The liberal atmosphere which pervades the procedure in

administrative proceedings does not empower the presiding

officer to make conclusions of fact before hearing all the
parties concerned. (Matuguina Integrated Wood Products,
Inc. vs. Court of Appeals, 263 SCRA 490 [1996])
o0o

G.R. No. 162894. February 26, 2008.*

RAYTHEON INTERNATIONAL, INC., petitioner, vs.

STOCKTON W. ROUZIE, JR., respondent.
Conflict of Laws Phases in Judicial Resolution of Conflictof
Laws Problems.Recently in Hasegawa v. Kitamura, 538 SCRA
261 (2007), the Court outlined three consecutive phases involved
in judicial resolution of conflictsoflaws problems, namely:
jurisdiction, choice of law, and recognition and enforcement of
judgments. Thus, in the instances where the Court held that the
local judicial machinery was adequate to resolve controversies
with a foreign element, the following requisites had to be proved:
(1) that the Philippine Court is one to which the parties may
conveniently resort (2) that the Philippine Court is in a position
to make an intelligent decision as to the law and the facts and (3)
that the Philippine Court has or is likely to have the power to
enforce its decision.
Same Jurisdictions Pleadings and Practice Where the case
is filed in a Philippine court and where the court has jurisdiction
over the subject matter, the parties and the res, it may or can
proceed to try the case even if the rules of conflictoflaws or the
convenience of the parties point to a foreign forum Jurisdiction
over the nature and subject matter of an action is conferred by the
Constitution and the law and by the material allegations in the
complaint, irrespective of whether or not the plaintiff is entitled to
recover all or some of the claims or reliefs sought therein.On the
matter of jurisdiction over a
_______________

*SECOND DIVISION.

556

conflictsoflaws problem where the case is filed in a Philippine

court and where the court has jurisdiction over the subject
matter, the parties and the res, it may or can proceed to try the
case even if the rules of conflictoflaws or the convenience of the
parties point to a foreign forum. This is an exercise of sovereign
prerogative of the country where the case is filed. Jurisdiction
over the nature and subject matter of an action is conferred by the
Constitution and the law and by the material allegations in the
complaint, irrespective of whether or not the plaintiff is entitled to
recover all or some of the claims or reliefs sought therein. Civil
Case No. 1192BG is an action for damages arising from an
alleged breach of contract. Undoubtedly, the nature of the action
and the amount of damages prayed are within the jurisdiction of
the RTC.
Same Same Choice of Law Words and Phrases While
jurisdiction considers whether it is fair to cause a defendant to
travel to this state, choice of law asks the further question whether
the application of a substantive law which will determine the
merits of the case is fair to both partiesthe choice of law
stipulation will become relevant only when the substantive issues
develop, that is, after hearing on the merits proceeds before the
trial court.That the subject contract included a stipulation that
the same shall be governed by the laws of the State of Connecticut
does not suggest that the Philippine courts, or any other foreign
tribunal for that matter, are precluded from hearing the civil
action. Jurisdiction and choice of law are two distinct concepts.
Jurisdiction considers whether it is fair to cause a defendant to
travel to this state choice of law asks the further question
whether the application of a substantive law which will determine
the merits of the case is fair to both parties. The choice of law
stipulation will become relevant only when the substantive issues
of the instant case develop, that is, after hearing on the merits
proceeds before the trial court.
Same Same Forum Non Conveniens The propriety of dismissing
a case based on the principle of forum non conveniens requires a
factual determinationit is more properly considered as a matter
of defense.Under the doctrine of forum non conveniens, a court,
in conflictsoflaws cases, may refuse impositions on its
jurisdiction where it is not the most convenient or available
forum and the parties are not precluded from seeking remedies
elsewhere. Petitioners averments of the foreign elements in the
instant case are not

557

sufficient to oust the trial court of its jurisdiction over Civil Case
No. No. 1192BG and the parties involved. Moreover, the
propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination hence, it is more
properly considered as a matter of defense. While it is within the
discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after vital facts are
established, to determine whether special circumstances require
the courts desistance.
Cause of Action Pleadings and Practice Words and Phrases
Failure to state a cause of action refers to the insufficiency of
allegation in the pleading.Petitioner also contends that the
complaint in Civil Case No. 1192BG failed to state a cause of
action against petitioner. Failure to state a cause of action refers
to the insufficiency of allegation in the pleading. As a general
rule, the elementary test for failure to state a cause of action is
whether the complaint alleges facts which if true would justify the
relief demanded.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Quisumbing, Torres for petitioner.
Ceferino Padua Law Office for respondent.
TINGA, J.:
Before this Court is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure which
seeks the reversal of the Decision1 and Resolution2 of the
Court of Appeals in CAG.R. SP No. 67001 and the
dismissal of the
_______________
1Rollo, pp. 4246. Dated 28 August 2003 penned by Associate Justice
Arsenio J. Magpale and concurred in by Associate Justices Bienvenido L.
Reyes, Acting Chairperson of the Special Ninth Division, and Rebecca De
GuiaSalvador.
2Id., at p. 47. Dated 10 March 2004.
558

civil case filed by respondent against petitioner with the

trial court.
As culled from the records of the case, the following
antecedents appear:

Sometime in 1990, Brand Marine Services, Inc. (BMSI),

a corporation duly organized and existing under the laws of
the State of Connecticut, United States of America, and
respondent Stockton W. Rouzie, Jr., an American citizen,
entered into a contract whereby BMSI hired respondent as
its representative to negotiate the sale of services in
several government projects in the Philippines for an
agreed remuneration of 10% of the gross receipts. On 11
March 1992, respondent secured a service contract with the
Republic of the Philippines on behalf of BMSI for the
dredging of rivers affected by the Mt. Pinatubo eruption
and mudflows.3
On 16 July 1994, respondent filed before the Arbitration
Branch of the National Labor Relations Commission
(NLRC) a suit against BMSI and Rust International, Inc.
(RUST), Rodney C. Gilbert and Walter G. Browning for
alleged nonpayment of commissions, illegal termination
and breach of employment contract.4 On 28 September
1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered
judgment ordering BMSI and RUST to pay respondents
money claims.5 Upon appeal by BMSI, the NLRC reversed
the decision of the Labor Arbiter and dismissed
respondents complaint on the ground of lack of
jurisdiction.6 Respondent elevated the case to this Court
but it it was dismissed in a Resolution dated 26 November
1997. The Resolution became final and executory on 09
November 1998.
On 8 January 1999, respondent, then a resident of La
Union, instituted an action for damages before the
Regional Trial
_______________
3Id.
4Id., at pp. 6162.
5Id., at pp. 6374.
6Id., at pp. 7590.
559

Court (RTC) of Bauang, La Union. The Complaint,7

docketed as Civil Case No. 1192BG, named as defendants
herein petitioner Raytheon International, Inc. as well as
BMSI and RUST, the two corporations impleaded in the
earlier labor case. The complaint essentially reiterated the
allegations in the labor case that BMSI verbally employed
respondent to negotiate the sale of services in government
projects and that respondent was not paid the commissions

due him from the Pinatubo dredging project which he

secured on behalf of BMSI. The complaint also averred that
BMSI and RUST as well as petitioner itself had combined
and functioned as one company.
In its Answer,8 petitioner alleged that contrary to
respondents claim, it was a foreign corporation duly
licensed to do business in the Philippines and denied
entering into any arrangement with respondent or paying
the latter any sum of money. Petitioner also denied
combining with BMSI and RUST for the purpose of
assuming the alleged obligation of the said companies.9
Petitioner also referred to the NLRC decision which
disclosed that per the written agreement between
respondent and BMSI and RUST, denominated as Special
Sales Representative Agreement, the rights and
obligations of the parties shall be governed by the laws of
the State of Connecticut.10 Petitioner sought the dismissal
of the complaint on grounds of failure to state a cause of
action and forum non conveniens and prayed for damages
by way of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for
Preliminary Hearing Based on Affirmative Defenses and
for Summary Judgment12 seeking the dismissal of the
complaint
_______________
7Id., at pp. 4854.
8 Id., at pp. 9199.
9 Id., at p. 94.
10Id., at p. 96.
11Id., at pp. 9798.
12Id., at pp. 100111.
560

on grounds of forum non conveniens and failure to state a

cause of action. Respondent opposed the same. Pending the
resolution of the omnibus motion, the deposition of Walter
Browning was taken before the Philippine Consulate
General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied
petitioners omnibus motion. The trial court held that the
factual allegations in the complaint, assuming the same to
be admitted, were sufficient for the trial court to render a
valid judgment thereon. It also ruled that the principle of
forum non conveniens was inapplicable because the trial
court could enforce judgment on petitioner, it being a

foreign corporation licensed to do business in the

Philippines.15
Petitioner filed a Motion for Reconsideration16 of the
order, which motion was opposed by respondent.17 In an
Order dated 31 July 2001,18 the trial court denied
petitioners motion. Thus, it filed a Rule 65 Petition19 with
the Court of Appeals praying for the issuance of a writ of
certiorari and a writ of injunction to set aside the twin
orders of the trial court dated 13 September 2000 and 31
July 2001 and to enjoin the trial court from conducting
further proceedings.20
On 28 August 2003, the Court of Appeals rendered the
assailed Decision21 denying the petition for certiorari for
lack of merit. It also denied petitioners motion for
reconsideration in the assailed Resolution issued on 10
March 2004.22
_______________
13Records, Vol. I, pp. 180238.
14Rollo, pp. 127131.
15Id., at p. 130.
16Id., at pp. 132149.
17Id., at pp. 150151.
18Id., at p. 162.
19Id., at pp. 163192.
20Id., at p. 191.
21Supra note 1.
22Supra note 2.
561

The appellate court held that although the trial court

should not have confined itself to the allegations in the
complaint and should have also considered evidence
aliunde in resolving petitioners omnibus motion, it found
the evidence presented by petitioner, that is, the deposition
of Walter Browning, insufficient for purposes of
determining whether the complaint failed to state a cause
of action. The appellate court also stated that it could not
rule one way or the other on the issue of whether the
corporations, including petitioner, named as defendants in
the case had indeed merged together based solely on the
evidence presented by respondent. Thus, it held that the
issue should be threshed out during trial.23 Moreover, the
appellate court deferred to the discretion of the trial court
when the latter decided not to desist from assuming

jurisdiction on the ground of the inapplicability of the

principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO
STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT ON THE GROUND
OF FORUM NON CONVENIENS.24

Incidentally, respondent failed to file a comment despite

repeated notices. The Ceferino Padua Law Office, counsel
on record for respondent, manifested that the lawyer
handling the case, Atty. Rogelio Karagdag, had severed
relations with the law firm even before the filing of the
instant petition and that it could no longer find the
whereabouts of Atty. Karagdag or of respondent despite
diligent efforts. In a Resolution25
_______________
23Id.
24Id., at p. 18.
25Id., at p. 318.
562

dated 20 November 2006, the Court resolved to dispense

with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract
between respondent and BMSI included a valid choice of
law clause, that is, that the contract shall be governed by
the laws of the State of Connecticut. It also mentions the
presence of foreign elements in the disputenamely, the
parties and witnesses involved are American corporations
and citizens and the evidence to be presented is located
outside the Philippinesthat renders our local courts
inconvenient forums. Petitioner theorizes that the foreign
elements of the dispute necessitate the immediate
application of the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined
three consecutive phases involved in judicial resolution of
conflictsoflaws problems, namely: jurisdiction, choice of
law, and recognition and enforcement of judgments. Thus,
in the instances27 where the Court held that the local
judicial machinery was adequate to resolve controversies

with a foreign element, the following requisites had to be

proved: (1) that the Philippine Court is one to which the
parties may conveniently resort (2) that the Philippine
Court is in a position to make an intelligent decision as to
the law and the facts and (3) that the Philippine Court has
or is likely to have the power to enforce its decision.28
_______________
26G.R. No. 149177, 23 November 2007, 538 SCRA 261.
27 Bank of America NT & SA v. Court of Appeals, 448 Phil. 181 400
SCRA 156 (2003) Puyat v. Zabarte, 405 Phil. 413 352 SCRA 738 (2001)
Philsec Investment Corporation v. Court of Appeals, G.R. No. 103493, 19
June 1997, 274 SCRA 102.
28 The Manila Hotel Corp. v. National Labor Relations Commission,
397 Phil. 1, 1617 343 SCRA 1, 13 (2000) Communication Materials and
Design, Inc. v. Court of Appeals, 329 Phil. 487, 510511 260 SCRA 673
(1996).
564

On the matter of jurisdiction over a conflictsoflaws

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

from hearing the civil action. Jurisdiction and choice of law

are two distinct concepts. Jurisdiction considers whether it
is fair to cause a defendant to travel to this state choice of
law asks the further question whether the application of a
substantive law which
_______________
29 Agpalo, Ruben E. CONFLICT OF LAWS (Private International
Law), 2004 Ed., p. 491.
30 Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto
Cruz, G.R. No. 162890, 22 November 2005, 475 SCRA 743, 756.
31 Laresma v. Abellana, G.R. No. 140973, 11 November 2004, 442
SCRA 156, 168.
32See Arcelona v. Court of Appeals, 345 Phil. 250, 267 280 SCRA 20
(1997).
564

will determine the merits of the case is fair to both

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

petitioner. Failure to state a cause of action refers to the

insuffi
_______________
33Hasegawa v. Kitamura, supra note 26.
34Bank of America NT & SA v. Court of Appeals, supra note 27.
35Philsec Investment Corporation v. Court of Appeals, supra note 27 at
p. 113.
565

ciency of allegation in the pleading.36 As a general rule, the

elementary test for failure to state a cause of action is
whether the complaint alleges facts which if true would
justify the relief demanded.37
The complaint alleged that petitioner had combined with
BMSI and RUST to function as one company. Petitioner
contends that the deposition of Walter Browning rebutted
this allegation. On this score, the resolution of the Court of
Appeals is instructive, thus:
x x x Our examination of the deposition of Mr. Walter
Browning as well as other documents produced in the hearing
shows that these evidence aliunde are not quite sufficient for us
to mete a ruling that the complaint fails to state a cause of action.
Annexes A to E by themselves are not substantial,
convincing and conclusive proofs that Raytheon Engineers and
Constructors, Inc. (REC) assumed the warranty obligations of
defendant Rust International in the Makar Port Project in
General Santos City, after Rust International ceased to exist after
being absorbed by REC. Other documents already submitted in
evidence are likewise meager to preponderantly conclude that
Raytheon International, Inc., Rust International[,] Inc. and Brand
Marine Service, Inc. have combined into one company, so much so
that Raytheon International, Inc., the surviving company (if at
all) may be held liable for the obligation of BMSI to respondent
Rouzie for unpaid commissions. Neither these documents clearly
speak otherwise.38

As correctly pointed out by the Court of Appeals, the

question of whether petitioner, BMSI and RUST merged
together requires the presentation of further evidence,
which only a fullblown trial on the merits can afford.
_______________
36Bank of America NT & SA v. Court of Appeals, supra note 27 at p.
194 p. 167.

37Banco Filipino Savings and Mortgage Bank v. Court of Appeals, G.R.

No. 143896, 8 July 2005, 463 SCRA 64, 73.
38Rollo, p. 44.
566

WHEREFORE, the instant petition for review on

certiorari is DENIED. The Decision and Resolution of the
Court of Appeals in CAG.R. SP No. 67001 are hereby
AFFIRMED. Costs against petitioner.
SO ORDERED.
Carpio (Acting Chairperson), SandovalGutierrez,**
CarpioMorales and Velasco, Jr., JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.Forum shopping originated as a concept in
private international law, where nonresident litigants are
given the option to choose the forum or place wherein to
bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a
more friendly venue. (First Philippine International Bank
vs. Court of Appeals, 252 SCRA 259 [1996])
Generally, a foreign corporation has no legal existence
within the state in which it is foreign, and this proceeds
from the principle that juridical existence of a corporation
is confined within the territory of the state under whose
laws it was incorporated and organized, and it has no legal
status beyond such territory. (Communications Materials
and Design, Inc. vs. Court of Appeals, 260 SCRA 673
[1996])
o0o
_______________
** As replacement of Justice Leonardo A. Quisubing who inhibited
himself per Administrative Circular No. 842007.

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