiss is not reviewable by the appellate courts, the remedy of the movant being
to file his answer and to proceed with the hearing before the trial court. But the general rule
admits of exceptions, and one of these is when it is very clear in the records that the trial
court has no alternative but to dismiss the complaint (Philippine National Bank v. Florendo,
206 SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such
a case, it would be a sheer waste of time and energy to require the parties to undergo the
rigors of a trial.
The other procedural question raised by private respondent is the personality or legal
interest of the Department of Foreign Affairs to intervene in the case in behalf of the Holy
See (Rollo, pp. 186-190).
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 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.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court
allowed the said Department to file its memorandum in support of petitioner's claim of
sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local courts
by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America
v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states
bypass the Foreign Office, the courts can inquire into the facts and make their own
determination as to the nature of the acts and transactions involved.
III
The burden of the petition is that respondent trial court has no jurisdiction over petitioner,
being a foreign state enjoying sovereign immunity. On the other hand, private respondent
insists that the doctrine of non-suability is not anymore absolute and that petitioner has
divested itself of such a cloak when, of its own free will, it entered into a commercial
transaction for the sale of a parcel of land located in the Philippines.
A. The Holy See
Before we determine the issue of petitioner's non-suability, a brief look into its status as a
sovereign state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and
he, as the Holy See, was considered a subject of International Law. With the loss of the
Papal States and the limitation of the territory under the Holy See to an area of 108.7 acres,
the position of the Holy See in International Law became controversial (Salonga and Yap,
Public International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also
recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats
to foreign countries, and to enter into treaties according to International Law (Garcia,
Questions and Problems In International Law, Public and Private 81 [1948]).
The Lateran Treaty established the statehood of the Vatican City "for the purpose of
assuring to the Holy See absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international relations" (O'Connell, I
International Law 311 [1965]).
In view of the wordings of the Lateran Treaty, it is difficult to determine whether the
statehood is vested in the Holy See or in the Vatican City. Some writers even suggested
that the treaty created two international persons the Holy See and Vatican City (Salonga
and Yap, supra, 37).
The Vatican City fits into none of the established categories of states, and the attribution to
it of "sovereignty" must be made in a sense different from that in which it is applied to other
states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a
community of national states, the Vatican City represents an entity organized not for
political but for ecclesiastical purposes and international objects. Despite its size and
object, the Vatican City has an independent government of its own, with the Pope, who is
also head of the Roman Catholic Church, as the Holy See or Head of State, in conformity
with its traditions, and the demands of its mission in the world. Indeed, the world-wide
interests and activities of the Vatican City are such as to make it in a sense an
"international state" (Fenwick, supra., 125; Kelsen, Principles of International Law 160
[1956]).
One authority wrote that the recognition of the Vatican City as a state has significant
implication that it is possible for any entity pursuing objects essentially different from
those pursued by states to be invested with international personality (Kunz, The Status of
the Holy See in International Law, 46 The American Journal of International Law 308
[1952]).
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as
the Holy See and not in the name of the Vatican City, one can conclude that in the Pope's
own view, it is the Holy See that is the international person.
The Republic of the Philippines has accorded the Holy See the status of a foreign
sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic

representations with the Philippine government since 1957 (Rollo, p. 87). This appears to
be the universal practice in international relations.
B. Sovereign Immunity
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the
generally accepted principles of International Law. Even without this affirmation, such
principles of International Law are deemed incorporated as part of the law of the land as a
condition and consequence of our admission in the society of nations (United States of
America v. Guinto, 182 SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the courts of another sovereign. According to the newer
or restrictive theory, the immunity of the sovereign is recognized only with regard to public
acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago,
Public International Law 194 [1984]).
Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States passed
the Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as
"either a regular course of commercial conduct or a particular commercial transaction or
act." Furthermore, the law declared that the "commercial character of the activity shall be
determined by reference to the nature of the course of conduct or particular transaction or
act, rather than by reference to its purpose." The Canadian Parliament enacted in 1982 an
Act to Provide For State Immunity in Canadian Courts. The Act defines a "commercial
activity" as any particular transaction, act or conduct or any regular course of conduct that
by reason of its nature, is of a "commercial character."
The restrictive theory, which is intended to be a solution to the host of problems involving
the issue of sovereign immunity, has created problems of its own. Legal treatises and the
decisions in countries which follow the restrictive theory have difficulty in characterizing
whether a contract of a sovereign state with a private party is an act jure gestionis or an
act jure imperii.
The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental functions.
This is particularly true with respect to the Communist states which took control of
nationalized business activities and international trading.
This Court has considered the following transactions by a foreign state with private parties
as acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of
its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding
for the repair of a wharf at a United States Naval Station (United States of America v.
Ruiz, supra.); and (3) the change of employment status of base employees (Sanders v.
Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state
with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center,
consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop
at the John Hay Air Station in Baguio City, to cater to American servicemen and the general
public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for
the operation of barber shops in Clark Air Base in Angeles City (United States of America v.
Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to
the general public is undoubtedly for profit as a commercial and not a governmental
activity. By entering into the employment contract with the cook in the discharge of its
proprietary function, the United States government impliedly divested itself of its sovereign
immunity from suit.
In the absence of legislation defining what activities and transactions shall be considered
"commercial" and as constituting acts jure gestionis, we have to come out with our own
guidelines, tentative they may be.
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.
As held in United States of America v. Guinto, (supra):
There is no question that the United States of America, like any other
state, will be deemed to have impliedly waived its non-suability if it has
entered into a contract in its proprietary or private capacity. It is only
when the contract involves its sovereign or governmental capacity that no
such waiver may be implied.
In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real
estate business, surely the said transaction can be categorized as an act jure gestionis.
However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A
were made for profit but claimed that it acquired said property for the site of its mission or
the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to construct
thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign
to acquire property, real or personal, in a receiving state, necessary for the creation and
maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on
Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate
and entered into force in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and
administrative jurisdiction of the receiving state over any real action relating to private
immovable property situated in the territory of the receiving state which the envoy holds on
behalf of the sending state for the purposes of the mission. If this immunity is provided for a
diplomatic envoy, with all the more reason should immunity be recognized as regards the
sovereign itself, which in this case is the Holy See.
The decision to transfer the property and the subsequent disposal thereof are likewise
clothed with a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living
thereon made it almost impossible for petitioner to use it for the purpose of the donation.
The fact that squatters have occupied and are still occupying the lot, and that they
stubbornly refuse to leave the premises, has been admitted by private respondent in its
complaint (Rollo, pp. 26, 27).
The issue of petitioner's non-suability can be determined by the trial court without going to
trial in the light of the pleadings, particularly the admission of private respondent. Besides,
the privilege of sovereign immunity in this case was sufficiently established by the
Memorandum and Certification of the Department of Foreign Affairs. As the department
tasked with the conduct of the Philippines' foreign relations (Administrative Code of 1987,
Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this
case and officially certified that the Embassy of the Holy See is a duly accredited diplomatic
mission to the Republic of the Philippines exempt from local jurisdiction and entitled to all
the rights, privileges and immunities of a diplomatic mission or embassy in this country
(Rollo, pp. 156-157). The determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a political question that is
conclusive upon the courts (International Catholic Migration Commission v. Calleja, 190
SCRA 130 [1990]). Where the plea of immunity is recognized and affirmed by the executive
branch, it is the duty of the courts to accept this claim so as not to embarrass the executive
arm of the government in conducting the country's foreign relations (World Health
Organization v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration
Commission and in World Health Organization, we abide by the certification of the
Department of Foreign Affairs.
Ordinarily, the procedure would be to remand the case and order the trial court to conduct a
hearing to establish the facts alleged by petitioner in its motion. In view of said certification,
such procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd.
Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).
IV
Private respondent is not left without any legal remedy for the redress of its grievances.
Under both Public International Law and Transnational Law, a person who feels aggrieved
by the acts of a foreign sovereign can ask his own government to espouse his cause
through diplomatic channels.
Private respondent can ask the Philippine government, through the Foreign Office, to
espouse its claims against the Holy See. Its first task is to persuade the Philippine

government to take up with the Holy See the validity of its claims. Of course, the Foreign
Office shall first make a determination of the impact of its espousal on the relations
between the Philippine government and the Holy See (Young, Remedies of Private
Claimants Against Foreign States, Selected Readings on Protection by Law of Private
Foreign Investments 905, 919 [1964]). Once the Philippine government decides to espouse
the claim, the latter ceases to be a private cause.
According to the Permanent Court of International Justice, the forerunner of the
International Court of Justice:
By taking up the case of one of its subjects and by reporting to diplomatic
action or international judicial proceedings on his behalf, a State is in
reality asserting its own rights its right to ensure, in the person of its
subjects, respect for the rules of international law (The Mavrommatis
Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).
WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No.
90-183 against petitioner is DISMISSED.
SO ORDERED.

G.R. No. 139325

April 12, 2005

PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B. NARCISO, SR.

MARIANI DIMARANAN, SFIC, and JOEL C. LAMANGAN in their behalf and on behalf
of the Class Plaintiffs in Class Action No. MDL 840, United States District Court of
Hawaii, Petitioner,
vs.
HON. SANTIAGO JAVIER RANADA, in his capacity as Presiding Judge of Branch
137, Regional Trial Court, Makati City, and the ESTATE OF FERDINAND E. MARCOS,
through its court appointed legal representatives in Class Action MDL 840, United
States District Court of Hawaii, namely: Imelda R. Marcos and Ferdinand Marcos,
Jr., Respondents.
DECISION
TINGA, J.:
Our martial law experience bore strange unwanted fruits, and we have yet to finish weeding
out its bitter crop. While the restoration of freedom and the fundamental structures and
processes of democracy have been much lauded, according to a significant number, the
changes, however, have not sufficiently healed the colossal damage wrought under the
oppressive conditions of the martial law period. The cries of justice for the tortured, the
murdered, and the desaparecidos arouse outrage and sympathy in the hearts of the fairminded, yet the dispensation of the appropriate relief due them cannot be extended through
the same caprice or whim that characterized the ill-wind of martial rule. The damage done
was not merely personal but institutional, and the proper rebuke to the iniquitous past has
to involve the award of reparations due within the confines of the restored rule of law.
1

The petitioners in this case are prominent victims of human rights violations who, deprived
of the opportunity to directly confront the man who once held absolute rule over this
country, have chosen to do battle instead with the earthly representative, his estate. The
clash has been for now interrupted by a trial court ruling, seemingly comported to legal
logic, that required the petitioners to pay a whopping filing fee of over Four Hundred
Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to enforce a
judgment awarded them by a foreign court. There is an understandable temptation to cast
the struggle within the simplistic confines of a morality tale, and to employ short-cuts to
arrive at what might seem the desirable solution. But easy, reflexive resort to the equity
principle all too often leads to a result that may be morally correct, but legally wrong.
Nonetheless, the application of the legal principles involved in this case will comfort those
who maintain that our substantive and procedural laws, for all their perceived ambiguity and
susceptibility to myriad interpretations, are inherently fair and just. The relief sought by the
petitioners is expressly mandated by our laws and conforms to established legal principles.
The granting of this petition for certiorari is warranted in order to correct the legally infirm
and unabashedly unjust ruling of the respondent judge.

The essential facts bear little elaboration. On 9 May 1991, a complaint was filed with the
United States District Court (US District Court), District of Hawaii, against the Estate of
former Philippine President Ferdinand E. Marcos (Marcos Estate). The action was brought
2
forth by ten Filipino citizens who each alleged having suffered human rights abuses such
as arbitrary detention, torture and rape in the hands of police or military forces during the
3
Marcos regime. The Alien Tort Act was invoked as basis for the US District Court's
jurisdiction over the complaint, as it involved a suit by aliens for tortious violations of
4
international law. These plaintiffs brought the action on their own behalf and on behalf of a
class of similarly situated individuals, particularly consisting of all current civilian citizens of
the Philippines, their heirs and beneficiaries, who between 1972 and 1987 were tortured,
summarily executed or had disappeared while in the custody of military or paramilitary
groups. Plaintiffs alleged that the class consisted of approximately ten thousand (10,000)
members; hence, joinder of all these persons was impracticable.
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
5
(3) sub-classes of torture, summary execution and disappearance victims. 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
6
on 17 December 1996.
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
7
damages. 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 the Philippines, pursuant to Section 50, Rule 39 of
8
the Rules of Court then in force.
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
9
proper, pursuant to Section 7(c) of Rule 141.
10

On 9 September 1998, respondent Judge Santiago Javier Ranada of the Makati RTC
issued the subject Orderdismissing 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, 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
11
Certiorari under Rule 65 assailing the twin orders of respondent judge. 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.

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

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 characterized as indisputably unfair, inequitable,
and unjust.
12

The Commission on Human Rights (CHR) was permitted to intervene in this case. 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
13
finality, it can no longer be relitigated again in another country. 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.

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

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 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
14
amount of indebtedness or the mortgagee's claim. In special proceedings involving

properties such as for the allowance of wills, the filing fee is again based on the value of the
15
property. The aforecited rules evidently have no application to petitioners' complaint.

To resolve this question, a proper understanding is required on the nature and effects of a
foreign judgment in this jurisdiction.

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:

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
17
different countries. This principle was prominently affirmed in the leading American case
18
of Hilton v. Guyot and expressly recognized in our jurisprudence beginning withIngenholl
19
v. Walter E. Olsen & Co. 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,
20
was derived from the California Act of March 11, 1872. 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 states:

SEC. 7. Clerk of Regional Trial Court.(b) For filing

1.

Actions where the value

of the subject matter
cannot be estimated

2.

---

P 600.00

Special civil actions except

(a) In case of a judgment upon a specific thing, the judgment is

conclusive upon the title to the thing;

judicial foreclosure which

shall be governed by
paragraph (a) above
3.

---

P 600.00

All other actions not

involving property

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:

---

P 600.00

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
16
recovery of possession of real property. Neither the complaint nor the award of damages
adjudicated by the US District Court involves 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?

(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 inpersonam, the foreign judgment is presumptive, and not
conclusive, of a right as between the parties and their successors in interest by a
21
subsequent title. 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
22
23
24
party, collusion, fraud, or clear mistake of law or fact. Thus, the party aggrieved by the
foreign judgment is entitled to 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,
25
in order for the court in this jurisdiction to properly determine its efficacy.
It is clear then that it is usually necessary for an action to be filed in order to enforce a
26
foreign judgment , 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
27
efficacy. Consequently, the party attacking a foreign judgment has the burden of
28
overcoming the presumption of its validity.

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
29
sues another for the enforcement or protection of a right, and clearly an action to enforce
a foreign judgment is in essence a vindication of a right prescinding either from a
30
"conclusive judgment upon title" or the "presumptive evidence of a right." Absent perhaps
a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of
31
judgment must be brought before the regular courts.
There are distinctions, nuanced but discernible, between the 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.

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 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
35
that the value of such "enforcement" cannot be estimated.
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 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).

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 or law. The limitations on review is in consonance with a strong and pervasive
32
policy in all legal systems to limit repetitive litigation on claims and issues. 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
33
goal of all law: "rest and quietness." 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,
34
rendering immaterial the previously concluded litigation.

On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v.
36
Scandia, from which the rule in Singsong and Raymundo actually derives, but which
incorporates this additional nuance omitted in the latter cases:

Petitioners appreciate this distinction, and rely upon it to support the proposition that the
subject matter of the complaintthe enforcement of a foreign judgmentis incapable of
pecuniary estimation. Admittedly the proposition, as it applies in this case, is counterintuitive, 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
assailedOrder, the respondent judge pounced upon this point without equivocation:

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
38
39
40
41
deposits, validity of a mortgage, the right to support, validity of documents, rescission
42
43
44
of contracts, specific performance, and validity or annulment of judgments. It is urged
that an action for enforcement of a foreign judgment belongs to the same class.

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
37
terms of money, and are cognizable exclusively by courts of first instance.

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 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, damages of
whatever kind, attorney's fees, litigation expenses and costs: Provided, That value
45
of such property shall be determined by the assessed value of the adjacent lots.
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, 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
46
47
of preclusion, as well as the principles of comity, utility and convenience of nations as
the basis for the evolution of the rule calling for the recognition and enforcement of foreign
48
judgments. The US Supreme Court in Hilton v. Guyot relied heavily on the concept of
comity, as especially derived from the landmark treatise of Justice Story in his
49
Commentaries on the Conflict of Laws of 1834. Yet the notion of "comity" has since been
50
51
criticized as one "of dim contours" or suffering from a number of fallacies. Other
conceptual bases for the recognition of foreign judgments have evolved such as the vested
52
rights theory or the modern doctrine of obligation.
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
53
obstacles to recognition such as reciprocity and rvision au fond. 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
54
International Law. While it has not received the ratifications needed to have it take
55
56
effect, it is recognized as representing current scholarly thought on the topic. 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 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
57
important role in both fields.
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
58
the enforcement of the judgment issued by the court.
There is also consensus as to the requisites for recognition of a 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
59
parties. Similarly, the notion that fraud or collusion may preclude the enforcement of a
60
foreign judgment finds affirmation with foreign jurisprudence and commentators, as well
as the doctrine that the foreign judgment must not constitute "a clear mistake of law or
61
fact." 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
62
practice which may lead to a denial of recognition.

The viability of the public policy defense against the enforcement of a foreign judgment has
63
been recognized in this jurisdiction. This defense allows for the application of local
standards in reviewing the foreign judgment, especially when such judgment creates only a
64
presumptive right, as it does in cases wherein the judgment is against a person. The
defense is also recognized 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
65
wrong law to the case. 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
66
derive from treaty obligations. 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
67
the existence of a rule of law requiring it.
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 international
68
law. 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
69
state, 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 their efficacy not merely from the procedural rule, but
by virtue of the incorporation clause of the Constitution. Rules of procedure are
70
promulgated by the Supreme Court, 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
71
judgments.
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,
72
computed in accordance with the applicable laws and standards of the forum. The
vagaries of inflation, as well as the relative low-income capacity of the Filipino, to date may
very well translate into an 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 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
73
be resolved by the courts if the controversy can be settled on other grounds or unless the
74
resolution thereof is indispensable for the determination of the case.
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.
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.

G.R. No. 142396

February 11, 2003

KHOSROW MINUCHER, petitioner,

vs.
HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.
DECISION
VITUG, J.:
Sometime in May 1986, an Information for violation of Section 4 of Republic Act No. 6425,
otherwise also known as the "Dangerous Drugs Act of 1972," was filed against petitioner
Khosrow Minucher and one Abbas Torabian with the Regional Trial Court, Branch 151, of
Pasig City. The criminal charge followed a "buy-bust operation" conducted by the Philippine
police narcotic agents in the house of Minucher, an Iranian national, where a quantity of
heroin, a prohibited drug, was said to have been seized. The narcotic agents were
accompanied by private respondent Arthur Scalzo who would, in due time, become one of
the principal witnesses for the prosecution. On 08 January 1988, Presiding Judge Eutropio
Migrino rendered a decision acquitting the two accused.
On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial Court
(RTC), Branch 19, of Manila for damages on account of what he claimed to have been
trumped-up charges of drug trafficking made by Arthur Scalzo. The Manila RTC detailed
what it had found to be the facts and circumstances surrounding the case.
"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the
Philippines to study in the University of the Philippines in 1974. In 1976, under the regime
of the Shah of Iran, he was appointed Labor Attach for the Iranian Embassies in Tokyo,
Japan and Manila, Philippines. When the Shah of Iran was deposed by Ayatollah Khomeini,
plaintiff became a refugee of the United Nations and continued to stay in the Philippines.
He headed the Iranian National Resistance Movement in the Philippines.
"He came to know the defendant on May 13, 1986, when the latter was brought to his
house and introduced to him by a certain Jose Iigo, an informer of the Intelligence Unit of
the military. Jose Iigo, on the other hand, was met by plaintiff at the office of Atty. Crisanto
Saruca, a lawyer for several Iranians whom plaintiff assisted as head of the anti-Khomeini
movement in the Philippines.
"During his first meeting with the defendant on May 13, 1986, upon the introduction of Jose
Iigo, the defendant expressed his interest in buying caviar. As a matter of fact, he bought
two kilos of caviar from plaintiff and paid P10,000.00 for it. Selling caviar, aside from that of
Persian carpets, pistachio nuts and other Iranian products was his business after the
Khomeini government cut his pension of over $3,000.00 per month. During their
introduction in that meeting, the defendant gave the plaintiff his calling card, which showed
that he is working at the US Embassy in the Philippines, as a special agent of the Drug
Enforcement Administration, Department of Justice, of the United States, and gave his

address as US Embassy, Manila. At the back of the card appears a telephone number in
defendants own handwriting, the number of which he can also be contacted.
"It was also during this first meeting that plaintiff expressed his desire to obtain a US Visa
for his wife and the wife of a countryman named Abbas Torabian. The defendant told him
that he [could] help plaintiff for a fee of $2,000.00 per visa. Their conversation, however,
was more concentrated on politics, carpets and caviar. Thereafter, the defendant promised
to see plaintiff again.
"On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at
Mario's Restaurant at Makati. He wanted to buy 200 grams of caviar. Plaintiff brought the
merchandize but for the reason that the defendant was not yet there, he requested the
restaurant people to x x x place the same in the refrigerator. Defendant, however, came
and plaintiff gave him the caviar for which he was paid. Then their conversation was again
focused on politics and business.
"On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18 years at
Kapitolyo, Pasig. The defendant wanted to buy a pair of carpets which plaintiff valued at
$27,900.00. After some haggling, they agreed at $24,000.00. For the reason that defendant
did not yet have the money, they agreed that defendant would come back the next day.
The following day, at 1:00 p.m., he came back with his $24,000.00, which he gave to the
plaintiff, and the latter, in turn, gave him the pair of carpets.1awphi1.nt
"At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to
plaintiff's house and directly proceeded to the latter's bedroom, where the latter and his
countryman, Abbas Torabian, were playing chess. Plaintiff opened his safe in the bedroom
and obtained $2,000.00 from it, gave it to the defendant for the latter's fee in obtaining a
visa for plaintiff's wife. The defendant told him that he would be leaving the Philippines very
soon and requested him to come out of the house for a while so that he can introduce him
to his cousin waiting in a cab. Without much ado, and without putting on his shirt as he was
only in his pajama pants, he followed the defendant where he saw a parked cab opposite
the street. To his complete surprise, an American jumped out of the cab with a drawn highpowered gun. He was in the company of about 30 to 40 Filipino soldiers with 6 Americans,
all armed. He was handcuffed and after about 20 minutes in the street, he was brought
inside the house by the defendant. He was made to sit down while in handcuffs while the
defendant was inside his bedroom. The defendant came out of the bedroom and out from
defendant's attach case, he took something and placed it on the table in front of the
plaintiff. They also took plaintiff's wife who was at that time at the boutique near his house
and likewise arrested Torabian, who was playing chess with him in the bedroom and both
were handcuffed together. Plaintiff was not told why he was being handcuffed and why the
privacy of his house, especially his bedroom was invaded by defendant. He was not
allowed to use the telephone. In fact, his telephone was unplugged. He asked for any
warrant, but the defendant told him to `shut up. He was nevertheless told that he would be
able to call for his lawyer who can defend him.
"The plaintiff took note of the fact that when the defendant invited him to come out to meet
his cousin, his safe was opened where he kept the $24,000.00 the defendant paid for the
carpets and another $8,000.00 which he also placed in the safe together with a bracelet

worth $15,000.00 and a pair of earrings worth $10,000.00. He also discovered missing
upon his release his 8 pieces hand-made Persian carpets, valued at $65,000.00, a painting
he bought for P30,000.00 together with his TV and betamax sets. He claimed that when he
was handcuffed, the defendant took his keys from his wallet. There was, therefore, nothing
left in his house.
"That his arrest as a heroin trafficker x x x had been well publicized throughout the world, in
various newspapers, particularly in Australia, America, Central Asia and in the Philippines.
He was identified in the papers as an international drug trafficker. x x x
In fact, the arrest of defendant and Torabian was likewise on television, not only in the
Philippines, but also in America and in Germany. His friends in said places informed him
that they saw him on TV with said news.
"After the arrest made on plaintiff and Torabian, they were brought to Camp Crame
1
handcuffed together, where they were detained for three days without food and water."
During the trial, the law firm of Luna, Sison and Manas, filed a special appearance for
Scalzo and moved for extension of time to file an answer pending a supposed advice from
the United States Department of State and Department of Justice on the defenses to be
raised. The trial court granted the motion. On 27 October 1988, Scalzo filed another special
appearance to quash the summons on the ground that he, not being a resident of the
Philippines and the action being one in personam, was beyond the processes of the court.
The motion was denied by the court, in its order of 13 December 1988, holding that the
filing by Scalzo of a motion for extension of time to file an answer to the complaint was a
voluntary appearance equivalent to service of summons which could likewise be construed
a waiver of the requirement of formal notice. Scalzo filed a motion for reconsideration of the
court order, contending that a motion for an extension of time to file an answer was not a
voluntary appearance equivalent to service of summons since it did not seek an affirmative
relief. Scalzo argued that in cases involving the United States government, as well as its
agencies and officials, a motion for extension was peculiarly unavoidable due to the need
(1) for both the Department of State and the Department of Justice to agree on the
defenses to be raised and (2) to refer the case to a Philippine lawyer who would be
expected to first review the case. The court a quo denied the motion for reconsideration in
its order of 15 October 1989.
Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R. No.
17023, assailing the denial. In a decision, dated 06 October 1989, the appellate court
denied the petition and affirmed the ruling of the trial court. Scalzo then elevated the
incident in a petition for review on certiorari, docketed G.R. No. 91173, to this Court. The
petition, however, was denied for its failure to comply with SC Circular No. 1-88; in any
event, the Court added, Scalzo had failed to show that the appellate court was in error in its
questioned judgment.
Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a) declaring
Scalzo in default for his failure to file a responsive pleading (answer) and (b) setting the
case for the reception of evidence. On 12 March 1990, Scalzo filed a motion to set aside
the order of default and to admit his answer to the complaint. Granting the motion, the trial

court set the case for pre-trial. In his answer, Scalzo denied the material allegations of the
complaint and raised the affirmative defenses (a) of Minuchers failure to state a cause of
action in his complaint and (b) that Scalzo had acted in the discharge of his official duties
as being merely an agent of the Drug Enforcement Administration of the United States
Department of Justice. Scalzo interposed a counterclaim of P100,000.00 to answer for
attorneys' fees and expenses of litigation.
Then, on 14 June 1990, after almost two years since the institution of the civil case, Scalzo
filed a motion to dismiss the complaint on the ground that, being a special agent of the
United States Drug Enforcement Administration, he was entitled to diplomatic immunity. He
attached to his motion Diplomatic Note No. 414 of the United States Embassy, dated 29
May 1990, addressed to the Department of Foreign Affairs of the Philippines and a
Certification, dated 11 June 1990, of Vice Consul Donna Woodward, certifying that the note
is a true and faithful copy of its original. In an order of 25 June 1990, the trial court denied
the motion to dismiss.
On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this Court,
docketed G.R. No. 94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao Polo, et
al.," asking that the complaint in Civil Case No. 88-45691 be ordered dismissed. The case
was referred to the Court of Appeals, there docketed CA-G.R. SP No. 22505, per this
Courts resolution of 07 August 1990. On 31 October 1990, the Court of Appeals
promulgated its decision sustaining the diplomatic immunity of Scalzo and ordering the
dismissal of the complaint against him. Minucher filed a petition for review with this Court,
docketed G.R. No. 97765 and entitled "Khosrow Minucher vs. the Honorable Court of
Appeals, et. al." (cited in 214 SCRA 242), appealing the judgment of the Court of Appeals.
In a decision, dated 24 September 1992, penned by Justice (now Chief Justice) Hilario
Davide, Jr., this Court reversed the decision of the appellate court and remanded the case
to the lower court for trial. The remand was ordered on the theses (a) that the Court of
Appeals erred in granting the motion to dismiss of Scalzo for lack of jurisdiction over his
person without even considering the issue of the authenticity of Diplomatic Note No. 414
and (b) that the complaint contained sufficient allegations to the effect that Scalzo
committed the imputed acts in his personal capacity and outside the scope of his official
duties and, absent any evidence to the contrary, the issue on Scalzos diplomatic immunity
could not be taken up.
The Manila RTC thus continued with its hearings on the case. On 17 November 1995, the
trial court reached a decision; it adjudged:
"WHEREFORE, and in view of all the foregoing considerations, judgment is hereby
rendered for the plaintiff, who successfully established his claim by sufficient evidence,
against the defendant in the manner following:
"`Adjudging defendant liable to plaintiff in actual and compensatory damages of
P520,000.00; moral damages in the sum of P10 million; exemplary damages in the sum of
P100,000.00; attorney's fees in the sum of P200,000.00 plus costs.

`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of the
Court on this judgment to answer for the unpaid docket fees considering that the plaintiff in
2
this case instituted this action as a pauper litigant."

3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;

While the trial court gave credence to the claim of Scalzo and the evidence presented by
him that he was a diplomatic agent entitled to immunity as such, it ruled that he,
nevertheless, should be held accountable for the acts complained of committed outside his
official duties. On appeal, the Court of Appeals reversed the decision of the trial court and
sustained the defense of Scalzo that he was sufficiently clothed with diplomatic immunity
during his term of duty and thereby immune from the criminal and civil jurisdiction of the
"Receiving State" pursuant to the terms of the Vienna Convention.

5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.

Hence, this recourse by Minucher. The instant petition for review raises a two-fold issue: (1)
whether or not the doctrine of conclusiveness of judgment, following the decision rendered
by this Court in G.R. No. 97765, should have precluded the Court of Appeals from resolving
the appeal to it in an entirely different manner, and (2) whether or not Arthur Scalzo is
indeed entitled to diplomatic immunity.
The doctrine of conclusiveness of judgment, or its kindred rule of res judicata, would
require 1) the finality of the prior judgment, 2) a valid jurisdiction over the subject matter
and the parties on the part of the court that renders it, 3) a judgment on the merits, and 4)
3
an identity of the parties, subject matter and causes of action. Even while one of the
issues submitted in G.R. No. 97765 - "whether or not public respondent Court of Appeals
erred in ruling that private respondent Scalzo is a diplomat immune from civil suit
conformably with the Vienna Convention on Diplomatic Relations" - is also a pivotal
question raised in the instant petition, the ruling in G.R. No. 97765, however, has not
resolved that point with finality. Indeed, the Court there has made this observation "It may be mentioned in this regard that private respondent himself, in his Pre-trial Brief
filed on 13 June 1990, unequivocally states that he would present documentary evidence
consisting of DEA records on his investigation and surveillance of plaintiff and on his
position and duties as DEA special agent in Manila. Having thus reserved his right to
present evidence in support of his position, which is the basis for the alleged diplomatic
immunity, the barren self-serving claim in the belated motion to dismiss cannot be relied
4
upon for a reasonable, intelligent and fair resolution of the issue of diplomatic immunity."
Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the
Philippines is a signatory, grants him absolute immunity from suit, describing his functions
as an agent of the United States Drugs Enforcement Agency as "conducting surveillance
operations on suspected drug dealers in the Philippines believed to be the source of
prohibited drugs being shipped to the U.S., (and) having ascertained the target, (he then)
would inform the Philippine narcotic agents (to) make the actual arrest." Scalzo has
submitted to the trial court a number of documents 1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;
2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June 1990;

4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and

6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser,
Department of Foreign Affairs, dated 27 June 1990 forwarding Embassy Note No.
414 to the Clerk of Court of RTC Manila, Branch 19 (the trial court);
7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3');
and
8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol,
Department of Foreign Affairs, through Asst. Sec. Emmanuel Fernandez,
5
addressed to the Chief Justice of this Court.
The documents, according to Scalzo, would show that: (1) the United States Embassy
accordingly advised the Executive Department of the Philippine Government that Scalzo
was a member of the diplomatic staff of the United States diplomatic mission from his
arrival in the Philippines on 14 October 1985 until his departure on 10 August 1988; (2) that
the United States Government was firm from the very beginning in asserting the diplomatic
immunity of Scalzo with respect to the case pursuant to the provisions of the Vienna
Convention on Diplomatic Relations; and (3) that the United States Embassy repeatedly
urged the Department of Foreign Affairs to take appropriate action to inform the trial court
of Scalzos diplomatic immunity. The other documentary exhibits were presented to indicate
that: (1) the Philippine government itself, through its Executive Department, recognizing
and respecting the diplomatic status of Scalzo, formally advised the "Judicial Department"
of his diplomatic status and his entitlement to all diplomatic privileges and immunities under
the Vienna Convention; and (2) the Department of Foreign Affairs itself authenticated
Diplomatic Note No. 414. Scalzo additionally presented Exhibits "9" to "13" consisting of his
reports of investigation on the surveillance and subsequent arrest of Minucher, the
certification of the Drug Enforcement Administration of the United States Department of
Justice that Scalzo was a special agent assigned to the Philippines at all times relevant to
the complaint, and the special power of attorney executed by him in favor of his previous
6
counsel to show (a) that the United States Embassy, affirmed by its Vice Consul,
acknowledged Scalzo to be a member of the diplomatic staff of the United States
diplomatic mission from his arrival in the Philippines on 14 October 1985 until his departure
on 10 August 1988, (b) that, on May 1986, with the cooperation of the Philippine law
enforcement officials and in the exercise of his functions as member of the mission, he
investigated Minucher for alleged trafficking in a prohibited drug, and (c) that the Philippine
Department of Foreign Affairs itself recognized that Scalzo during his tour of duty in the
Philippines (14 October 1985 up to 10 August 1988) was listed as being an Assistant
Attach of the United States diplomatic mission and accredited with diplomatic status by
the Government of the Philippines. In his Exhibit 12, Scalzo described the functions of the
overseas office of the United States Drugs Enforcement Agency, i.e., (1) to provide criminal
investigative expertise and assistance to foreign law enforcement agencies on narcotic and
drug control programs upon the request of the host country, 2) to establish and maintain

liaison with the host country and counterpart foreign law enforcement officials, and 3) to
conduct complex criminal investigations involving international criminal conspiracies which
affect the interests of the United States.
The Vienna Convention on Diplomatic Relations was a codification of centuries-old
customary law and, by the time of its ratification on 18 April 1961, its rules of law had long
become stable. Among the city states of ancient Greece, among the peoples of the
Mediterranean before the establishment of the Roman Empire, and among the states of
India, the person of the herald in time of war and the person of the diplomatic envoy in time
7
of peace were universally held sacrosanct. By the end of the 16th century, when the
earliest treatises on diplomatic law were published, the inviolability of ambassadors was
8
firmly established as a rule of customary international law. Traditionally, the exercise of
diplomatic intercourse among states was undertaken by the head of state himself, as being
the preeminent embodiment of the state he represented, and the foreign secretary, the
official usually entrusted with the external affairs of the state. Where a state would wish to
have a more prominent diplomatic presence in the receiving state, it would then send to the
latter a diplomatic mission. Conformably with the Vienna Convention, the functions of the
diplomatic mission involve, by and large, the representation of the interests of the sending
9
state and promoting friendly relations with the receiving state.

commercial, agricultural, labor, science, and customs attaches, or the like. Attaches assist
a chief of mission in his duties and are administratively under him, but their main function is
to observe, analyze and interpret trends and developments in their respective fields in the
host country and submit reports to their own ministries or departments in the home
14
government. These officials are not generally regarded as members of the diplomatic
mission, nor are they normally designated as having diplomatic rank.
In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes Nos. 414,
757 and 791, all issued post litem motam, respectively, on 29 May 1990, 25 October 1991
and 17 November 1992. The presentation did nothing much to alleviate the Court's initial
reservations in G.R. No. 97765, viz:
"While the trial court denied the motion to dismiss, the public respondent gravely abused its
discretion in dismissing Civil Case No. 88-45691 on the basis of an erroneous assumption
that simply because of the diplomatic note, the private respondent is clothed with diplomatic
immunity, thereby divesting the trial court of jurisdiction over his person.
"x x x x x x x x x

The Convention lists the classes of heads of diplomatic missions to include (a)
10
11
ambassadors or nuncios accredited to the heads of state, (b) envoys, ministers
12
or internuncios accredited to the heads of states; and (c) charges d' affairs accredited to
13
the ministers of foreign affairs. Comprising the "staff of the (diplomatic) mission" are the
diplomatic staff, the administrative staff and the technical and service staff. Only the heads
of missions, as well as members of the diplomatic staff, excluding the members of the
administrative, technical and service staff of the mission, are accorded diplomatic rank.
Even while the Vienna Convention on Diplomatic Relations provides for immunity to the
members of diplomatic missions, it does so, nevertheless, with an understanding that the
same be restrictively applied. Only "diplomatic agents," under the terms of the Convention,
are vested with blanket diplomatic immunity from civil and criminal suits. The Convention
defines "diplomatic agents" as the heads of missions or members of the diplomatic staff,
thus impliedly withholding the same privileges from all others. It might bear stressing that
even consuls, who represent their respective states in concerns of commerce and
navigation and perform certain administrative and notarial duties, such as the issuance of
passports and visas, authentication of documents, and administration of oaths, do not
ordinarily enjoy the traditional diplomatic immunities and privileges accorded diplomats,
mainly for the reason that they are not charged with the duty of representing their states in
political matters. Indeed, the main yardstick in ascertaining whether a person is a diplomat
entitled to immunity is the determination of whether or not he performs duties of diplomatic
nature.

"And now, to the core issue - the alleged diplomatic immunity of the private respondent.
Setting aside for the moment the issue of authenticity raised by the petitioner and the
doubts that surround such claim, in view of the fact that it took private respondent one (1)
year, eight (8) months and seventeen (17) days from the time his counsel filed on 12
September 1988 a Special Appearance and Motion asking for a first extension of time to
file the Answer because the Departments of State and Justice of the United States of
America were studying the case for the purpose of determining his defenses, before he
could secure the Diplomatic Note from the US Embassy in Manila, and even granting for
the sake of argument that such note is authentic, the complaint for damages filed by
petitioner cannot be peremptorily dismissed.

Scalzo asserted, particularly in his Exhibits "9" to "13," that he was an Assistant Attach of
the United States diplomatic mission and was accredited as such by the Philippine
Government. An attach belongs to a category of officers in the diplomatic establishment
who may be in charge of its cultural, press, administrative or financial affairs. There could
also be a class of attaches belonging to certain ministries or departments of the
government, other than the foreign ministry or department, who are detailed by their
respective ministries or departments with the embassies such as the military, naval, air,

A significant document would appear to be Exhibit No. 08, dated 08 November 1992,
issued by the Office of Protocol of the Department of Foreign Affairs and signed by
Emmanuel C. Fernandez, Assistant Secretary, certifying that "the records of the
Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of office in the
Philippines (from 14 October 1985 up to 10 August 1988) was listed as an Assistant
Attach of the United States diplomatic mission and was, therefore, accredited diplomatic

"x x x x x x x x x
"There is of course the claim of private respondent that the acts imputed to him were done
in his official capacity. Nothing supports this self-serving claim other than the so-called
Diplomatic Note. x x x. The public respondent then should have sustained the trial court's
denial of the motion to dismiss. Verily, it should have been the most proper and appropriate
recourse. It should not have been overwhelmed by the self-serving Diplomatic Note whose
belated issuance is even suspect and whose authenticity has not yet been proved. The
undue haste with which respondent Court yielded to the private respondent's claim is
arbitrary."

status by the Government of the Philippines." No certified true copy of such "records," the
supposed bases for the belated issuance, was presented in evidence.
Concededly, vesting a person with diplomatic immunity is a prerogative of the executive
15
branch of the government. In World Health Organization vs. Aquino, the Court has
recognized that, in such matters, the hands of the courts are virtually tied. Amidst
apprehensions of indiscriminate and incautious grant of immunity, designed to gain
exemption from the jurisdiction of courts, it should behoove the Philippine government,
specifically its Department of Foreign Affairs, to be most circumspect, that should
particularly be no less than compelling, in its post litem motam issuances. It might be
recalled that the privilege is not an immunity from the observance of the law of the territorial
sovereign or from ensuing legal liability; it is, rather, an immunity from the exercise of
16
territorial jurisdiction. The government of the United States itself, which Scalzo claims to
be acting for, has formulated its standards for recognition of a diplomatic agent. The State
Department policy is to only concede diplomatic status to a person who possesses an
17
acknowledged diplomatic title and "performs duties of diplomatic nature." Supplementary
criteria for accreditation are the possession of a valid diplomatic passport or, from States
which do not issue such passports, a diplomatic note formally representing the intention to
assign the person to diplomatic duties, the holding of a non-immigrant visa, being over
twenty-one years of age, and performing diplomatic functions on an essentially full-time
18
basis. Diplomatic missions are requested to provide the most accurate and descriptive job
title to that which currently applies to the duties performed. The Office of the Protocol would
19
then assign each individual to the appropriate functional category.
But while the diplomatic immunity of Scalzo might thus remain contentious, it was
sufficiently established that, indeed, he worked for the United States Drug Enforcement
Agency and was tasked to conduct surveillance of suspected drug activities within the
country on the dates pertinent to this case. If it should be ascertained that Arthur Scalzo
was acting well within his assigned functions when he committed the acts alleged in the
complaint, the present controversy could then be resolved under the related doctrine of
State Immunity from Suit.
The precept that a State cannot be sued in the courts of a foreign state is a longstanding rule of customary international law then closely identified with the personal
20
immunity of a foreign sovereign from suit and, with the emergence of democratic states,
made to attach not just to the person of the head of state, or his representative, but also
21
distinctly to the state itself in its sovereign capacity. If the acts giving rise to a suit are
those of a foreign government done by its foreign agent, although not necessarily a
diplomatic personage, but acting in his official capacity, the complaint could be barred by
the immunity of the foreign sovereign from suit without its consent. Suing a representative
of a state is believed to be, in effect, suing the state itself. The proscription is not accorded
for the benefit of an individual but for the State, in whose service he is, under the maxim par in parem, non habet imperium - that all states are sovereign equals and cannot assert
22
jurisdiction over one another. The implication, in broad terms, is that if the judgment
against an official would require the state itself to perform an affirmative act to satisfy the
award, such as the appropriation of the amount needed to pay the damages decreed
against him, the suit must be regarded as being against the state itself, although it has not
23
been formally impleaded.

24

In United States of America vs. Guinto, involving officers of the United States Air Force
and special officers of the Air Force Office of Special Investigators charged with the duty of
preventing the distribution, possession and use of prohibited drugs, this Court has ruled "While the doctrine (of state immunity) appears to prohibit only suits against the state
without its consent, it is also applicable to complaints filed against officials of the state for
acts allegedly performed by them in the discharge of their duties. x x x. It cannot for a
moment be imagined that they were acting in their private or unofficial capacity when they
apprehended and later testified against the complainant. It follows that for discharging their
duties as agents of the United States, they cannot be directly impleaded for acts imputable
to their principal, which has not given its consent to be sued. x x x As they have acted on
behalf of the government, and within the scope of their authority, it is that government, and
25
not the petitioners personally, [who were] responsible for their acts."
This immunity principle, however, has its limitations. Thus, Shauf vs. Court of
26
Appeals elaborates:
"It is a different matter where the public official is made to account in his capacity as such
for acts contrary to law and injurious to the rights of the plaintiff. As was clearly set forth by
Justice Zaldivar in Director of the Bureau of Telecommunications, et al., vs. Aligaen, et al.
(33 SCRA 368): `Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an action
against the officials or officers by one whose rights have been invaded or violated by such
acts, for the protection of his rights, is not a suit against the State within the rule of
immunity of the State from suit. In the same tenor, it has been said that an action at law or
suit in equity against a State officer or the director of a State department on the ground
that, while claiming to act for the State, he violates or invades the personal and property
rights of the plaintiff, under an unconstitutional act or under an assumption of authority
which he does not have, is not a suit against the State within the constitutional provision
that the State may not be sued without its consent. The rationale for this ruling is that the
doctrine of state immunity cannot be used as an instrument for perpetrating an injustice.
"x x x x x x x x x
"(T)he doctrine of immunity from suit will not apply and may not be invoked where the
public official is being sued in his private and personal capacity as an ordinary citizen. The
cloak of protection afforded the officers and agents of the government is removed the
moment they are sued in their individual capacity. This situation usually arises where the
public official acts without authority or in excess of the powers vested in him. It is a wellsettled principle of law that a public official may be liable in his personal private capacity for
whatever damage he may have caused by his act done with malice and in bad faith or
27
beyond the scope of his authority and jurisdiction."
A foreign agent, operating within a territory, can be cloaked with immunity from suit but only
as long as it can be established that he is acting within the directives of the sending state.
The consent of the host state is an indispensable requirement of basic courtesy between
the two sovereigns. Guinto and Shauf both involve officers and personnel of the United
States, stationed within Philippine territory, under the RP-US Military Bases Agreement.

While evidence is wanting to show any similar agreement between the governments of the
Philippines and of the United States (for the latter to send its agents and to conduct
surveillance and related activities of suspected drug dealers in the Philippines), the consent
or imprimatur of the Philippine government to the activities of the United States Drug
Enforcement Agency, however, can be gleaned from the facts heretofore elsewhere
mentioned. The official exchanges of communication between agencies of the government
of the two countries, certifications from officials of both the Philippine Department of
Foreign Affairs and the United States Embassy, as well as the participation of members of
the Philippine Narcotics Command in the "buy-bust operation" conducted at the residence
of Minucher at the behest of Scalzo, may be inadequate to support the "diplomatic status"
of the latter but they give enough indication that the Philippine government has given
its imprimatur, if not consent, to the activities within Philippine territory of agent Scalzo of
the United States Drug Enforcement Agency. The job description of Scalzo has tasked him
to conduct surveillance on suspected drug suppliers and, after having ascertained the
target, to inform local law enforcers who would then be expected to make the arrest. In
conducting surveillance activities on Minucher, later acting as the poseur-buyer during the
buy-bust operation, and then becoming a principal witness in the criminal case against
Minucher, Scalzo hardly can be said to have acted beyond the scope of his official function
or duties.
All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of the
United States Drug Enforcement Agency allowed by the Philippine government to conduct
activities in the country to help contain the problem on the drug traffic, is entitled to the
defense of state immunity from suit.
WHEREFORE, on the foregoing premises, the petition is DENIED. No costs.
SO ORDERED.

G.R. No. 82631 February 23, 1995

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and YONG CHAN KIM, respondents.

On February 14, 1992, this Court, in Southeast Asian Fisheries Development CenterAquaculture Department v.National Labor Relations Commission, 206 SCRA 283 (1992)
held that NLRC had no jurisdiction over petitioner, the latter being "an international agency
beyond the jurisdiction of the courts or local agencies of the Philippine Government."
By reason of this Court's pronouncement in the aforementioned case, petitioner filed a
supplemental petition on May 16, 1992, raising the issue of lack of jurisdiction on the part of
NLRC to hear and decide the case.

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and
set aside the Decision and Resolution of the National Labor Relations Commission, (NLRC)
dated August 20, 1987 and February 15, 1988 respectively, in RAB Case No. 0093-83.

In opposition to the supplemental petition, private respondent Yong argued that petitioner
was precluded from raising the issue of jurisdiction in view of the latter's failure to do so
before the Labor Arbiter or even before the Commission. In support of his argument, he
invoked the doctrine of estoppel in Tijam v. Sibonghanoy, 23 SCRA 29 (1968), which
justified the departure from the accepted concept of non-waivability of objection to
jurisdiction.

We grant the petition.

On June 10, 1983, private respondent Yong Chan Kim (Yong) filed a complaint for illegal
dismissal against petitioner Southeast Asian Fisheries Development Center (SEAFDEC).
On June 16, 1986, the Labor Arbiter rendered a decision ordering petitioner ". . . to
reinstate complainant [respondent Yong] to his former
position . . . with full back wages . . . and to pay complainant moral damages in the amount
of P50,000.00 (Rollo, p. 65).
Petitioner appealed the decision to the NLRC. Respondent Yong likewise filed a partial
appeal wherein he sought to increase the award of moral damages to P200, 000.00.

The Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDECAQD) was established by the Government of Burma, the Kingdom of Cambodia, the
Republic of Indonesia, Japan, the Kingdom of Laos, Malaysia, the Republic of the
Philippines, the Republic of Singapore, the Kingdom of Thailand and the Republic of
Vietnam. The Philippines was a signatory to the Agreement establishing SEAFDEC
(Lacanilao v. de Leon, 147 SCRA 286 [1987]).
The purpose of establishing said international organization is to contribute to the promotion
of the fisheries development in Southeast Asia by mutual co-operation among the member
governments of the Center, and governments external to the Center (Agreement
Establishing the SEAFDEC, Art. 1).

On August 20, 1987, NLRC affirmed the decision of the Labor Arbiter but increased the
moral damages to P200,000.00, added P50,000.00 as exemplary damages and awarded
ten percent of the total monetary awards as attorney's fees (Rollo, p. 84).

In Southeast Asian Fisheries Development Center-Aquaculture Department v. Danilo

Acosta, Resolution, 226 SCRA 49 (1993), we reiterated our rulings in Southeast Asia
Center, supra, and Lacanilao v. de Leon, 147 SCRA 286 (1987) that SEAFDEC, as an
international agency, enjoys diplomatic immunity.

The motion for reconsideration was denied by NLRC in its Resolution dated February 15,
1988, which prompted petitioner to elevate the matter to this Court through a petition for
review on certiorari. (Rollo, pp. 119-153).

In Opinion No. 139, Series of 1984, the Minister of Justice explained the concept of the
immunity of international organizations from the jurisdiction of local courts, thus:

On May 9, 1988, petitioner filed an urgent motion for the issuance of an order restraining
NLRC from issuing a writ of execution in connection with its August 20, 1987 Decision.
In a resolution dated May 12, 1988, this Court, without giving due course to the petition,
issued a temporary restraining order.
On July 12, 1989, we resolved to give due course to the petition and required the parties to
submit their respective memoranda.

4. One of the basic immunities of an international organization is

immunity from local jurisdiction, i.e., that it is immune from the legal writs
and processes issued by the tribunals of the court where it is found.
(See Jenks; Id., pp. 37-44) The obvious reason for this is that the
subjection of such an organization to the authority of the local courts
would afford a convenient medium thru which the host government may
interfere in their operations or even influence or control its policies and
decisions of the organization; besides, such subjection to local
jurisdiction would impair the capacity of such body to discharge its
responsibilities impartially, on behalf of its member-states. In the case at
bar, for instance, the entertainment by the National Labor Relations

Commission of Mr. Madamba's reinstatement cases would amount to

interference by the Philippine Government in the management decisions
of the SEARCA governing board; even worse, it could compromise the
desired impartiality of the organization since it will have to suit its
actuations to the requirements of Philippine law, which may not
necessarily coincide with the interests of the other member-states. It is
precisely to forestall these possibilities that in cases where the extent of
the immunity is specified in the enabling instruments of international
organizations, (jurisdictional immunity, is specified in the enabling
instruments of international organizations) jurisdictional immunity from
the host country is invariably among the first accorded.
(See Jenks, Id; See Bowett. The Law of International Institutions, pp.
284-285).
Private respondent Yong's invocation of estoppel is unavailing. The issue of estoppel on
the part of petitioner to timely raise the question of jurisdiction has been squarely passed
upon in Southeast Asian Fisheries Development Center-Aquaculture Department
v. National Labor Relations Commission, 206 SCRA 283 (1992). In said case, we reiterated
the general rule that estoppel does not apply to confer jurisdiction to a tribunal that has
none over a cause of action. As we explained in, Calimlim v. Ramirez, 118 SCRA 399
(1982), there were exceptional circumstances involved in the Tijam case which justified the
exception to the general rule enunciated therein. In the Tijam case, a complaint for the
collection of P1,908.00 was filed on July 19, 1948 in the Court of First Instance of Cebu
when under the Judiciary Act of 1948, it was the Municipal Court that had jurisdiction
thereof. It was only in 1963 or long after the decision of the trial court had become final and
executory that a motion to dismiss the complaint was filed.
At any rate, we rule that the Tijam case applies only to ordinary litigants and not to parties
which enjoy sovereign or diplomatic immunity. With respect to foreign states and
international organizations, the immunity from suit or the jurisdiction of local courts can only
be waived expressly by said entities and not by the employees or agents (Salonga and
Yap, Public International Law 114-115 [5th ed.]; Akehurst, A Modern Introduction to
International Law 118 [5th ed.]).
WHEREFORE, the petition is GRANTED. The restraining order is made PERMANENT.
SO ORDERED.