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HE MANILA HOTEL CORP. AND MANILA HOTEL INTL.

LTD. petitioners, vs. NATIONAL LABOR RELATIONS


COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO
G. SANTOS, respondents.

DECISION
PARDO, J.:

The case before the Court is a petition for certiorari[1] to annul the following
orders of the National Labor Relations Commission (hereinafter referred to as
NLRC) for having been issued without or with excess jurisdiction and with
grave abuse of discretion:[2]
(1) Order of May 31, 1993.[3] Reversing and setting aside its earlier
resolution of August 28, 1992.[4] The questioned order declared that the NLRC,
not the Philippine Overseas Employment Administration (hereinafter referred
to as POEA), had jurisdiction over private respondents complaint;
(2) Decision of December 15, 1994.[5] Directing petitioners to jointly and
severally pay private respondent twelve thousand and six hundred dollars
(US$12,600.00) representing salaries for the unexpired portion of his contract;
three thousand six hundred dollars (US$3,600.00) as extra four months salary
for the two (2) year period of his contract, three thousand six hundred dollars
(US$3,600.00) as 14th month pay or a total of nineteen thousand and eight
hundred dollars (US$19,800.00) or its peso equivalent and attorneys fees
amounting to ten percent (10%) of the total award; and
(3) Order of March 30, 1995.[6] Denying the motion for reconsideration of
the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to
as Santos) was an overseas worker employed as a printer at the Mazoon
Printing Press, Sultanate of Oman.Subsequently, in June 1988, he was
directly hired by the Palace Hotel, Beijing, Peoples Republic of China and
later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as
MHC) and the Manila Hotel International Company, Limited (hereinafter
referred to as MHICL).
When the case was filed in 1990, MHC was still a government-owned and
controlled corporation duly organized and existing under the laws of the
Philippines.
MHICL is a corporation duly organized and existing under the laws of
Hong Kong.[7] MHC is an incorporator of MHICL, owning 50% of its capital
stock.[8]
By virtue of a management agreement[9] with the Palace Hotel (Wang Fu
Company Limited), MHICL[10] trained the personnel and staff of the Palace
Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of
Oman, respondent Santos received a letter dated May 2, 1988 from Mr.
Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but
with a higher monthly salary and increased benefits. The position was slated
to open on October 1, 1988.[11]
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his
acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a
ready to sign employment contract to respondent Santos. Mr. Henk advised
respondent Santos that if the contract was acceptable, to return the same to
Mr. Henk in Manila, together with his passport and two additional pictures for
his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing
Press, effective June 30, 1988, under the pretext that he was needed at home
to help with the familys piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and
acknowledged Mr. Henks letter. Respondent Santos enclosed four (4) signed
copies of the employment contract (dated June 4, 1988) and notified them that
he was going to arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment
would commence September 1, 1988 for a period of two years.[12] It provided
for a monthly salary of nine hundred dollars (US$900.00) net of taxes, payable
fourteen (14) times a year.[13]
On June 30, 1988, respondent Santos was deemed resigned from the
Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He
started to work at the Palace Hotel.[14]
Subsequently, respondent Santos signed an amended employment
agreement with the Palace Hotel, effective November 5, 1988. In the contract,
Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and
Development) of petitioner MHICL Miguel D. Cergueda signed the
employment agreement under the word noted.
From June 8 to 29, 1989, respondent Santos was in the Philippines on
vacation leave. He returned to China and reassumed his post on July 17,
1989.
On July 22, 1989, Mr. Shmidts Executive Secretary, a certain Joanna
suggested in a handwritten note that respondent Santos be given one (1)
month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by
letter signed by Mr. Shmidt that his employment at the Palace Hotel print shop
would be terminated due to business reverses brought about by the political
upheaval in China.[15] We quote the letter:[16]

After the unfortunate happenings in China and especially Beijing (referring to


Tiannamen Square incidents), our business has been severely affected. To reduce
expenses, we will not open/operate printshop for the time being.

We sincerely regret that a decision like this has to be made, but rest assured this does
in no way reflect your past performance which we found up to our expectations.

Should a turnaround in the business happen, we will contact you directly and give you
priority on future assignment.

On September 5, 1989, the Palace Hotel terminated the employment of


respondent Santos and paid all benefits due him, including his plane fare back
to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty.
Ednave wrote Mr. Shmidt, demanding full compensation pursuant to the
employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:[17]
His service with the Palace Hotel, Beijing was not abruptly terminated but we
followed the one-month notice clause and Mr. Santos received all benefits due him.

For your information, the Print Shop at the Palace Hotel is still not operational and
with a low business outlook, retrenchment in various departments of the hotel is going
on which is a normal management practice to control costs.

When going through the latest performance ratings, please also be advised that his
performance was below average and a Chinese National who is doing his job now
shows a better approach.

In closing, when Mr. Santos received the letter of notice, he hardly showed up for
work but still enjoyed free accommodation/laundry/meals up to the day of his
departure.

On February 20, 1990, respondent Santos filed a complaint for illegal


dismissal with the Arbitration Branch, National Capital Region, National Labor
Relations Commission (NLRC). He prayed for an award of nineteen thousand
nine hundred and twenty three dollars (US$19,923.00) as actual damages,
forty thousand pesos (P40,000.00) as exemplary damages and attorneys fees
equivalent to 20% of the damages prayed for. The complaint named MHC,
MHICL, the Palace Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and
neither participated in the proceedings before the Labor Arbiter.[18]
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case
against petitioners, thus:[19]

WHEREFORE, judgment is hereby rendered:

1. directing all the respondents to pay complainant jointly and severally;

a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;

b) P50,000.00 as moral damages;

c) P40,000.00 as exemplary damages; and

d) Ten (10) percent of the total award as attorneys fees.

SO ORDERED.
On July 23, 1991, petitioners appealed to the NLRC, arguing that the
POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating:[20]

WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void
for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the
POEA.

SO ORDERED.

On September 18, 1992, respondent Santos moved for reconsideration of


the afore-quoted resolution. He argued that the case was not cognizable by
the POEA as he was not an overseas contract worker.[21]
On May 31, 1993, the NLRC granted the motion and reversed itself. The
NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the
question of whether private respondent was retrenched or dismissed.[22]
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings
based on the testimonial and documentary evidence presented to and heard
by him.[23]
Subsequently, Labor Arbiter Tumanon was re-assigned as trial arbiter of
the National Capital Region, Arbitration Branch, and the case was transferred
to Labor Arbiter Jose G. de Vera.[24]
On November 25, 1994, Labor Arbiter de Vera submitted his report.[25] He
found that respondent Santos was illegally dismissed from employment and
recommended that he be paid actual damages equivalent to his salaries for
the unexpired portion of his contract.[26]
On December 15, 1994, the NLRC ruled in favor of private respondent, to
wit:
[27]

WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the
respondents to jointly and severally pay complainant the following computed
contractual benefits: (1) US$12,600.00 as salaries for the un-expired portion of the
parties contract; (2) US$3,600.00 as extra four (4) months salary for the two (2) years
period (sic) of the parties contract; (3) US$3,600.00 as 14th month pay for the
aforesaid two (2) years contract stipulated by the parties or a total of US$19,800.00 or
its peso equivalent, plus (4) attorneys fees of 10% of complainants total award.

SO ORDERED.
On February 2, 1995, petitioners filed a motion for reconsideration arguing
that Labor Arbiter de Veras recommendation had no basis in law and in fact.[28]
On March 30, 1995, the NLRC denied the motion for reconsideration.[29]
Hence, this petition.[30]
On October 9, 1995, petitioners filed with this Court an urgent motion for
the issuance of a temporary restraining order and/or writ of preliminary
injunction and a motion for the annulment of the entry of judgment of the
NLRC dated July 31, 1995.[31]
On November 20, 1995, the Court denied petitioners urgent motion. The
Court required respondents to file their respective comments, without giving
due course to the petition.[32]
On March 8, 1996, the Solicitor General filed a manifestation stating that
after going over the petition and its annexes, they can not defend and sustain
the position taken by the NLRC in its assailed decision and orders. The
Solicitor General prayed that he be excused from filing a comment on behalf
of the NLRC[33]
On April 30,1996, private respondent Santos filed his comment.[34]
On June 26, 1996, the Court granted the manifestation of the Solicitor
General and required the NLRC to file its own comment to the petition.[35]
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.


We note that the main aspects of the case transpired in two foreign
jurisdictions and the case involves purely foreign elements. The only link that
the Philippines has with the case is that respondent Santos is a Filipino
citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases
involving our citizens can be tried here.
The employment contract.-- Respondent Santos was hired directly by
the Palace Hotel, a foreign employer, through correspondence sent to the
Sultanate of Oman, where respondent Santos was then employed. He was
hired without the intervention of the POEA or any authorized recruitment
agency of the government.[36]
Under the rule of forum non conveniens, a Philippine court or
agency may assume jurisdiction over the case if it chooses to do
so provided: (1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the Philippine court
has or is likely to have power to enforce its decision.[37] The conditions are
unavailing in the case at bar.
Not Convenient.-- We fail to see how the NLRC is a convenient forum
given that all the incidents of the case - from the time of recruitment, to
employment to dismissal occurred outside the Philippines. The inconvenience
is compounded by the fact that the proper defendants, the Palace Hotel and
MHICL are not nationals of the Philippines. Neither are they doing business in
the Philippines. Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are
non-residents of the Philippines.
No power to determine applicable law.-- Neither can an intelligent
decision be made as to the law governing the employment contract as such
was perfected in foreign soil. This calls to fore the application of the principle
of lex loci contractus (the law of the place where the contract was made).[38]
The employment contract was not perfected in the
Philippines. Respondent Santos signified his acceptance by writing a letter
while he was in the Republic of Oman. This letter was sent to the Palace Hotel
in the Peoples Republic of China.
No power to determine the facts.-- Neither can the NLRC determine the
facts surrounding the alleged illegal dismissal as all acts complained of took
place in Beijing, Peoples Republic of China. The NLRC was not in a position
to determine whether the Tiannamen Square incident truly adversely affected
operations of the Palace Hotel as to justify respondent Santos retrenchment.
Principle of effectiveness, no power to execute decision.-- Even
assuming that a proper decision could be reached by the NLRC, such would
not have any binding effect against the employer, the Palace Hotel. The
Palace Hotel is a corporation incorporated under the laws of China and was
not even served with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to
solve controversies involving foreign employers. Neither are we saying that
we do not have power over an employment contract executed in a foreign
country. If Santos were an overseas contract worker, a Philippine forum,
specifically the POEA, not the NLRC, would protect him.[39] He is not an
overseas contract worker a fact which he admits with conviction.[40]
Even assuming that the NLRC was the proper forum, even on the merits,
the NLRCs decision cannot be sustained.
II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the
case, and (2) that MHICL was liable for Santos retrenchment, still MHC, as a
separate and distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its
capital stock. However, this is not enough to pierce the veil of corporate fiction
between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to
when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud or defend a crime.[41] It is done only when a corporation is a mere
alter ego or business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,[42] we held that the mere
ownership by a single stockholder or by another corporation of all or nearly all
of the capital stock of a corporation is not of itself a sufficient reason for
disregarding the fiction of separate corporate personalities.
The tests in determining whether the corporate veil may be pierced
are: First, the defendant must have control or complete domination of the
other corporations finances, policy and business practices with regard to the
transaction attacked. There must be proof that the other corporation had no
separate mind, will or existence with respect the act complained of.Second,
control must be used by the defendant to commit fraud or wrong. Third, the
aforesaid control or breach of duty must be the proximate cause of the injury
or loss complained of.The absence of any of the elements prevents the
piercing of the corporate veil.[43]
It is basic that a corporation has a personality separate and distinct from
those composing it as well as from that of any other legal entity to which it
may be related.[44] Clear and convincing evidence is needed to pierce the veil
of corporate fiction.[45] In this case, we find no evidence to show that MHICL
and MHC are one and the same entity.
III. MHICL not Liable

Respondent Santos predicates MHICLs liability on the fact that MHICL


signed his employment contract with the Palace Hotel. This fact fails to
persuade us.
First, we note that the Vice President (Operations and Development) of
MHICL, Miguel D. Cergueda signed the employment contract as a mere
witness. He merely signed under the word noted.
When one notes a contract, one is not expressing his agreement or
approval, as a party would.[46] In Sichangco v. Board of Commissioners of
Immigration,[47] the Court recognized that the term noted means that the
person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a decision
on the matter.
Mr. Cergueda merely signed the witnessing part of the document. The
witnessing part of the document is that which, in a deed or other formal
instrument is that part which comes after the recitals, or where there are no
recitals, after the parties (emphasis ours).[48] As opposed to a party to a
contract, a witness is simply one who, being present, personally sees or
perceives a thing; a beholder, a spectator, or eyewitness.[49] One who notes
something just makes a brief written statement[50] a memorandum or
observation.
Second, and more importantly, there was no existing employer-employee
relationship between Santos and MHICL. In determining the existence of an
employer-employee relationship, the following elements are considered:[51]

(1) the selection and engagement of the employee;

(2) the payment of wages;

(3) the power to dismiss; and

(4) the power to control employees conduct.

MHICL did not have and did not exercise any of the aforementioned
powers. It did not select respondent Santos as an employee for the Palace
Hotel. He was referred to the Palace Hotel by his friend, Nestor
Buenio. MHICL did not engage respondent Santos to work. The terms of
employment were negotiated and finalized through correspondence between
respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and
representatives of the Palace Hotel and not MHICL. Neither did respondent
Santos adduce any proof that MHICL had the power to control his
conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL
that terminated respondent Santos services.
Neither is there evidence to suggest that MHICL was a labor-only
contractor.[52] There is no proof that MHICL supplied respondent Santos or
even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL
are one and the same entity. The fact that the Palace Hotel is a member of
the Manila Hotel Group is notenough to pierce the corporate veil between
MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering


further that no employer-employee relationship existed between MHICL, MHC
and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
jurisdiction over respondents claim in NLRC NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over the
following:[53]

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions
involving legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and


maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.

In all these cases, an employer-employee relationship is an indispensable


jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the
Labor Code is limited to disputes arising from an employer-employee
relationship which can be resolved by reference to the Labor Code, or other
labor statutes, or their collective bargaining agreements.[54]
To determine which body has jurisdiction over the present controversy, we
rely on the sound judicial principle that jurisdiction over the subject matter is
conferred by law and is determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims
asserted therein.[55]
The lack of jurisdiction of the Labor Arbiter was obvious from the
allegations of the complaint. His failure to dismiss the case amounts to grave
abuse of discretion.[56]
V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and
ANNULS the orders and resolutions of the National Labor Relations
Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in
NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.

Manila Hotel Corporation vs


National Labor Relations
Commission
343 SCRA 1 – Private International Law – Forum Non Conveniens
In May 1988, Marcelo Santos was an overseas worker in Oman. In
June 1988, he was recruited by Palace Hotel in Beijing, China. Due to
higher pay and benefits, Santos agreed to the hotel’s job offer and so
he started working there in November 1988. The employment contract
between him and Palace Hotel was however without the intervention
of the Philippine Overseas Employment Administration (POEA). In
August 1989, Palace Hotel notified Santos that he will be laid off due
to business reverses. In September 1989, he was officially terminated.
In February 1990, Santos filed a complaint for illegal dismissal against
Manila Hotel Corporation (MHC) and Manila Hotel International, Ltd.
(MHIL). The Palace Hotel was impleaded but no summons were
served upon it. MHC is a government owned and controlled
corporation. It owns 50% of MHIL, a foreign corporation (Hong Kong).
MHIL manages the affair of the Palace Hotel. The labor arbiter who
handled the case ruled in favor of Santos. The National Labor
Relations Commission (NLRC) affirmed the labor arbiter.
ISSUE: Whether or not the NLRC has jurisdiction over the case.
HELD: No. The NLRC is a very inconvenient forum for the following
reasons:

1. The only link that the Philippines has in this case is the fact that
Santos is a Filipino;
2. However, the Palace Hotel and MHIL are foreign corporations – MHC
cannot be held liable because it merely owns 50% of MHIL, it has no
direct business in the affairs of the Palace Hotel. The veil of corporate
fiction can’t be pierced because it was not shown that MHC is directly
managing the affairs of MHIL. Hence, they are separate entities.
3. Santos’ contract with the Palace Hotel was not entered into in the
Philippines;
4. Santos’ contract was entered into without the intervention of the POEA
(had POEA intervened, NLRC still does not have jurisdiction because
it will be the POEA which will hear the case);
5. MHIL and the Palace Hotel are not doing business in the Philippines;
their agents/officers are not residents of the Philippines;

Due to the foregoing, the NLRC cannot possibly determine all the
relevant facts pertaining to the case. It is not competent to determine
the facts because the acts complained of happened outside our
jurisdiction. It cannot determine which law is applicable. And in case a
judgment is rendered, it cannot be enforced against the Palace Hotel
(in the first place, it was not served any summons).
The Supreme Court emphasized that under the rule of forum non
conveniens, a Philippine court or agency may assume jurisdiction over
the case if it chooses to do so provided:
(1) that the Philippine court is one to which the parties may
conveniently resort to;
(2) that the Philippine court is in a position to make an intelligent
decision as to the law and the facts; and
(3) that the Philippine court has or is likely to have power to enforce its
decision.
None of the above conditions are apparent in the case at bar.

[G.R. No. 102223. August 22, 1996]

COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-


TRADE, INC., (formerly ASPAC-ITEC PHILIPPINES, INC.) and
FRANCISCO S.AGUIRRE, petitioners, vs. THE COURT OF
APPEALS, ITEC INTERNATIONAL, INC., and ITEC,
INC., respondents.

DECISION
TORRES, JR., J.:

Business Corporations, according to Lord Coke, have no souls. They do


business peddling goods, wares or even services across national boundaries
in soulless forms in quest for profits albeit at times, unwelcomed in these
strange lands venturing into uncertain markets and, the risk of dealing with
wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the
Court of Appeals on June 7, 1991, sustaining the RTC Order dated February
22, 1991, denying the petitioners Motion to Dismiss, and directing the
issuance of a writ of preliminary injunction, and its companion Resolution of
October 9, 1991, denying the petitioners Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI,
for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both
domestic corporations, while petitioner Francisco S. Aguirre is their President
and majority stockholder. Private Respondents ITEC, INC. and/or ITEC,
INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly organized
and existing under the laws of the State of Alabama, United States of
America. There is no dispute that ITEC is a foreign corporation not licensed to
do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC
referred to as Representative Agreement. Pursuant to the contract, ITEC
[1]

engaged ASPAC as its exclusive representative in the Philippines for the sale
of ITECs products, in consideration of which, ASPAC was paid a stipulated
commission. The agreement was signed by G.A. Clark and Francisco S.
Aguirre, presidents of ITEC and ASPAC respectively, for and in behalf of their
companies. The said agreement was initially for a term of twenty-four
[2]

months. After the lapse of the agreed period, the agreement was renewed for
another twenty-four months.
Through a License Agreement entered into by the same parties on
[3]

November 10, 1988, ASPAC was able to incorporate and use the name ITEC
in its own name. Thus, ASPAC Multi-Trade, Inc. became legally and publicly
known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by
ITEC, to their sole customer, the Philippine Long Distance Telephone
Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new appellation,
and PLDT executed a document entitled PLDT-ASPAC/ITEC
PROTOCOL which defined the project details for the supply of ITECs
[4]

Interface Equipment in connection with the Fifth Expansion Program of PLDT.


One year into the second term of the parties Representative Agreement,
ITEC decided to terminate the same, because petitioner ASPAC allegedly
violated its contractual commitment as stipulated in their agreements.
[5]

ITEC charges the petitioners and another Philippine Corporation, DIGITAL


BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of
which is likewise petitioner Aguirre, of using knowledge and information of
ITECs products specifications to develop their own line of equipment and
product support, which are similar, if not identical to ITECs own, and offering
them to ITECs former customer.
On January 31, 1991, the complaint in Civil Case No. 91-294, was filed
[6]

with the Regional Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff
sought to enjoin, first, preliminarily and then, after trial, permanently; (1)
defendants DIGITAL, CMDI, and Francisco Aguirre and their agents and
business associates, to cease and desist from selling or attempting to sell to
PLDT and to any other party, products which have been copied or
manufactured in like manner, similar or identical to the products, wares and
equipment of plaintiff, and (2) defendant ASPAC, to cease and desist from
using in its corporate name, letter heads, envelopes, sign boards and
business dealings, plaintiffs trademark, internationally known as ITEC; and the
recovery from defendants in solidum, damages of at least P500,000.00,
attorneys fees and litigation expenses.
In due time, defendants filed a motion to dismiss the complaint on the
[7]

following grounds: (1) That plaintiff has no legal capacity to sue as it is a


foreign corporation doing business in the Philippines without the required BOI
authority and SEC license, and (2) that plaintiff is simply engaged in forum
shopping which justifies the application against it of the principle of forum non
conveniens.
On February 8, 1991, the complaint was amended by virtue of which ITEC
INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC. [8]

In their Supplemental Motion to Dismiss, defendants took note of the


[9]

amendment of the complaint and asked the court to consider in toto their
motion to dismiss and their supplemental motion as their answer to the
amended complaint.
After conducting hearings on the prayer for preliminary injunction, the
court a quo on February 22, 1991, issued its Order: (1) denying the motion to
[10]

dismiss for being devoid of legal merit with a rejection of both grounds relied
upon by the defendants in their motion to dismiss, and (2) directing the
issuance of a writ of preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case to the respondent
Court of Appeals on a Petition for Certiorari and Prohibition under Rule 65 of
[11]

the Revised Rules of Court, assailing and seeking the nullification and the
setting aside of the Order and the Writ of Preliminary Injunction issued by the
Regional Trial Court.
The respondent appellate court stated, thus:

We find no reason whether in law or from the facts of record, to disagree with the
(lower courts) ruling. We therefore are unable to find in respondent Judges issuance of
said writ the grave abuse of discretion ascribed thereto by the petitioners.

In fine, We find that the petition prima facie does not show that Certiorari lies in the
present case and therefore, the petition does not deserve to be given due course.

WHEREFORE, the present petition should be, as it is hereby, denied due course and
accordingly, is hereby dismissed. Costs against the petitioners.

SO ORDERED." [12]
Petitioners filed a motion for reconsideration on June 7, 1991, which was
[13]

likewise denied by the respondent court.

WHEREFORE, the present motion for reconsideration should be, as it is hereby,


denied for lack of merit. For the same reason, the motion to have the motion for
reconsideration set for oral argument likewise should be and is hereby denied.

SO ORDERED." [14]

Petitioners are now before us via Petition for Review on Certiorari under [15]

Rule 45 of the Revised Rules of Court.


It is the petitioners submission that private respondents are foreign
corporations actually doing business in the Philippines without the requisite
authority and license from the Board of Investments and the Securities and
Exchange Commission, and thus, disqualified from instituting the present
action in our courts. It is their contention that the provisions of the
Representative Agreement, petitioner ASPAC executed with private
respondent ITEC, are similarly highly restrictive in nature as those found in the
agreements which confronted the Court in the case of Top-Weld
Manufacturing, Inc. vs. ECED S.A. et al., as to reduce petitioner ASPAC to a
[16]

mere conduit or extension of private respondents in the Philippines.


In that case, we ruled that respondent foreign corporations are doing
business in the Philippines because when the respondents entered into the
disputed contracts with the petitioner, they were carrying out the purposes for
which they were created, i.e., to manufacture and market welding products
and equipment. The terms and conditions of the contracts as well as the
respondents conduct indicate that they established within our country a
continuous business, and not merely one of a temporary character. The
respondents could be exempted from the requirements of Republic Act 5455 if
the petitioner is an independent entity which buys and distributes products not
only of the petitioner, but also of other manufacturers or transacts business in
its name and for its account and not in the name or for the account of the
foreign principal. A reading of the agreements between the petitioner and the
respondents shows that they are highly restrictive in nature, thus making the
petitioner a mere conduit or extension of the respondents.
It is alleged that certain provisions of the Representative Agreement
executed by the parties are similar to those found in the License Agreement of
the parties in the Top-Weld case which were considered as highly restrictive
by this Court. The provisions in point are:
2.0 Terms and Conditions of Sales.

2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to
time. Unless otherwise expressly agreed to in writing by ITEC the purchase price is
net to ITEC and does not include any transportation charges, import charges or taxes
into or within the Territory. All orders from customers are subject to formal
acceptance by ITEC at its Huntsville, Alabama U.S.A. facility.

xxx xxx xxx

3.0 Duties of Representative

3.1. REPRESENTATIVE SHALL:

3.1.1. Not represent or offer for sale within the Territory any product which competes
with an existing ITEC product or any product which ITEC has under active
development.

3.1.2. Actively solicit all potential customers within the Territory in a systematic and
businesslike manner.

3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid
and the like within the Territory.

3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The Sales
Goals for the first 24 months is set forth on Attachment two (2) hereto. The Sales
Goal for additional twelve month periods, if any, shall be sent to the Sales Agent by
ITEC at the beginning of each period. These Sales Goals shall be incorporated into
this Agreement and made a part hereof.

xxx xxx xxx

6.0. Representative as Independent Contractor

xxx xxx xxx

6.2. When acting under this Agreement REPRESENTATIVE is authorized to solicit


sales within the Territory on ITECs behalf but is authorized to bind ITEC only in its
capacity as Representative and no other, and then only to specific customers and on
terms and conditions expressly authorized by ITEC in writing. [17]
Aside from the abovestated provisions, petitioners point out the following
matters of record, which allegedly witness to the respondents' activities within
the Philippines in pursuit of their business dealings:

a. While petitioner ASPAC was the authorized exclusive representative for three (3)
years, it solicited from and closed several sales for and on behalf of private
respondents as to their products only and no other, to PLDT, worth no less than US
$15 Million (p. 20, tsn, Feb. 18, 1991);

b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by
private respondents sole witness, Mr. Clarence Long, is not in the name of petitioner
ASPAC as such representative, but in the name of private respondent ITEC, INC. (p.
20, tsn, Feb. 18, 1991);

c. The document denominated as PLDT-ASPAC/ITEC PROTOCOL (Annex C of the


original and amended complaints) which defined the responsibilities of the parties
thereto as to the supply, installation and maintenance of the ITEC equipment sold
under said Contract No. 1 is, as its very title indicates, in the names jointly of the
petitioner ASPAC and private respondents;

d. To evidence receipt of the purchase price of US $15 Million, private respondent


ITEC, Inc. issued in its letter head, a Confirmation of payment dated November 13,
1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2 of the Motion to
Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which were
identified by private respondents sole witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991).[18]

Petitioners contend that the above acts or activities belie the supposed
independence of petitioner ASPAC from private respondents. The unrebutted
evidence on record below for the petitioners likewise reveal the continuous
character of doing business in the Philippines by private respondents based
on the standards laid down by this Court in Wang Laboratories, Inc. vs. Hon.
Rafael T. Mendoza, et al. and again in TOP-WELD. (supra) It thus appears
[19]

that as the respondent Court of Appeals and the trial courts failure to give
credence on the grounds relied upon in support of their Motion to Dismiss that
petitioners ascribe grave abuse of discretion amounting to an excess of
jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no capacity
to bring suit here, the Philippines is not the most convenient forum because
the trial court is devoid of any power to enforce its orders issued or decisions
rendered in a case that could not have been commenced to begin with, such
that in insisting to assume and exercise jurisdiction over the case below, the
trial court had gravely abused its discretion and even actually exceeded its
jurisdiction.
As against petitioners insistence that private respondent is doing business
in the Philippines, the latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules
and Regulations Implementing the Omnibus Investments Code of 1987, the
following:

(1) A foreign firm is deemed not engaged in business in the Philippines if it transacts
business through middlemen, acting in their own names, such as indebtors,
commercial bookers or commercial merchants.

(2) A foreign corporation is deemed not doing business if its representative domiciled
in the Philippines has an independent status in that it transacts business in its name
and for its account.
[20]

Private respondent argues that a scrutiny of its Representative Agreement


with the Petitioners will show that although ASPAC was named as
representative of ITEC., ASPAC actually acted in its own name and for its own
account. The following provisions are particularly mentioned:

3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC,


REPRESENTATIVE will pay for its own account; all customs duties and import fees
imposed on any ITEC products; all import expediting or handling charges and
expenses imposed on ITEC products; and any stamp tax fees imposed on ITEC.

xxx xxx xxx

4.1. As complete consideration and payment for acting as representative under this
Agreement, REPRESENTATIVE shall receive a sales commission equivalent to a
percentum of the FOB value of all ITEC equipment sold to customers within the
territory as a direct result of REPRESENTATIVEs sales efforts. [21]

More importantly, private respondents charge ASPAC of admitting its


independence from ITEC by entering and ascribing to provision No. 6 of the
Representative Agreement.

6.0. Representative as Independent Contractor


6.1. When performing any of its duties under this Agreement, REPRESENTATIVE
shall act as an independent contractor and not as an employee, worker, laborer,
partner, joint venturer of ITEC as these terms are defined by the laws, regulations,
decrees or the like of any jurisdiction, including the jurisdiction of the United States,
the state of Alabama and the Territory. [22]

Although it admits that the Representative Agreement contains provisions


which both support and belie the independence of ASPAC, private
respondents echoes the respondent courts finding that the lower court did not
commit grave abuse of discretion nor acted in excess of jurisdiction when it
found that the ground relied upon by the petitioners in their motion to dismiss
does not appear to be indubitable. [23]

The issues before us now are whether or not private respondent ITEC is
an unlicensed corporation doing business in the Philippines, and if it is,
whether or not this fact bars it from invoking the injunctive authority of our
courts.
Considering the above, it is necessary to state what is meant by doing
business in the Philippines. Section 133 of the Corporation Code, provides
that No foreign corporation, transacting business in the Philippines without a
license, or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine Courts or administrative tribunals on any valid cause
of action recognized under Philippine laws. [24]

Generally, a foreign corporation has no legal existence within the state in


which it is foreign. 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. Such foreign corporation may be excluded by any other state from
doing business within its limits, or conditions may be imposed on the exercise
of such privileges. Before a foreign corporation can transact business in this
[25]

country, it must first obtain a license to transact business in the Philippines,


and a certificate from the appropriate government agency. If it transacts
business in the Philippines without such a license, it shall not be permitted to
maintain or intervene in any action, suit, or proceeding in any court or
administrative agency of the Philippines, but it may be sued on any valid
cause of action recognized under Philippine laws. [26]

In a long line of decisions, this Court has not altogether prohibited a


foreign corporation not licensed to do business in the Philippines from suing or
maintaining an action in Philippine Courts. What it seeks to prevent is a
foreign corporation doing business in the Philippines without a license from
gaining access to Philippine Courts. [27]

The purpose of the law in requiring that foreign corporations doing


business in the Philippines be licensed to do so and that they appoint an
agent for service of process is to subject the foreign corporation doing
business in the Philippines to the jurisdiction of its courts. The object is not to
prevent the foreign corporation from performing single acts, but to prevent it
from acquiring a domicile for the purpose of business without taking steps
necessary to render it amenable to suit in the local courts. The implication of
[28]

the law is that it was never the purpose of the legislature to exclude a foreign
corporation which happens to obtain an isolated order for business from the
Philippines, and thus, in effect, to permit persons to avoid their contracts
made with such foreign corporations. [29]

There is no exact rule or governing principle as to what constitutes doing


or engaging or transacting business. Indeed, such case must be judged in the
light of its peculiar circumstances, upon its peculiar facts and upon the
language of the statute applicable. The true test, however, seems to be
whether the foreign corporation is continuing the body or substance of the
business or enterprise for which it was organized. [30]

Article 44 of the Omnibus Investments Code of 1987 defines the phrase to


include:

soliciting orders, purchases, service contracts, opening offices, whether called liaison
offices or branches; appointing representatives or distributors who are domiciled in
the Philippines or who in any calendar year stay in the Philippines for a period or
periods totaling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity or
commercial dealings or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the
business organization.

Thus, a foreign corporation with a settling agent in the Philippines which


issued twelve marine policies covering different shipments to the
Philippines and a foreign corporation which had been collecting premiums on
[31]

outstanding policies were regarded as doing business here.


[32]

The same rule was observed relating to a foreign corporation with an


exclusive distributing agent in the Philippines, and which has been selling its
products here since 1929, and a foreign corporation engaged in the business
[33]

of manufacturing and selling computers worldwide, and had installed at least


26 different products in several corporations in the Philippines, and allowed its
registered logo and trademark to be used and made it known that there exists
a designated distributor in the Philippines.
[34]

In Georg Grotjahn GMBH and Co. vs. Isnani, it was held that the
[35]

uninterrupted performance by a foreign corporation of acts pursuant to its


primary purposes and functions as a regional area headquarters for its home
office, qualifies such corporation as one doing business in the country.
These foregoing instances should be distinguished from a single or
isolated transaction or occasional, incidental, or casual transactions, which do
not come within the meaning of the law, for in such case, the foreign
[36]

corporation is deemed not engaged in business in the Philippines.


Where a single act or transaction, however, is not merely incidental or
casual but indicates the foreign corporations intention to do other business in
the Philippines, said single act or transaction constitutes doing or engaging in
or transacting business in the Philippines.[37]

In determining whether a corporation does business in the Philippines or


not, aside from their activities within the forum, reference may be made to the
contractual agreements entered into by it with other entities in the country.
Thus, in the Top-Weld case (supra), the foreign corporations LICENSE AND
TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT with their local
contacts were made the basis of their being regarded by this Tribunal as
corporations doing business in the country. Likewise, in Merill Lynch Futures,
Inc. vs. Court of Appeals,etc. the FUTURES CONTRACT entered into by the
[38]

petitioner foreign corporation weighed heavily in the courts ruling.


With the abovestated precedents in mind, we are persuaded to conclude
that private respondent had been engaged in or doing business in the
Philippines for some time now. This is the inevitable result after a scrutiny of
the different contracts and agreements entered into by ITEC with its various
business contacts in the country, particularly ASPAC and Telephone
Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local
electronics firm engaged by ITEC to be its local technical representative, and
to create a service center for ITEC products sold locally. Its arrangements,
with these entities indicate convincingly ITECs purpose to bring about the
situation among its customers and the general public that they are dealing
directly with ITEC, and that ITEC is actively engaging in business in the
country.
In its Master Service Agreement with TESSI, private respondents
[39]

required its local technical representative to provide the employees of the


technical and service center with ITEC identification cards and business
cards, and to correspond only on ITEC, Inc., letterhead. TESSI personnel are
instructed to answer the telephone with ITEC Technical Assistance Center.,
such telephone being listed in the telephone book under the heading of ITEC
Technical Assistance Center, and all calls being recorded and forwarded to
ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report
detailing the failure and repair of ITEC products, and to requisition monthly the
materials and components needed to replace stock consumed in the warranty
repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the
respondents shows that there are provisions which are highly restrictive in
nature, such as to reduce petitioner ASPAC to a mere extension or instrument
of the private respondent.
The No Competing Product provision of the Representative Agreement
between ITEC and ASPAC provides: The Representative shall not represent
or offer for sale within the Territory any product which competes with an
existing ITEC product or any product which ITEC has under active
development. Likewise pertinent is the following provision: When acting under
this Agreement, REPRESENTATIVE is authorized to solicit sales within the
Territory on ITECs behalf but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific customers and on
terms and conditions expressly authorized by ITEC in writing.
When ITEC entered into the disputed contracts with ASPAC and TESSI,
they were carrying out the purposes for which it was created, i.e., to market
electronics and communications products. The terms and conditions of the
contracts as well as ITECs conduct indicate that they established within our
country a continuous business, and not merely one of a temporary character. [40]

Notwithstanding such finding that ITEC is doing business in the country,


petitioner is nonetheless estopped from raising this fact to bar ITEC from
instituting this injunction case against it.
A foreign corporation doing business in the Philippines may sue in
Philippine Courts although not authorized to do business here against a
Philippine citizen or entity who had contracted with and benefited by said
corporation. To put it in another way, a party is estopped to challenge the
[41]

personality of a corporation after having acknowledged the same by entering


into a contract with it. And the doctrine of estoppel to deny corporate
existence applies to a foreign as well as to domestic corporations. One who
[42]

has dealt with a corporation of foreign origin as a corporate entity is estopped


to deny its corporate existence and capacity. The principle will be applied to
prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases where such
person has received the benefits of the contract. [43]

The rule is deeply rooted in the time-honored axiom of Commodum ex


injuria sua non habere debet - no person ought to derive any advantage of his
own wrong. This is as it should be for as mandated by law, every person must
in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith. [44]

Concededly, corporations act through agents like directors and officers.


Corporate dealings must be characterized by utmost good faith and fairness.
Corporations cannot just feign ignorance of the legal rules as in most cases,
they are manned by sophisticated officers with tried management skills and
legal experts with practiced eye on legal problems. Each party to a corporate
transaction is expected to act with utmost candor and fairness and, thereby
allow a reasonable proportion between benefits and expected burdens. This is
a norm which should be observed where one or the other is a foreign entity
venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time
they enter into a contract and at the time it is to become operative.
(Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98).
Moreover, a person is presumed to be more knowledgeable about his own
state law than his alien or foreign contemporary. In this case, the record
shows that, at least, petitioner had actual knowledge of the applicability of
R.A. No. 5455 at the time the contract was executed and at all times
thereafter. This conclusion is compelled by the fact that the same statute is
now being propounded by the petitioner to bolster its claim. We, therefore
sustain the appellate courts view that it was incumbent upon TOP-WELD to
know whether or not IRTI and ECED were properly authorized to engage in
business in the Philippines when they entered into the licensing and
distributorship agreements. The very purpose of the law was circumvented
and evaded when the petitioner entered into said agreements despite the
prohibition of R.A. No. 5455. The parties in this case being equally guilty of
violating R.A. No. 5455, they are in pari delicto, in which case it follows as a
consequence that petitioner is not entitled to the relief prayed for in this case.
The doctrine of lack of capacity to sue based on the failure to acquire a
local license is based on considerations of sound public policy. The license
requirement was imposed to subject the foreign corporation doing business in
the Philippines to the jurisdiction of its courts. It was never intended to favor
domestic corporations who enter into solitary transactions with unwary foreign
firms and then repudiate their obligations simply because the latter are not
licensed to do business in this country.[45]

In Antam Consolidated Inc. vs. Court of Appeals, et al. we expressed our


[46]

chagrin over this commonly used scheme of defaulting local companies which
are being sued by unlicensed foreign companies not engaged in business in
the Philippines to invoke the lack of capacity to sue of such foreign
companies. Obviously, the same ploy is resorted to by ASPAC to prevent the
injunctive action filed by ITEC to enjoin petitioner from using knowledge
possibly acquired in violation of fiduciary arrangements between the parties.
By entering into the Representative Agreement with ITEC, Petitioner is
charged with knowledge that ITEC was not licensed to engage in business
activities in the country, and is thus estopped from raising in defense such
incapacity of ITEC, having chosen to ignore or even presumptively take
advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be exempted from
the license requirement in order to institute an action in our courts if its
representative in the country maintained an independent status during the
existence of the disputed contract. Petitioner is deemed to have acceded to
such independent character when it entered into the Representative
Agreement with ITEC, particularly, provision 6.2 (supra).
Petitioners insistence on the dismissal of this action due to the application,
or non application, of the private international law rule of forum non
conveniens defies well-settled rules of fair play. According to petitioner, the
Philippine Court has no venue to apply its discretion whether to give
cognizance or not to the present action, because it has not acquired
jurisdiction over the person of the plaintiff in the case, the latter allegedly
having no personality to sue before Philippine Courts. This argument is
misplaced because the court has already acquired jurisdiction over the plaintiff
in the suit, by virtue of his filing the original complaint. And as we have already
observed, petitioner are not at liberty to question plaintiffs standing to sue,
having already acceded to the same by virtue of its entry into the
Representative Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court, based
on the facts of the case, whether to give due course to the suit or dismiss it,
on the principle of forum non conveniens. Hence, the Philippine Court may
[47]

refuse to assume jurisdiction in spite of its having acquired


jurisdiction. Conversely, the court may assume jurisdiction over the case if it
chooses to do so; provided, that the following requisites are met: 1) That the
Philippine Court is one to which the parties may conveniently resort to; 2) That
the Philippine Court is in a position to make an intelligent decision as to the
law and the facts; and, 3) That the Philippine Court has or is likely to have
power to enforce its decision.
[48]

The aforesaid requirements having been met, and in view of the courts
disposition to give due course to the questioned action, the matter of the
present forum not being the most convenient as a ground for the suits
dismissal, deserves scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby
DISMISSED. The decision of the Court of Appeals dated June 7, 1991,
upholding the RTC Order dated February 22, 1991, denying the petitioners
Motion to Dismiss, and ordering the issuance of the Writ of Preliminary
Injunction is hereby affirmed in toto.
SO ORDERED.
Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.

COMMUNICATION
MATERIALS VS. CA
MARCH 28, 2013 ~ VBDIAZ

COMMUNICATION MATERIALS AND DESIGN, INC et


al vs.CA et al.
G.R. No. 102223
August 22, 1996
FACTS: Petitioners COMMUNICATION MATERIALS AND
DESIGN, INC., (CMDI) and ASPAC MULTI-TRADE INC.,
(ASPAC) are both domestic corporations.. Private Respondents
ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC) are
corporations duly organized and existing under the laws of the
State of Alabama, USA. There is no dispute that ITEC is a
foreign corporation not licensed to do business in the
Philippines.
ITEC entered into a contract with ASPAC referred to as
“Representative Agreement”. Pursuant to the contract, ITEC
engaged ASPAC as its “exclusive representative” in the
Philippines for the sale of ITEC’s products, in consideration of
which, ASPAC was paid a stipulated commission. Through a
“License Agreement” entered into by the same parties later on,
ASPAC was able to incorporate and use the name “ITEC” in its
own name. Thus , ASPAC Multi-Trade, Inc. became legally and
publicly known as ASPAC-ITEC (Philippines).
One year into the second term of the parties’ Representative
Agreement, ITEC decided to terminate the same, because
petitioner ASPAC allegedly violated its contractual commitment
as stipulated in their agreements. ITEC charges the petitioners
and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL), the President of
which is likewise petitioner Aguirre, of using knowledge and
information of ITEC’s products specifications to develop their
own line of equipment and product support, which are similar, if
not identical to ITEC’s own, and offering them to ITEC’s
former customer.

The complaint was filed with the RTC-Makati by ITEC, INC.


Defendants filed a MTD the complaint on the following
grounds: (1) That plaintiff has no legal capacity to sue as it is a
foreign corporation doing business in the Philippines without the
required BOI authority and SEC license, and (2) that plaintiff is
simply engaged in forum shopping which justifies the
application against it of the principle of “forum non
conveniens”. The MTD was denied.
Petitioners elevated the case to the respondent CA on a Petition
for Certiorari and Prohibition under Rule 65 of the Revised
ROC. It was dismissed as well. MR denied, hence this Petition
for Review on Certiorari under Rule 45.

ISSUE:
1. Did the Philippine court acquire jurisdiction over the person
of the petitioner corp, despite allegations of lack of capacity to
sue because of non-registration?
2. Can the Philippine court give due course to the suit or dismiss
it, on the principle of forum non convenience?
HELD: petition dismissed.
1. YES; We are persuaded to conclude that ITEC had been
“engaged in” or “doing business” in the Philippines for some
time now. This is the inevitable result after a scrutiny of the
different contracts and agreements entered into by ITEC with its
various business contacts in the country. Its arrangements, with
these entities indicate convincingly that ITEC is actively
engaging in business in the country.

A foreign corporation doing business in the Philippines may sue


in Philippine Courts although not authorized to do business here
against a Philippine citizen or entity who had contracted with
and benefited by said corporation. To put it in another way, a
party is estopped to challenge the personality of a corporation
after having acknowledged the same by entering into a contract
with it. And the doctrine of estoppel to deny corporate existence
applies to a foreign as well as to domestic corporations. One
who has dealt with a corporation of foreign origin as a corporate
entity is estopped to deny its corporate existence and capacity.
In Antam Consolidated Inc. vs. CA et al. we expressed our
chagrin over this commonly used scheme of defaulting local
companies which are being sued by unlicensed foreign
companies not engaged in business in the Philippines to invoke
the lack of capacity to sue of such foreign companies.
Obviously, the same ploy is resorted to by ASPAC to prevent
the injunctive action filed by ITEC to enjoin petitioner from
using knowledge possibly acquired in violation of fiduciary
arrangements between the parties.

2. YES; Petitioner’s insistence on the dismissal of this action


due to the application, or non application, of the private
international law rule of forum non conveniens defies well-
settled rules of fair play. According to petitioner, the Philippine
Court has no venue to apply its discretion whether to give
cognizance or not to the present action, because it has not
acquired jurisdiction over the person of the plaintiff in the case,
the latter allegedly having no personality to sue before
Philippine Courts. This argument is misplaced because the court
has already acquired jurisdiction over the plaintiff in the suit, by
virtue of his filing the original complaint. And as we have
already observed, petitioner is not at liberty to question
plaintiff’s standing to sue, having already acceded to the same
by virtue of its entry into the Representative Agreement referred
to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine


Court, based on the facts of the case, whether to give due course
to the suit or dismiss it, on the principle of forum non
convenience. Hence, the Philippine Court may refuse to assume
jurisdiction in spite of its having acquired jurisdiction.
Conversely, the court may assume jurisdiction over the case if it
chooses to do so; provided, that the following requisites are met:

1) That the Philippine Court is one to which the parties may


conveniently resort to;
2) That the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and,
3) That the Philippine Court has or is likely to have power to
enforce its decision.
The aforesaid requirements having been met, and in view of the
court’s disposition to give due course to the questioned action,
the matter of the present forum not being the “most convenient”
as a ground for the suit’s dismissal, deserves scant
consideration.

[G.R. No. 103493. June 19, 1997]

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL


FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners,
vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO
DAIC, VENTURA O. DUCAT, PRECIOSO R. PERLAS, and
WILLIAM H. CRAIG, respondents.

DECISION
MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon
the rights of the parties under the same cause of action asserted in a case in our local
court.Petitioners brought this case in the Regional Trial Court of Makati, Branch 56,
which, in view of the pendency at the time of the foreign action, dismissed Civil Case
No. 16563 on the ground of litis pendentia, in addition to forum non conveniens. On
appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans
from petitioners Ayala International Finance Limited (hereafter called AYALA) [1] and
Philsec Investment Corporation (hereafter called PHILSEC) in the sum of
US$2,500,000.00, secured by shares of stock owned by Ducat with a market value
of P14,088,995.00. In order to facilitate the payment of the loans, private respondent
1488, Inc., through its president, private respondent Drago Daic, assumed Ducats
obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a
Warranty Deed with Vendors Lien by which it sold to petitioner Athona Holdings, N.V.
(hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for
US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the
amount of US$2,500,000.00 as initial payment of the purchase price. The balance of
US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in
favor of 1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488,
Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to
1488, Inc. all the shares of stock in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire
amount covered by the note became due and demandable. Accordingly, on October 17,
1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA
in the United States for payment of the balance of US$307,209.02 and for damages for
breach of contract and for fraud allegedly perpetrated by petitioners in misrepresenting
the marketability of the shares of stock delivered to 1488, Inc. under the
Agreement. Originally instituted in the United States District Court of Texas, 165th
Judicial District, where it was docketed as Case No. 85-57746, the venue of the action
was later transferred to the United States District Court for the Southern District of
Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the
original complaint. ATHONA filed an answer with counterclaim, impleading private
respondents herein as counterdefendants, for allegedly conspiring in selling the
property at a price over its market value. Private respondent Perlas, who had allegedly
appraised the property, was later dropped as counterdefendant. ATHONA sought the
recovery of damages and excess payment allegedly made to 1488, Inc. and, in the
alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA
filed a motion to dismiss on the ground of lack of jurisdiction over their person, but, as
their motion was denied, they later filed a joint answer with counterclaim against private
respondents and Edgardo V. Guevarra, PHILSECs own former president, for the
rescission of the sale on the ground that the property had been overvalued. On March
13, 1990, the United States District Court for the Southern District of Texas dismissed
the counterclaim against Edgardo V. Guevarra on the ground that it was frivolous and
[was] brought against him simply to humiliate and embarrass him. For this reason, the
U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered
them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States,
petitioners filed a complaint For Sum of Money with Damages and Writ of Preliminary
Attachment against private respondents in the Regional Trial Court of Makati, where it
was docketed as Civil Case No. 16563. The complaint reiterated the allegation of
petitioners in their respective counterclaims in Civil Action No. H-86-440 of the United
States District Court of Southern Texas that private respondents committed fraud by
selling the property at a price 400 percent more than its true value of US$800,000.00.
Petitioners claimed that, as a result of private respondents fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the
Agreement and to purchase the Houston property. Petitioners prayed that private
respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00
and to pay damages. On April 20, 1987, the trial court issued a writ of preliminary
attachment against the real and personal properties of private respondents. [2]
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of
(1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the
U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to
state a cause of action. Ducat contended that the alleged overpricing of the property
prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which
were not parties to the sale and whose only participation was to extend financial
accommodation to ATHONA under a separate loan agreement. On the other hand,
private respondents 1488, Inc. and its president Daic filed a joint Special Appearance
and Qualified Motion to Dismiss, contending that the action being in personam,
extraterritorial service of summons by publication was ineffectual and did not vest the
court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and
Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducats motion to dismiss, stating that
the evidentiary requirements of the controversy may be more suitably tried before the
forum of the litis pendentia in the U.S., under the principle in private international law
of forum non conveniens, even as it noted that Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daics motion to
dismiss. On March 9, 1988, the trial court[3] granted the motion to dismiss filed by 1488,
Inc. and Daic on the ground of litis pendentia considering that

the main factual element of the cause of action in this case which is the validity of
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District
Court which, under the doctrine of forum non conveniens, is the better (if not
exclusive) forum to litigate matters needed to determine the assessment and/or
fluctuations of the fair market value of real estate situated in Houston, Texas,
U.S.A. from the date of the transaction in 1983 up to the present and verily, . . .
(emphasis by trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they
were non-residents and the action was not an action in rem or quasi in rem, so that
extraterritorial service of summons was ineffective. The trial court subsequently lifted
the writ of attachment it had earlier issued against the shares of stocks of 1488, Inc. and
Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in
applying the principle of litis pendentia and forum non conveniens and in ruling that it
had no jurisdiction over the defendants, despite the previous attachment of shares of
stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals[4] affirmed the dismissal of Civil Case No.
16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants
are Philsec, the Ayala International Finance Ltd. (BPI-IFLs former name) and the
Athona Holdings, NV. The case at bar involves the same parties. The transaction sued
upon by the parties, in both cases is the Warranty Deed executed by and between
Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed
by herein appellants, on the marketability of Ducats securities given in exchange for
the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the same Warranty
Deed.

The Court of Appeals also held that Civil Case No. 16563 was an action in personam for
the recovery of a sum of money for alleged tortious acts, so that service of summons by
publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago
Daic. The dismissal of Civil Case No. 16563 on the ground of forum non
conveniens was likewise affirmed by the Court of Appeals on the ground that the case
can be better tried and decided by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction, and involve
foreign elements, to wit: 1) the property subject matter of the sale is situated in Texas,
U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the
buyer, Athona Holdings, a foreign corporation which does not claim to be doing
business in the Philippines, is wholly owned by Philsec, a domestic corporation,
Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the
Warranty Deed was executed in Texas, U.S.A.

In their present appeal, petitioners contend that:


1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME
PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE
COURT OF APPEALS IN AFFIRMING THE TRIAL COURTS DISMISSAL OF THE
CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE
COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT
OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS
ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE
ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS
RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY
REASON TO PROTECT AND VINDICATE PETITIONERS RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS
(WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE
IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.
First. It is important to note in connection with the first point that while the present
case was pending in the Court of Appeals, the United States District Court for the
Southern District of Texas rendered judgment[5] in the case before it. The judgment,
which was in favor of private respondents, was affirmed on appeal by the Circuit Court
of Appeals.[6] Thus, the principal issue to be resolved in this case is whether Civil Case
No. 16536 is barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be pleaded as res
judicata, a judgment admitting the foreign decision is not necessary. On the other hand,
petitioners argue that the foreign judgment cannot be given the effect of res judicata
without giving them an opportunity to impeach it on grounds stated in Rule 39, 50 of the
Rules of Court, to wit: want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact.
Petitioners contention is meritorious. While this Court has given the effect of res
judicata to foreign judgments in several cases,[7] it was after the parties opposed to the
judgment had been given ample opportunity to repel them on grounds allowed under
the law.[8] It is not necessary for this purpose to initiate a separate action or proceeding
for enforcement of the foreign judgment. What is essential is that there is opportunity to
challenge the foreign judgment, in order for the court to properly determine its
efficacy. This is because in this jurisdiction, with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely constitutes prima facie
evidence of the justness of the claim of a party and, as such, is subject to proof to the
contrary.[9] Rule 39, 50 provides:

SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a


foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive evidence of a


right as between the parties and their successors in interest by a subsequent title; but
the judgment may be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union Insurance
Society of Canton, Ltd.,[10] which private respondents invoke for claiming conclusive
effect for the foreign judgment in their favor, the foreign judgment was considered res
judicata because this Court found from the evidence as well as from appellants own
pleadings[11] that the foreign court did not make a clear mistake of law or fact or that its
judgment was void for want of jurisdiction or because of fraud or collusion by the
defendants. Trial had been previously held in the lower court and only afterward was a
decision rendered, declaring the judgment of the Supreme Court of the State of
Washington to have the effect of res judicata in the case before the lower court. In the
same vein, in Philippine International Shipping Corp. v. Court of Appeals,[12] this Court
held that the foreign judgment was valid and enforceable in the Philippines there being
no showing that it was vitiated by want of notice to the party, collusion, fraud or clear
mistake of law or fact. The prima facie presumption under the Rule had not been
rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to
challenge the judgment of the U.S. court as basis for declaring it res judicata or
conclusive of the rights of private respondents. The proceedings in the trial court were
summary. Neither the trial court nor the appellate court was even furnished copies of
the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure
a proper determination of whether the issues then being litigated in the U.S. court were
exactly the issues raised in this case such that the judgment that might be rendered
would constitute res judicata. As the trial court stated in its disputed order dated March
9, 1988:

On the plaintiffs claim in its Opposition that the causes of action of this case
and the pending case in the United States are not identical, precisely the Order
of January 26, 1988 never found that the causes of action of this case and the
case pending before the USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that petitioners action is
barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of
the U.S. court over their persons, but their claim was brushed aside by both the trial
court and the Court of Appeals.[13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition
for the enforcement of judgment in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the
proceedings were suspended because of the pendency of this case. To sustain the
appellate courts ruling that the foreign judgment constitutes res judicata and is a bar to
the claim of petitioners would effectively preclude petitioners from repelling the
judgment in the case for enforcement. An absurdity could then arise: a foreign judgment
is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to
resist a claim as in this case, but it may be opposed by the defendant if the foreign
judgment is sought to be enforced against him in a separate proceeding. This is plainly
untenable. It has been held therefore that:
[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the
Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order that
the defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. [14]

Accordingly, to insure the orderly administration of justice, this case and Civil Case
No. 92-1070 should be consolidated.[15] After all, the two have been filed in the Regional
Trial Court of Makati, albeit in different salas, this case being assigned to Branch 56
(Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134
of Judge Ignacio Capulong.In such proceedings, petitioners should have the burden of
impeaching the foreign judgment and only in the event they succeed in doing so may
they proceed with their action against private respondents.
Second. Nor is the trial courts refusal to take cognizance of the case justifiable
under the principle of forum non conveniens. First, a motion to dismiss is limited to the
grounds under Rule 16, 1, which does not include forum non conveniens.[16] The
propriety of dismissing a case based on this principle requires a factual determination,
hence, it is more properly considered a matter of defense. Second, while it is within the
discretion of the trial court to abstain from assuming jurisdiction on this ground, it should
do so only after vital facts are established, to determine whether special circumstances
require the courts desistance.[17]
In this case, the trial court abstained from taking jurisdiction solely on the basis of
the pleadings filed by private respondents in connection with the motion to dismiss. It
failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one
of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the
latters debt which was the object of the transaction under litigation. The trial court
arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S.
case.
Third. It was error we think for the Court of Appeals and the trial court to hold that
jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action
in personam and summons were served by extraterritorial service. Rule 14, 17 on
extraterritorial service provides that service of summons on a non-resident defendant
may be effected out of the Philippines by leave of Court where, among others, the
property of the defendant has been attached within the Philippines.[18] It is not disputed
that the properties, real and personal, of the private respondents had been attached
prior to service of summons under the Order of the trial court dated April 20, 1987.[19]
Fourth. As for the temporary restraining order issued by the Court on June 29,
1994, to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V.
Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S.
court, the Court finds that the judgment sought to be enforced is severable from the
main judgment under consideration in Civil Case No. 16563. The separability of
Guevarras claim is not only admitted by petitioners,[20] it appears from the pleadings that
petitioners only belatedly impleaded Guevarra as defendant in Civil Case No.
16563.[21] Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to
proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case
No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation with
Civil Case No. 92-1070 and for further proceedings in accordance with this
decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

PHILSEC INVESTMENT et al vs.CA et al


G.R. No. 103493
June 19, 1997
FACTS: Private respondent Ducat obtained separate loans
from petitioners Ayala International Finance Limited
(AYALA) and Philsec Investment Corp (PHILSEC),
secured by shares of stock owned by Ducat.
In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private
respondent Daic, assumed Ducat’s obligation under an
Agreement, whereby 1488, Inc. executed a Warranty Deed
with Vendor’s Lien by which it sold to petitioner Athona
Holdings, N.V. (ATHONA) a parcel of land in Texas,
U.S.A., while PHILSEC and AYALA extended a loan to
ATHONA as initial payment of the purchase price. The
balance was to be paid by means of a promissory note
executed by ATHONA in favor of 1488, Inc. Subsequently,
upon their receipt of the money from 1488, Inc., PHILSEC
and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their
possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance, the


entire amount covered by the note became due and
demandable. Accordingly, private respondent 1488, Inc.
sued petitioners PHILSEC, AYALA, and ATHONA in the
United States for payment of the balance and for damages
for breach of contract and for fraud allegedly perpetrated
by petitioners in misrepresenting the marketability of the
shares of stock delivered to 1488, Inc. under the
Agreement.

While the Civil Case was pending in the United States,


petitioners filed a complaint “For Sum of Money with
Damages and Writ of Preliminary Attachment” against
private respondents in the RTC Makati. The complaint
reiterated the allegation of petitioners in their respective
counterclaims in the Civil Action in the United States
District Court of Southern Texas that private respondents
committed fraud by selling the property at a price 400
percent more than its true value.

Ducat moved to dismiss the Civil Case in the RTC-Makati


on the grounds of (1) litis pendentia, vis-a-vis the Civil
Action in the U.S., (2) forum non conveniens, and (3)
failure of petitioners PHILSEC and BPI-IFL to state a
cause of action.

The trial court granted Ducat’s MTD, stating that “the


evidentiary requirements of the controversy may be more
suitably tried before the forum of the litis pendentia in the
U.S., under the principle in private international law of
forum non conveniens,” even as it noted that Ducat was
not a party in the U.S. case.
Petitioners appealed to the CA, arguing that the trial court
erred in applying the principle of litis pendentia and forum
non conveniens.

The CA affirmed the dismissal of Civil Case against Ducat,


1488, Inc., and Daic on the ground of litis pendentia.

ISSUE: is the Civil Case in the RTC-Makati barred by the


judgment of the U.S. court?
HELD: CA reversed. Case remanded to RTC-Makati
NO
While this Court has given the effect of res judicata to
foreign judgments in several cases, it was after the parties
opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the
law. This is because in this jurisdiction, with respect to
actions in personam, as distinguished from actions in rem,
a foreign judgment merely constitutes prima facie
evidence of the justness of the claim of a party and, as
such, is subject to proof to the contrary. Rule 39, §50
provides:

Sec. 50. Effect of foreign judgments. — The effect of a


judgment of a tribunal of a foreign country, having
jurisdiction to pronounce the judgment is as follows:

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


judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and
their successors in interest by a subsequent title; but the
judgment may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact.

In the case at bar, it cannot be said that petitioners were


given the opportunity to challenge the judgment of the
U.S. court as basis for declaring it res judicata or
conclusive of the rights of private respondents. The
proceedings in the trial court were summary. Neither the
trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the
evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in
the U.S. court were exactly the issues raised in this case
such that the judgment that might be rendered would
constitute res judicata.

Second. Nor is the trial court’s refusal to take cognizance


of the case justifiable under the principle of forum non
conveniens:

First, a MTD is limited to the grounds under Rule 16, sec.1,


which does not include forum non conveniens. The
propriety of dismissing a case based on this principle
requires a factual determination, hence, it is more properly
considered a matter of defense.
Second, while it is within the discretion of the trial court to
abstain from assuming jurisdiction on this ground, it
should do so only after “vital facts are established, to
determine whether special circumstances” require the
court’s desistance.

G.R. No. 72494 August 11, 1989

HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,


vs.
JACK ROBERT SHERMAN, DEODATO RELOJ and THE
INTERMEDIATE APPELLATE COURT, respondents.

Quiason, Makalintal, Barot & Torres for petitioner.

Alejandro, Aranzaso & Associates for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Intermediate


Appellate Court (now Court of Appeals) dated August 2, 1985, which
reversed the order of the Regional Trial Court dated February 28,1985
denying the Motion to Dismiss filed by private respondents Jack Robert
Sherman and Deodato Reloj.

A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by
petitioner Hongkong and Shanghai Banking Corporation (hereinafter
referred to as petitioner BANK) against private respondents Jack Robert
Sherman and Deodato Reloj, docketed as Civil Case No. Q-42850 before
the Regional Trial Court of Quezon City, Branch 84.

It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd.
(hereinafter referred to as COMPANY), a company incorporated in
Singapore applied with, and was granted by, the Singapore branch of
petitioner BANK an overdraft facility in the maximum amount of Singapore
dollars 200,000.00 (which amount was subsequently increased to
Singapore dollars 375,000.00) with interest at 3% over petitioner BANK
prime rate, payable monthly, on amounts due under said overdraft facility;
as a security for the repayment by the COMPANY of sums advanced by
petitioner BANK to it through the aforesaid overdraft facility, on October 7,
1982, both private respondents and a certain Robin de Clive Lowe, all of
whom were directors of the COMPANY at such time, executed a Joint and
Several Guarantee (p. 53, Rollo) in favor of petitioner BANK whereby
private respondents and Lowe agreed to pay, jointly and severally, on
demand all sums owed by the COMPANY to petitioner BANK under the
aforestated overdraft facility.

The Joint and Several Guarantee provides, inter alia, that:

This guarantee and all rights, obligations and liabilities arising


hereunder shall be construed and determined under and may
be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts of Singapore shall
have jurisdiction over all disputes arising under this guarantee.
... (p. 33-A, Rollo).

The COMPANY failed to pay its obligation. Thus, petitioner BANK


demanded payment of the obligation from private respondents,
conformably with the provisions of the Joint and Several Guarantee.
Inasmuch as the private respondents still failed to pay, petitioner BANK
filed the above-mentioned complaint.

On December 14,1984, private respondents filed a motion to dismiss (pp


54-56, Rollo) which was opposed by petitioner BANK (pp. 58-62, Rollo).
Acting on the motion, the trial court issued an order dated February 28,
1985 (pp, 64-65, Rollo), which read as follows:

In a Motion to Dismiss filed on December 14, 1984, the


defendants seek the dismissal of the complaint on two grounds,
namely:

1. That the court has no jurisdiction over the subject matter of


the complaint; and

2. That the court has no jurisdiction over the persons of the


defendants.

In the light of the Opposition thereto filed by plaintiff, the Court


finds no merit in the motion. "On the first ground, defendants
claim that by virtue of the provision in the Guarantee (the
actionable document) which reads —
This guarantee and all rights, obligations and
liabilities arising hereunder shall be construed and
determined under and may be enforced in
accordance with the laws of the Republic of
Singapore. We hereby agree that the courts in
Singapore shall have jurisdiction over all disputes
arising under this guarantee,

the Court has no jurisdiction over the subject matter of the


case. The Court finds and concludes otherwise. There is
nothing in the Guarantee which says that the courts of
Singapore shall have jurisdiction to the exclusion of the courts
of other countries or nations. Also, it has long been established
in law and jurisprudence that jurisdiction of courts is fixed by
law; it cannot be conferred by the will, submission or consent of
the parties.

On the second ground, it is asserted that defendant Robert' ,


Sherman is not a citizen nor a resident of the Philippines. This
argument holds no water. Jurisdiction over the persons of
defendants is acquired by service of summons and copy of the
complaint on them. There has been a valid service of summons
on both defendants and in fact the same is admitted when said
defendants filed a 'Motion for Extension of Time to File
Responsive Pleading on December 5, 1984.

WHEREFORE, the Motion to Dismiss is hereby DENIED.

SO ORDERED.

A motion for reconsideration of the said order was filed by private


respondents which was, however, denied (p. 66,Rollo).

Private respondents then filed before the respondent Intermediate


Appellate Court (now Court of Appeals) a petition for prohibition with
preliminary injunction and/or prayer for a restraining order (pp. 39-
48, Rollo). On August 2, 1985, the respondent Court rendered a decision
(p. 37, Rollo), the dispositive portion of which reads:

WHEREFORE, the petition for prohibition with preliminary


injuction is hereby GRANTED. The respondent Court is
enjoined from taking further cognizance of the case and to
dismiss the same for filing with the proper court of Singapore
which is the proper forum. No costs.

SO ORDERED.

The motion for reconsideration was denied (p. 38, Rollo), hence, the
present petition.

The main issue is whether or not Philippine courts have jurisdiction over the
suit.

The controversy stems from the interpretation of a provision in the Joint


and Several Guarantee, to wit:

(14) This guarantee and all rights, obligations and liabilites


arising hereunder shall be construed and determined under and
may be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts in Singapore shall
have jurisdiction over all disputes arising under this guarantee.
... (p. 53-A, Rollo)

In rendering the decision in favor of private respondents, the Court of


Appeals made, the following observations (pp. 35-36, Rollo):

There are significant aspects of the case to which our attention


is invited. The loan was obtained by Eastern Book Service PTE,
Ltd., a company incorporated in Singapore. The loan was
granted by the Singapore Branch of Hongkong and Shanghai
Banking Corporation. The Joint and Several Guarantee was
also concluded in Singapore. The loan was in Singaporean
dollars and the repayment thereof also in the same currency.
The transaction, to say the least, took place in Singporean
setting in which the law of that country is the measure by which
that relationship of the parties will be governed.

xxx xxx xxx

Contrary to the position taken by respondents, the guarantee


agreement compliance that any litigation will be before the
courts of Singapore and that the rights and obligations of the
parties shall be construed and determined in accordance with
the laws of the Republic of Singapore. A closer examination of
paragraph 14 of the Guarantee Agreement upon which the
motion to dismiss is based, employs in clear and unmistakeable
(sic) terms the word 'shall' which under statutory construction is
mandatory.

Thus it was ruled that:

... the word 'shall' is imperative, operating to impose a duty


which may be enforced (Dizon vs. Encarnacion, 9 SCRA 714). lâwphî1.ñèt

There is nothing more imperative and restrictive than what the


agreement categorically commands that 'all rights, obligations,
and liabilities arising hereunder shall be construed and
determined under and may be enforced in accordance with
the laws of the Republic of Singapore.'

While it is true that "the transaction took place in Singaporean setting" and
that the Joint and Several Guarantee contains a choice-of-forum clause,
the very essence of due process dictates that the stipulation that "[t]his
guarantee and all rights, obligations and liabilities arising hereunder shall
be construed and determined under and may be enforced in accordance
with the laws of the Republic of Singapore. We hereby agree that the
Courts in Singapore shall have jurisdiction over all disputes arising under
this guarantee" be liberally construed. One basic principle underlies all
rules of jurisdiction in International Law: a State does not have jurisdiction
in the absence of some reasonable basis for exercising it, whether the
proceedings are in rem quasi in rem or in personam. To be reasonable, the
jurisdiction must be based on some minimum contacts that will not offend
traditional notions of fair play and substantial justice (J. Salonga, Private
International Law, 1981, p. 46). Indeed, as pointed-out by petitioner BANK
at the outset, the instant case presents a very odd situation. In the ordinary
habits of life, anyone would be disinclined to litigate before a foreign
tribunal, with more reason as a defendant. However, in this case, private
respondents are Philippine residents (a fact which was not disputed by
them) who would rather face a complaint against them before a foreign
court and in the process incur considerable expenses, not to mention
inconvenience, than to have a Philippine court try and resolve the case.
Private respondents' stance is hardly comprehensible, unless their ultimate
intent is to evade, or at least delay, the payment of a just obligation.

The defense of private respondents that the complaint should have been
filed in Singapore is based merely on technicality. They did not even claim,
much less prove, that the filing of the action here will cause them any
unnecessary trouble, damage, or expense. On the other hand, there is no
showing that petitioner BANK filed the action here just to harass private
respondents.

In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October
31, 1969, 30 SCRA 187, it was ruled:

... An accurate reading, however, of the stipulation, 'The parties


agree to sue and be sued in the Courts of Manila,' does not
preclude the filing of suits in the residence of plaintiff or
defendant. The plain meaning is that the parties merely
consented to be sued in Manila. Qualifying or restrictive words
which would indicate that Manila and Manila alone is the venue
are totally absent therefrom. We cannot read into that clause
that plaintiff and defendant bound themselves to file suits with
respect to the last two transactions in question only or
exclusively in Manila. For, that agreement did not change or
transfer venue. It simply is permissive. The parties solely
agreed to add the courts of Manila as tribunals to which they
may resort. They did not waive their right to pursue remedy in
the courts specifically mentioned in Section 2(b) of Rule
4. Renuntiatio non praesumitur.

This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v.
Lagamon, etc., et al., G.R. No. 57250, October 30, 1981, 108 SCRA 740,
where the stipulation was "[i]n case of litigation, jurisdiction shall be vested
in the Court of Davao City." We held:

Anent the claim that Davao City had been stipulated as the
venue, suffice it to say that a stipulation as to venue does not
preclude the filing of suits in the residence of plaintiff or
defendant under Section 2 (b), Rule 4, Rules of Court, in the
absence of qualifying or restrictive words in the agreement
which would indicate that the place named is the only venue
agreed upon by the parties.

Applying the foregoing to the case at bar, the parties did not thereby
stipulate that only the courts of Singapore, to the exclusion of all the rest,
has jurisdiction. Neither did the clause in question operate to divest
Philippine courts of jurisdiction. In International Law, jurisdiction is often
defined as the light of a State to exercise authority over persons and things
within its boundaries subject to certain exceptions. Thus, a State does not
assume jurisdiction over travelling sovereigns, ambassadors and diplomatic
representatives of other States, and foreign military units stationed in or
marching through State territory with the permission of the latter's
authorities. This authority, which finds its source in the concept of
sovereignty, is exclusive within and throughout the domain of the State. A
State is competent to take hold of any judicial matter it sees fit by making
its courts and agencies assume jurisdiction over all kinds of cases brought
before them (J. Salonga, Private International Law, 1981, pp. 37-38). lâwphî1.ñèt

As regards the issue on improper venue, petitioner BANK avers that the
objection to improper venue has been waived. However, We agree with the
ruling of the respondent Court that:

While in the main, the motion to dismiss fails to categorically


use with exactitude the words 'improper venue' it can be
perceived from the general thrust and context of the motion that
what is meant is improper venue, The use of the word
'jurisdiction' was merely an attempt to copy-cat the same word
employed in the guarantee agreement but conveys the concept
of venue. Brushing aside all technicalities, it would appear that
jurisdiction was used loosely as to be synonymous with venue.
It is in this spirit that this Court must view the motion to dismiss.
... (p. 35, Rollo).

At any rate, this issue is now of no moment because We hold that venue
here was properly laid for the same reasons discussed above.

The respondent Court likewise ruled that (pp. 36-37, Rollo):

... In a conflict problem, a court will simply refuse to entertain


the case if it is not authorized by law to exercise jurisdiction.
And even if it is so authorized, it may still refuse to entertain the
case by applying the principle of forum non conveniens. ...

However, whether a suit should be entertained or dismissed on the basis of


the principle of forum non conveniensdepends largely upon the facts of the
particular case and is addressed to the sound discretion of the trial court (J.
Salonga, Private International Law, 1981, p. 49). Thus, the respondent
lâwphî1.ñèt

Court should not have relied on such principle.

Although the Joint and Several Guarantee prepared by petitioner BANK is


a contract of adhesion and that consequently, it cannot be permitted to take
a stand contrary to the stipulations of the contract, substantial bases exist
for petitioner Bank's choice of forum, as discussed earlier.

Lastly, private respondents allege that neither the petitioner based at


Hongkong nor its Philippine branch is involved in the transaction sued
upon. This is a vain attempt on their part to further thwart the proceedings
below inasmuch as well-known is the rule that a defendant cannot plead
any defense that has not been interposed in the court below.

ACCORDINGLY, the decision of the respondent Court is hereby


REVERSED and the decision of the Regional Trial Court is REINSTATED,
with costs against private respondents. This decision is immediately
executory.

SO ORDERED.

HONGKONG AND SHANGHAI BANKING


CORPORATION (HSBC) vs. SHERMAN et al
G.R. No. 72494
August 11, 1989
FACTS: It appears that sometime in 1981, Eastern Book
Supply Service PTE, Ltd. (COMPANY), a company
incorporated in Singapore applied with and was granted
by HSBC Singapore branch an overdraft facility in the
maximum amount of Singapore dollars 200,000 with
interest at 3% over HSBC prime rate, payable monthly, on
amounts due under said overdraft facility.
As a security for the repayment by the COMPANY of sums
advanced by HSBC to it through the aforesaid overdraft
facility, in 1982, both private respondents and a certain
Lowe, all of whom were directors of the COMPANY at such
time, executed a Joint and Several Guarantee in favor of
HSBC whereby private respondents and Lowe agreed to
pay, jointly and severally, on demand all sums owed by the
COMPANY to petitioner BANK under the aforestated
overdraft facility.

The Joint and Several Guarantee provides, inter alia, that:


This guarantee and all rights, obligations and liabilities
arising hereunder shall be construed and determined
under and may be enforced in accordance with the laws of
the Republic of Singapore. We hereby agree that the
Courts of Singapore shall have jurisdiction over all
disputes arising under this guarantee. …

The COMPANY failed to pay its obligation. Thus, HSBC


demanded payment and inasmuch as the private
respondents still failed to pay, HSBC filed A complaint for
collection of a sum of money against private respondents
Sherman and Reloj before RTC of Quezon City.
Private respondents filed an MTD on the ground of lack of
jurisdiction over the subject matter. The trial court denied
the motion. They then filed before the respondent IAC a
petition for prohibition with preliminary injunction
and/or prayer for a restraining order. The IAC rendered a
decision enjoining the RTC Quezon City from taking
further cognizance of the case and to dismiss the same for
filing with the proper court of Singapore which is the
proper forum. MR denied, hence this petition.

ISSUE: Do Philippine courts have jurisdiction over the


suit, vis-a-vis the Guarantee stipulation regarding
jurisdiction?
HELD: YES
One basic principle underlies all rules of jurisdiction in
International Law: a State does not have jurisdiction in the
absence of some reasonable basis for exercising it, whether
the proceedings are in rem quasi in rem or in personam.
To be reasonable, the jurisdiction must be based on some
minimum contacts that will not offend traditional notions
of fair play and substantial justice
The defense of private respondents that the complaint
should have been filed in Singapore is based merely on
technicality. They did not even claim, much less prove,
that the filing of the action here will cause them any
unnecessary trouble, damage, or expense. On the other
hand, there is no showing that petitioner BANK filed the
action here just to harass private respondents.

**

In the case of Neville Y. Lamis Ents., et al. v. Lagamon,


etc., where the stipulation was “[i]n case of litigation,
jurisdiction shall be vested in the Court of Davao City.” We
held:
Anent the claim that Davao City had been stipulated as the
venue, suffice it to say that a stipulation as to venue does
not preclude the filing of suits in the residence of plaintiff
or defendant under Section 2 (b), Rule 4, ROC, in the
absence of qualifying or restrictive words in the agreement
which would indicate that the place named is the only
venue agreed upon by the parties.
Applying the foregoing to the case at bar, the parties did
not thereby stipulate that only the courts of Singapore, to
the exclusion of all the rest, has jurisdiction. Neither did
the clause in question operate to divest Philippine courts
of jurisdiction. In International Law, jurisdiction is often
defined as the light of a State to exercise authority over
persons and things within its boundaries subject to certain
exceptions. Thus, a State does not assume jurisdiction over
travelling sovereigns, ambassadors and diplomatic
representatives of other States, and foreign military units
stationed in or marching through State territory with the
permission of the latter’s authorities. This authority, which
finds its source in the concept of sovereignty, is exclusive
within and throughout the domain of the State. A State is
competent to take hold of any judicial matter it sees fit by
making its courts and agencies assume jurisdiction over all
kinds of cases brought before them

NOTES:
The respondent IAC likewise ruled that:
… In a conflict problem, a court will simply refuse to
entertain the case if it is not authorized by law to exercise
jurisdiction. And even if it is so authorized, it may still
refuse to entertain the case by applying the principle of
forum non conveniens. …
However, whether a suit should be entertained or
dismissed on the basis of the principle of forum non
conveniens depends largely upon the facts of the particular
case and is addressed to the sound discretion of the trial
court. Thus, the IAC should not have relied on such
principle.

G.R. No. L-16749 January 31, 1963

IN THE MATTER OF THE TESTATE ESTATE OF EDWARD E.


CHRISTENSEN, DECEASED.
ADOLFO C. AZNAR, Executor and LUCY CHRISTENSEN, Heir of the
deceased, Executor and Heir-appellees,
vs.
HELEN CHRISTENSEN GARCIA, oppositor-appellant.

M. R. Sotelo for executor and heir-appellees.


Leopoldo M. Abellera and Jovito Salonga for oppositor-appellant.

LABRADOR, J.:

This is an appeal from a decision of the Court of First Instance of Davao,


Hon. Vicente N. Cusi, Jr., presiding, in Special Proceeding No. 622 of said
court, dated September 14, 1949, approving among things the final
accounts of the executor, directing the executor to reimburse Maria Lucy
Christensen the amount of P3,600 paid by her to Helen Christensen Garcia
as her legacy, and declaring Maria Lucy Christensen entitled to the residue
of the property to be enjoyed during her lifetime, and in case of death
without issue, one-half of said residue to be payable to Mrs. Carrie Louise
C. Borton, etc., in accordance with the provisions of the will of the testator
Edward E. Christensen. The will was executed in Manila on March 5, 1951
and contains the following provisions:

3. I declare ... that I have but ONE (1) child, named MARIA LUCY
CHRISTENSEN (now Mrs. Bernard Daney), who was born in the
Philippines about twenty-eight years ago, and who is now residing at
No. 665 Rodger Young Village, Los Angeles, California, U.S.A.
4. I further declare that I now have no living ascendants, and no
descendants except my above named daughter, MARIA LUCY
CHRISTENSEN DANEY.

xxx xxx xxx

7. I give, devise and bequeath unto MARIA HELEN CHRISTENSEN,


now married to Eduardo Garcia, about eighteen years of age and
who, notwithstanding the fact that she was baptized Christensen, is
not in any way related to me, nor has she been at any time adopted
by me, and who, from all information I have now resides in Egpit,
Digos, Davao, Philippines, the sum of THREE THOUSAND SIX
HUNDRED PESOS (P3,600.00), Philippine Currency the same to be
deposited in trust for the said Maria Helen Christensen with the
Davao Branch of the Philippine National Bank, and paid to her at the
rate of One Hundred Pesos (P100.00), Philippine Currency per month
until the principal thereof as well as any interest which may have
accrued thereon, is exhausted..

xxx xxx xxx

12. I hereby give, devise and bequeath, unto my well-beloved


daughter, the said MARIA LUCY CHRISTENSEN DANEY (Mrs.
Bernard Daney), now residing as aforesaid at No. 665 Rodger Young
Village, Los Angeles, California, U.S.A., all the income from the rest,
remainder, and residue of my property and estate, real, personal
and/or mixed, of whatsoever kind or character, and wheresoever
situated, of which I may be possessed at my death and which may
have come to me from any source whatsoever, during her lifetime: ....

It is in accordance with the above-quoted provisions that the executor in his


final account and project of partition ratified the payment of only P3,600 to
Helen Christensen Garcia and proposed that the residue of the estate be
transferred to his daughter, Maria Lucy Christensen.

Opposition to the approval of the project of partition was filed by Helen


Christensen Garcia, insofar as it deprives her (Helen) of her legitime as an
acknowledged natural child, she having been declared by Us in G.R. Nos.
L-11483-84 an acknowledged natural child of the deceased Edward E.
Christensen. The legal grounds of opposition are (a) that the distribution
should be governed by the laws of the Philippines, and (b) that said order
of distribution is contrary thereto insofar as it denies to Helen Christensen,
one of two acknowledged natural children, one-half of the estate in full
ownership. In amplification of the above grounds it was alleged that the law
that should govern the estate of the deceased Christensen should not be
the internal law of California alone, but the entire law thereof because
several foreign elements are involved, that the forum is the Philippines and
even if the case were decided in California, Section 946 of the California
Civil Code, which requires that the domicile of the decedent should apply,
should be applicable. It was also alleged that Maria Helen Christensen
having been declared an acknowledged natural child of the decedent, she
is deemed for all purposes legitimate from the time of her birth.

The court below ruled that as Edward E. Christensen was a citizen of the
United States and of the State of California at the time of his death, the
successional rights and intrinsic validity of the provisions in his will are to
be governed by the law of California, in accordance with which a testator
has the right to dispose of his property in the way he desires, because the
right of absolute dominion over his property is sacred and inviolable (In re
McDaniel's Estate, 77 Cal. Appl. 2d 877, 176 P. 2d 952, and In re
Kaufman, 117 Cal. 286, 49 Pac. 192, cited in page 179, Record on
Appeal). Oppositor Maria Helen Christensen, through counsel, filed various
motions for reconsideration, but these were denied. Hence, this appeal.

The most important assignments of error are as follows:

THE LOWER COURT ERRED IN IGNORING THE DECISION OF THE


HONORABLE SUPREME COURT THAT HELEN IS THE
ACKNOWLEDGED NATURAL CHILD OF EDWARD E. CHRISTENSEN
AND, CONSEQUENTLY, IN DEPRIVING HER OF HER JUST SHARE IN
THE INHERITANCE.

II

THE LOWER COURT ERRED IN ENTIRELY IGNORING AND/OR


FAILING TO RECOGNIZE THE EXISTENCE OF SEVERAL FACTORS,
ELEMENTS AND CIRCUMSTANCES CALLING FOR THE APPLICATION
OF INTERNAL LAW.

III
THE LOWER COURT ERRED IN FAILING TO RECOGNIZE THAT
UNDER INTERNATIONAL LAW, PARTICULARLY UNDER THE RENVOI
DOCTRINE, THE INTRINSIC VALIDITY OF THE TESTAMENTARY
DISPOSITION OF THE DISTRIBUTION OF THE ESTATE OF THE
DECEASED EDWARD E. CHRISTENSEN SHOULD BE GOVERNED BY
THE LAWS OF THE PHILIPPINES.

IV

THE LOWER COURT ERRED IN NOT DECLARING THAT THE


SCHEDULE OF DISTRIBUTION SUBMITTED BY THE EXECUTOR IS
CONTRARY TO THE PHILIPPINE LAWS.

THE LOWER COURT ERRED IN NOT DECLARING THAT UNDER THE


PHILIPPINE LAWS HELEN CHRISTENSEN GARCIA IS ENTITLED TO
ONE-HALF (1/2) OF THE ESTATE IN FULL OWNERSHIP.

There is no question that Edward E. Christensen was a citizen of the


United States and of the State of California at the time of his death. But
there is also no question that at the time of his death he was domiciled in
the Philippines, as witness the following facts admitted by the executor
himself in appellee's brief:

In the proceedings for admission of the will to probate, the facts of


record show that the deceased Edward E. Christensen was born on
November 29, 1875 in New York City, N.Y., U.S.A.; his first arrival in
the Philippines, as an appointed school teacher, was on July 1, 1901,
on board the U.S. Army Transport "Sheridan" with Port of
Embarkation as the City of San Francisco, in the State of California,
U.S.A. He stayed in the Philippines until 1904.

In December, 1904, Mr. Christensen returned to the United States


and stayed there for the following nine years until 1913, during which
time he resided in, and was teaching school in Sacramento,
California.

Mr. Christensen's next arrival in the Philippines was in July of the


year 1913. However, in 1928, he again departed the Philippines for
the United States and came back here the following year, 1929.
Some nine years later, in 1938, he again returned to his own country,
and came back to the Philippines the following year, 1939.

Wherefore, the parties respectfully pray that the foregoing stipulation


of facts be admitted and approved by this Honorable Court, without
prejudice to the parties adducing other evidence to prove their case
not covered by this stipulation of facts.1äwphï1.ñët

Being an American citizen, Mr. Christensen was interned by the


Japanese Military Forces in the Philippines during World War II. Upon
liberation, in April 1945, he left for the United States but returned to
the Philippines in December, 1945. Appellees Collective Exhibits "6",
CFI Davao, Sp. Proc. 622, as Exhibits "AA", "BB" and "CC-Daney";
Exhs. "MM", "MM-l", "MM-2-Daney" and p. 473, t.s.n., July 21, 1953.)

In April, 1951, Edward E. Christensen returned once more to


California shortly after the making of his last will and testament (now
in question herein) which he executed at his lawyers' offices in Manila
on March 5, 1951. He died at the St. Luke's Hospital in the City of
Manila on April 30, 1953. (pp. 2-3)

In arriving at the conclusion that the domicile of the deceased is the


Philippines, we are persuaded by the fact that he was born in New York,
migrated to California and resided there for nine years, and since he came
to the Philippines in 1913 he returned to California very rarely and only for
short visits (perhaps to relatives), and considering that he appears never to
have owned or acquired a home or properties in that state, which would
indicate that he would ultimately abandon the Philippines and make home
in the State of California.

Sec. 16. Residence is a term used with many shades of meaning


from mere temporary presence to the most permanent abode.
Generally, however, it is used to denote something more than mere
physical presence. (Goodrich on Conflict of Laws, p. 29)

As to his citizenship, however, We find that the citizenship that he acquired


in California when he resided in Sacramento, California from 1904 to 1913,
was never lost by his stay in the Philippines, for the latter was a territory of
the United States (not a state) until 1946 and the deceased appears to
have considered himself as a citizen of California by the fact that when he
executed his will in 1951 he declared that he was a citizen of that State; so
that he appears never to have intended to abandon his California
citizenship by acquiring another. This conclusion is in accordance with the
following principle expounded by Goodrich in his Conflict of Laws.

The terms "'residence" and "domicile" might well be taken to mean


the same thing, a place of permanent abode. But domicile, as has
been shown, has acquired a technical meaning. Thus one may be
domiciled in a place where he has never been. And he may reside in
a place where he has no domicile. The man with two homes, between
which he divides his time, certainly resides in each one, while living in
it. But if he went on business which would require his presence for
several weeks or months, he might properly be said to have sufficient
connection with the place to be called a resident. It is clear, however,
that, if he treated his settlement as continuing only for the particular
business in hand, not giving up his former "home," he could not be a
domiciled New Yorker. Acquisition of a domicile of choice requires the
exercise of intention as well as physical presence. "Residence simply
requires bodily presence of an inhabitant in a given place, while
domicile requires bodily presence in that place and also an intention
to make it one's domicile." Residence, however, is a term used with
many shades of meaning, from the merest temporary presence to the
most permanent abode, and it is not safe to insist that any one use et
the only proper one. (Goodrich, p. 29)

The law that governs the validity of his testamentary dispositions is defined
in Article 16 of the Civil Code of the Philippines, which is as follows:

ART. 16. Real property as well as personal property is subject to the


law of the country where it is situated.

However, intestate and testamentary successions, both with respect


to the order of succession and to the amount of successional rights
and to the intrinsic validity of testamentary provisions, shall be
regulated by the national law of the person whose succession is
under consideration, whatever may be the nature of the property and
regardless of the country where said property may be found.

The application of this article in the case at bar requires the determination
of the meaning of the term "national law"is used therein.
There is no single American law governing the validity of testamentary
provisions in the United States, each state of the Union having its own
private law applicable to its citizens only and in force only within the state.
The "national law" indicated in Article 16 of the Civil Code above quoted
can not, therefore, possibly mean or apply to any general American law. So
it can refer to no other than the private law of the State of California.

The next question is: What is the law in California governing the disposition
of personal property? The decision of the court below, sustains the
contention of the executor-appellee that under the California Probate Code,
a testator may dispose of his property by will in the form and manner he
desires, citing the case of Estate of McDaniel, 77 Cal. Appl. 2d 877, 176 P.
2d 952. But appellant invokes the provisions of Article 946 of the Civil Code
of California, which is as follows:

If there is no law to the contrary, in the place where personal property


is situated, it is deemed to follow the person of its owner, and is
governed by the law of his domicile.

The existence of this provision is alleged in appellant's opposition and is


not denied. We have checked it in the California Civil Code and it is there.
Appellee, on the other hand, relies on the case cited in the decision and
testified to by a witness. (Only the case of Kaufman is correctly cited.) It is
argued on executor's behalf that as the deceased Christensen was a
citizen of the State of California, the internal law thereof, which is that given
in the abovecited case, should govern the determination of the validity of
the testamentary provisions of Christensen's will, such law being in force in
the State of California of which Christensen was a citizen. Appellant, on the
other hand, insists that Article 946 should be applicable, and in accordance
therewith and following the doctrine of the renvoi, the question of the
validity of the testamentary provision in question should be referred back to
the law of the decedent's domicile, which is the Philippines.

The theory of doctrine of renvoi has been defined by various authors, thus:

The problem has been stated in this way: "When the Conflict of Laws
rule of the forum refers a jural matter to a foreign law for decision, is
the reference to the purely internal rules of law of the foreign system;
i.e., to the totality of the foreign law minus its Conflict of Laws rules?"
On logic, the solution is not an easy one. The Michigan court chose to
accept the renvoi, that is, applied the Conflict of Laws rule of Illinois
which referred the matter back to Michigan law. But once having
determined the the Conflict of Laws principle is the rule looked to, it is
difficult to see why the reference back should not have been to
Michigan Conflict of Laws. This would have resulted in the "endless
chain of references" which has so often been criticized be legal
writers. The opponents of the renvoi would have looked merely to the
internal law of Illinois, thus rejecting the renvoi or the reference back.
Yet there seems no compelling logical reason why the original
reference should be the internal law rather than to the Conflict of
Laws rule. It is true that such a solution avoids going on a merry-go-
round, but those who have accepted the renvoi theory avoid
this inextricabilis circulas by getting off at the second reference and at
that point applying internal law. Perhaps the opponents of
the renvoi are a bit more consistent for they look always to internal
law as the rule of reference.

Strangely enough, both the advocates for and the objectors to


the renvoi plead that greater uniformity will result from adoption of
their respective views. And still more strange is the fact that the only
way to achieve uniformity in this choice-of-law problem is if in the
dispute the two states whose laws form the legal basis of the litigation
disagree as to whether the renvoi should be accepted. If both reject,
or both accept the doctrine, the result of the litigation will vary with the
choice of the forum. In the case stated above, had the Michigan court
rejected the renvoi, judgment would have been against the woman; if
the suit had been brought in the Illinois courts, and they too rejected
the renvoi, judgment would be for the woman. The same result would
happen, though the courts would switch with respect to which would
hold liability, if both courts accepted the renvoi.

The Restatement accepts the renvoi theory in two instances: where


the title to land is in question, and where the validity of a decree of
divorce is challenged. In these cases the Conflict of Laws rule of the
situs of the land, or the domicile of the parties in the divorce case, is
applied by the forum, but any further reference goes only to the
internal law. Thus, a person's title to land, recognized by the situs, will
be recognized by every court; and every divorce, valid by the domicile
of the parties, will be valid everywhere. (Goodrich, Conflict of Laws,
Sec. 7, pp. 13-14.)

X, a citizen of Massachusetts, dies intestate, domiciled in France,


leaving movable property in Massachusetts, England, and France.
The question arises as to how this property is to be distributed among
X's next of kin.

Assume (1) that this question arises in a Massachusetts court. There


the rule of the conflict of laws as to intestate succession to movables
calls for an application of the law of the deceased's last domicile.
Since by hypothesis X's last domicile was France, the natural thing
for the Massachusetts court to do would be to turn to French statute
of distributions, or whatever corresponds thereto in French law, and
decree a distribution accordingly. An examination of French law,
however, would show that if a French court were called upon to
determine how this property should be distributed, it would refer the
distribution to the national law of the deceased, thus applying the
Massachusetts statute of distributions. So on the surface of things the
Massachusetts court has open to it alternative course of action: (a)
either to apply the French law is to intestate succession, or (b) to
resolve itself into a French court and apply the Massachusetts statute
of distributions, on the assumption that this is what a French court
would do. If it accepts the so-called renvoidoctrine, it will follow the
latter course, thus applying its own law.

This is one type of renvoi. A jural matter is presented which the


conflict-of-laws rule of the forum refers to a foreign law, the conflict-
of-laws rule of which, in turn, refers the matter back again to the law
of the forum. This is renvoi in the narrower sense. The German term
for this judicial process is 'Ruckverweisung.'" (Harvard Law Review,
Vol. 31, pp. 523-571.)

After a decision has been arrived at that a foreign law is to be


resorted to as governing a particular case, the further question may
arise: Are the rules as to the conflict of laws contained in such foreign
law also to be resorted to? This is a question which, while it has been
considered by the courts in but a few instances, has been the subject
of frequent discussion by textwriters and essayists; and the doctrine
involved has been descriptively designated by them as the
"Renvoyer" to send back, or the "Ruchversweisung", or the
"Weiterverweisung", since an affirmative answer to the question
postulated and the operation of the adoption of the foreign law in toto
would in many cases result in returning the main controversy to be
decided according to the law of the forum. ... (16 C.J.S. 872.)

Another theory, known as the "doctrine of renvoi", has been


advanced. The theory of the doctrine of renvoi is that the court of the
forum, in determining the question before it, must take into account
the whole law of the other jurisdiction, but also its rules as to conflict
of laws, and then apply the law to the actual question which the rules
of the other jurisdiction prescribe. This may be the law of the forum.
The doctrine of the renvoi has generally been repudiated by the
American authorities. (2 Am. Jur. 296)

The scope of the theory of renvoi has also been defined and the reasons
for its application in a country explained by Prof. Lorenzen in an article in
the Yale Law Journal, Vol. 27, 1917-1918, pp. 529-531. The pertinent parts
of the article are quoted herein below:

The recognition of the renvoi theory implies that the rules of the
conflict of laws are to be understood as incorporating not only the
ordinary or internal law of the foreign state or country, but its rules of
the conflict of laws as well. According to this theory 'the law of a
country' means the whole of its law.

xxx xxx xxx

Von Bar presented his views at the meeting of the Institute of


International Law, at Neuchatel, in 1900, in the form of the following
theses:

(1) Every court shall observe the law of its country as regards the
application of foreign laws.

(2) Provided that no express provision to the contrary exists, the court
shall respect:

(a) The provisions of a foreign law which disclaims the right to


bind its nationals abroad as regards their personal statute, and
desires that said personal statute shall be determined by the
law of the domicile, or even by the law of the place where the
act in question occurred.

(b) The decision of two or more foreign systems of law,


provided it be certain that one of them is necessarily
competent, which agree in attributing the determination of a
question to the same system of law.

xxx xxx xxx

If, for example, the English law directs its judge to distribute the
personal estate of an Englishman who has died domiciled in Belgium
in accordance with the law of his domicile, he must first inquire
whether the law of Belgium would distribute personal property upon
death in accordance with the law of domicile, and if he finds that the
Belgian law would make the distribution in accordance with the law of
nationality — that is the English law — he must accept this reference
back to his own law.

We note that Article 946 of the California Civil Code is its conflict of laws
rule, while the rule applied in In re Kaufman, Supra, its internal law. If the
law on succession and the conflict of laws rules of California are to be
enforced jointly, each in its own intended and appropriate sphere, the
principle cited In re Kaufman should apply to citizens living in the State, but
Article 946 should apply to such of its citizens as are not domiciled in
California but in other jurisdictions. The rule laid down of resorting to the
law of the domicile in the determination of matters with foreign element
involved is in accord with the general principle of American law that the
domiciliary law should govern in most matters or rights which follow the
person of the owner.

When a man dies leaving personal property in one or more states,


and leaves a will directing the manner of distribution of the property,
the law of the state where he was domiciled at the time of his death
will be looked to in deciding legal questions about the will, almost as
completely as the law of situs is consulted in questions about the
devise of land. It is logical that, since the domiciliary rules control
devolution of the personal estate in case of intestate succession, the
same rules should determine the validity of an attempted
testamentary dispostion of the property. Here, also, it is not that the
domiciliary has effect beyond the borders of the domiciliary state. The
rules of the domicile are recognized as controlling by the Conflict of
Laws rules at the situs property, and the reason for the recognition as
in the case of intestate succession, is the general convenience of the
doctrine. The New York court has said on the point: 'The general
principle that a dispostiton of a personal property, valid at the
domicile of the owner, is valid anywhere, is one of the universal
application. It had its origin in that international comity which was one
of the first fruits of civilization, and it this age, when business
intercourse and the process of accumulating property take but little
notice of boundary lines, the practical wisdom and justice of the rule
is more apparent than ever. (Goodrich, Conflict of Laws, Sec. 164,
pp. 442-443.)

Appellees argue that what Article 16 of the Civil Code of the Philippines
pointed out as the national law is the internal law of California. But as
above explained the laws of California have prescribed two sets of laws for
its citizens, one for residents therein and another for those domiciled in
other jurisdictions. Reason demands that We should enforce the California
internal law prescribed for its citizens residing therein, and enforce the
conflict of laws rules for the citizens domiciled abroad. If we must enforce
the law of California as in comity we are bound to go, as so declared in
Article 16 of our Civil Code, then we must enforce the law of California in
accordance with the express mandate thereof and as above explained, i.e.,
apply the internal law for residents therein, and its conflict-of-laws rule for
those domiciled abroad.

It is argued on appellees' behalf that the clause "if there is no law to the
contrary in the place where the property is situated" in Sec. 946 of the
California Civil Code refers to Article 16 of the Civil Code of the Philippines
and that the law to the contrary in the Philippines is the provision in said
Article 16 that the national law of the deceased should govern. This
contention can not be sustained. As explained in the various authorities
cited above the national law mentioned in Article 16 of our Civil Code is the
law on conflict of laws in the California Civil Code, i.e., Article 946, which
authorizes the reference or return of the question to the law of the testator's
domicile. The conflict of laws rule in California, Article 946, Civil Code,
precisely refers back the case, when a decedent is not domiciled in
California, to the law of his domicile, the Philippines in the case at bar. The
court of the domicile can not and should not refer the case back to
California; such action would leave the issue incapable of determination
because the case will then be like a football, tossed back and forth between
the two states, between the country of which the decedent was a citizen
and the country of his domicile. The Philippine court must apply its own law
as directed in the conflict of laws rule of the state of the decedent, if the
question has to be decided, especially as the application of the internal law
of California provides no legitime for children while the Philippine law, Arts.
887(4) and 894, Civil Code of the Philippines, makes natural children
legally acknowledged forced heirs of the parent recognizing them.

The Philippine cases (In re Estate of Johnson, 39 Phil. 156; Riera vs.
Palmaroli, 40 Phil. 105; Miciano vs. Brimo, 50 Phil. 867; Babcock
Templeton vs. Rider Babcock, 52 Phil. 130; and Gibbs vs. Government, 59
Phil. 293.) cited by appellees to support the decision can not possibly apply
in the case at bar, for two important reasons, i.e., the subject in each case
does not appear to be a citizen of a state in the United States but with
domicile in the Philippines, and it does not appear in each case that there
exists in the state of which the subject is a citizen, a law similar to or
identical with Art. 946 of the California Civil Code.

We therefore find that as the domicile of the deceased Christensen, a


citizen of California, is the Philippines, the validity of the provisions of his
will depriving his acknowledged natural child, the appellant, should be
governed by the Philippine Law, the domicile, pursuant to Art. 946 of the
Civil Code of California, not by the internal law of California..

WHEREFORE, the decision appealed from is hereby reversed and the


case returned to the lower court with instructions that the partition be made
as the Philippine law on succession provides. Judgment reversed, with
costs against appellees.

Padilla, Bautista Angelo, Concepcion, Reyes, Barrera, Paredes, Dizon,


Regala and Makalintal, JJ., concur.
Bengzon, C.J., took no part.
TESTATE ESTATE OF EDWARD E.
CHRISTENSEN vs. HELEN
CHRISTENSEN GARCIA, G.R. No. L-
16749 January 31, 1963
IN THE MATTER OF THE TESTATE ESTATE OF EDWARD E. CHRISTENSEN,
DECEASED.
ADOLFO C. AZNAR, Executor and LUCY CHRISTENSEN, Heir of the deceased,
Executor and
Heir-appellees, VS. HELEN CHRISTENSEN GARCIA, oppositor-appellant
January 31, 1963

FACTS:
Edward E. Christensen, though born in New York, migrated to California, where
he resided and consequently was considered a California citizen. In 1913, he
came to the Philippines where he became a domiciliary until his death. However,
during the entire period of his residence in this country he had always considered
himself a citizen of California. In his will executed on March 5, 1951, he instituted
an acknowledged natural daughter, Maria Lucy Christensen as his only heir, but
left a legacy of sum of money in favor of Helen Christensen Garcia who was
rendered to have been declared acknowledged natural daughter. Counsel for
appellant claims that California law should be applied; that under California law,
the matter is referred back to the law of the domicile; that therefore Philippine law
is ultimately applicable; that finally, the share of Helen must be increased in view
of the success ional rights of illegitimate children under Philippine law. On the
other hand, counsel for the heir of Christensen contends that inasmuch as it is
clear that under Article 16 of our Civil Code, the national law of the deceased
must apply, our courts must immediately apply the internal law of California on
the matter; that under California law there are no compulsory heirs and
consequently a testator could dispose of any property possessed by him in
absolute dominion and that finally, illegitimate children not being entitled to
anything and his will remain undisturbed.

ISSUE:
Whether or not the Philippine law should prevail in administering the estate of
Christensen?

RULING:
The court in deciding to grant more successional rights to Helen said in effect
that there are two rules in California on the matter: the internal law which should
apply to Californians domiciled in California; and the conflict rule which should
apply to Californians domiciled outside of California. The California conflict rule
says: “If there is no law to the contrary in the place where personal property is
situated, is deemed to follow the person of its owner and is governed by the law
of his domicile.” Christensen being domiciled outside California, the law of his
domicile, the Philippines, ought to be followed. Where it is referred back to
California, it will form a circular pattern referring to both country back and forth.

G.R. No. L-22288 January 12, 1925

CARL FRANZ ADOLPH OTTO INGENOHL, plaintiff-appellee,


vs.
WALTER E. OLSEN AND COMPANY, INC., defendant-appellant.

Gibbs and McDonough for appellant.


Ross, Lawrence and Selph for appellee.

STATEMENT

August 16, 1922, the plaintiff filed a complaint in the Court of First Instance
against the defendant in which after formal pleas, he alleges:

III. That on the 5th day of May, 1922, in the Supreme Court of
Hongkong, the same being a court of competent jurisdiction and
having jurisdiction over both the plaintiff and the defendant in a
certain action wherein the plaintiff herein was plaintiff and the
defendant here was defendant, a final judgment was rendered in
favor of the plaintiff and against defendant a duly certified transcript of
which said judgment is hereto attached, marked Exhibit A.

IV. That the said judgment has not been reversed or modified and still
in full force and effect.

V. That on the 30th day of June, 1922, costs were duly taxed and
allowed in the said Supreme Court of Hongkong in favor of plaintiff
and against the defendant in the sum of twenty-six thousand two
hundred and forty-four and 23/100 dollars ($26,244.23), Hongkong
currency, as appears by the certificate of the registrar of the said
Supreme Court of Hongkong, hereto attached and made a part
hereof.

VI. That demand has been made by plaintiff upon defendant for the
payment of the said sum of twenty-six thousand two hundred and
forty-four and 23/100 dollars ($26,244.23), Hongkong currency, but
the defendant has failed and refused and still fails and refuses to pay
plaintiff the said sum or any part thereof.

VII. That the equivalent of the said sum of twenty-six thousand two
hundred and forty-four and 23/100 dollars ($26,244.23), Hongkong
currency, on the said 30th day of June, 1922, was thirty-one
thousand ninety-nine pesos and forty-one centavos (P31,099.41),
Philippine currency.

Wherefore, he prays judgment for that amount, with legal interest, and for
such other and further relief as may seem just and equitable.

A duly certified transcript of the judgment of the Hongkong court was


attached to the complaint, marked Exhibit A.

For amended answer, the defendant denies each and every allegation of
the complaint, and, as a separate special defense, alleges that the
judgment in question should be considered in connection with the decision
of the Supreme Court of Hongkong, a copy of which is attached to and
made a part of the answer, marked Exhibit 1. That the decision and
judgment of that court were rendered and entered as a result of a clear
mistake of law and fact.

3. That previous to the 25th day of January, 1919, A. Mitchell Palmer,


the duly appointed, qualified and acting Alien Property Custodian of
the United States, under and by virtue of the Act of Congress of the
United States approved October 6, 1917, known as the Trading with
the Enemy Act as amended, and in accordance with executive orders
issued in pursuance thereof, required and caused to be conveyed,
transferred and assigned, delivered and paid over to him the property
and business then owing and belonging to, or held for, by, or on
account of, or on behalf, or for the benefit of the company known as
Syndicat Oriente, a joint account association (sociedad de cuentas en
participacion), of which the plaintiff was the "gestor," and which
association formed under the laws of Belgium with its registered
office in the City of Antwerp, Belgium, and an enemy as defined in
said Act, not holding a license granted by the President under said
Trading with the Enemy Act, and which the President of the United
States, after investigation had determined was so owing, or so
belonged, or was so held, and thereafter the said Alien Property
Custodian in pursuance of said Act and proclamations and executive
orders, advertised that he would sell through his managing director of
the Philippine Islands to the highest bidder at public sale, subject to
the terms and conditions set forth in the advertisement of sale, the
said property and business of the Syndicat Oriente and of the said
plaintiff as its "gestor" on the 27th day of December, 1918, at Manila
in the Philippine Islands, and pursuant to said advertisement of sale,
and in compliance with all the terms and conditions therein set forth,
and after due and public notice given thereof, on the 27th day of
December, 1918, duly sold at public sale at Manila, Philippines
Islands, the said property and business, with certain exceptions
immaterial to this case, mentioned in the deed of conveyance
hereinafter referred to, in consideration of the bid therefor by the said
defendant corporation of the sum of P2,350,000, Philippine currency,
which was the highest bid of any bidder qualified to bid for and
purchase said property and business at said sale, and the said Alien
Property Custodian of the United States having thereafter accepted
said bid and received from the defendant corporation in cash the
amount of said bid, did on the 25th day of January, 1919, under and
by virtue of said Act of Congress and said proclamations and
executive orders, execute in favor of the defendant corporation a
deed of conveyance of said property and business of the said
Syndicat Oriente and of the said plaintiff as its "gestor," a copy of
which deed marked Exhibit 2 for identification is hereto attached and
made a part of this amended answer and counterclaim.

4. That among the property conveyed and described in said deed so


executed by the Alien Property Custodian of the United States in
favor of the defendant corporation was the cigar and cigarette factory
situated in the City of Manila, Philippine Islands, known as "El Oriente
Fabrica de Tabacos, C. Ingenohl," and all incidents and
appurtenances thereto including the business as a going concern and
the goodwill, trade names and trade-marks thereof, and of the said
Syndicat Oriente.

That at all times said C. Ingenohl mentioned therein was the gestor of the
said Syndicat Oriente and plaintiff in this action.

That based upon the claim of the plaintiff for himself and as gestor and
agent of the Syndicat Oriente, in the year 1921, the plaintiff collected and
received from the Alien Property Custodian of the United States, the
purchase price of the property mentioned and described in this answer and
counterclaim and thereby ratified and confirmed the sale and conveyance
of the property to the defendant to all intents and purposes, the same as if
the sale had originally been made by plaintiff to the defendant.

7. That at the time of the conveyance of said property to the


defendant corporation and for many years previous and subsequent
thereto, and up to the time of the wrongful acts of the plaintiff as
hereinafter set forth, China, the colony of Hongkong, the Federated
Malay States, and the Straits Settlements were the principal markets
for the output of the cigars manufactured in the said cigar factory, and
the only trade-marks and the trade names under which said cigars
were sold in those markets by the plaintiff previous to said
conveyance, and by the defendant subsequent thereto were "La
Perla del Oriente," El Cometa del Oriente" and "Imperio del Mundo;"
that by the sale of large quantities of the output of said cigar factory in
said markets by the plaintiff previous to said conveyance, and by the
defendant thereafter under said trade-marks and trade names and by
the appropriate registration of said trade-marks and trade names in
said countries, the plaintiff previous to said conveyance, and the
defendant thereafter as his successor in interest appropriated,
acquired and became entitled to the exclusive use of said trade-
marks and trade names in said markets to designate the cigar
products of said factory.

That by virtue of the fact that the plaintiff took and accepted the purchase
price for the sale of the property, he thereby ratified and confirmed the
peaceable possession and enjoyment and the use of the property,
including said trade-marks and trade names, the same is he had personally
made the sale.
9. That on or about the 28th of May, 1919, the said trade-marks and
trade names known as "La Perla del Oriente" and "El Cometa del
Oriente" were duly registered at Shanghai in the name of the
defendant corporation for all of China with the exception of the colony
of Hongkong, which is British territory and where separate registration
proceedings were and are required; that by virtue of said registration
and by virtue of the sale under said trade-marks and trade names of
the cigars manufactured in said factory by the plaintiff previous to
said conveyance and by the defendant as his successor in interest
thereafter, the latter acquired the sole and exclusive right to the use
of said trade-marks and trade names in all of China.

That at the time the plaintiff accepted the proceeds of the sale, he well
knew that the Property Custodian intended to and did sell and convey to
the defendant, and that the defendant believed that it acquired and did
acquire the exclusive right to the use of said trade-marks and trade names
in said markets, and that the said trade-marks and trade names had been
duly registered at Shanghai for all of China in the name of the corporation,
and that at the time he accepted such proceeds, the plaintiff well knew that
the defendant ever since the purchase of the property was selling the
product of said factory under trade-marks and trade names in all of said
markets. That plaintiff also knew the value of them at the time of the sale
was P1,000,000, and that said trade-marks and trade names evidenced
P1,000,000 of the purchase price of the, property. That after obtaining the
proceeds of the sale, the plaintiff wrongfully instituted the said action in the
Supreme Court of the colony of Hongkong, resulting in the rendition of the
judgment in question. That at the time it was rendered the Hongkong court
had before it and under consideration the deed of conveyance executed by
the Property Custodian to the defendant and facsimiles of the trade-marks
and trade names and the admission of the plaintiff that he had received the
proceeds of the sale from the Property Custodian. That notwithstanding
such facts, the Hongkong court decided in effect that the language
"wheresoever situate in the Philippine Islands" was a limitation upon the
goodwill and right to the use of said trade-marks and trade names to the
Philippine Islands, whereas in truth and in fact, as the plaintiff well knew at
the time of said conveyance, almost the entire output of the factory in the
City of Manila was exported and sold outside of the Philippine Islands, and
that the intention of said conveyance was to convey the right to the use of
said trade-marks and trade names outside of the Philippine Islands, and
that plaintiff willfully concealed and withheld said facts from the Hongkong
court, and induced it to hold in effect that the right to the use of said trade-
marks was limited by the conveyance to the Philippine Islands. The trade-
marks in question are then specifically described.

That the plaintiff in Hongkong court claimed to be the proprietor of the


trade-marks and trade names known as "La Perla del Oriente," "El Cometa
del Oriente" and "Imperio del Mundo," in connection with cigars
manufactured by him in the factory at Mongkok, Hongkong, known as the
Hongkong factory, and which at the time of the conveyance, was a mere
branch of the Manila cigar factory.

That at the trial in the Hongkong court it appeared that between the years
1882 and 1905, "El Oriente Fabrica de Tabacos Sociedad Anonima,"
hereinafter referred to as "Sociedad Anonima," carried on a business as
manufacturers of cigars and cigarettes in Manila, Philippine Islands, and in
connection with the cigars manufactured therein, made use of the trade-
marks and trade names, which are in dispute in this action. That on
November 28, 1905, the "Sociedad Anonima," being then in liquidation,
sold all of its business interests and assets in the Philippine Islands with its
goodwill and trade-marks, including those in dispute here, to the plaintiff as
a gestor of a joint association consisting of the plaintiff and others, which
was known as the Syndicat Oriente, and carried on its business in the
Philippine Islands under the style of "EL Oriente Fabrica de Tabacos, C.
Ingenohl, Manila." That in the year 1908 the Syndicat Oriente opened the
Hongkong factory, as a branch or agency, for the manufacture and sale in
Hongkong of cigars which were made of the tobacco supplied by "El
Oriente Fabrica de Tabacos" in the Philippine Islands, and which bore the
trade-marks in dispute in this action. That such trade-marks were
registered in the Philippine Islands in the years 1884 and 1887 as the
property of the said "Sociedad Anonima," and such registration was
renewed in the year 1902. That in the year 1903 they were registered on
the Hongkong register of trade-marks as the property of the "Sociedad
Anonima." That about April, 1906, the assignment of the said trade-marks
to "El Oriente Fabrica de Tabacos" was registered in the Philippine Islands,
and in February, 1910, they were assigned on the Hongkong register with
the knowledge and authority and by direction of the plaintiff, to the name of
said Syndicat Oriente under its name and style of "El Oriente Fabrica de
Tabacos, C. Ingenohl, Manila," as proprietor. That on March 13, 1917, the
plaintiff renewed the registration of such trade-marks on the Hongkong
register for a further period of fourteen years from the 15th of April, 1917, in
the same name, to wit: "El Oriente Fabrica de Tabacos, C. Ingenohl,
Manila," as proprietor. That such trade-marks and trade names were
inseparably connected and identified with the cigars manufactured in the
Manila factory, and that the Hongkong factory had no right to the use of
them, except as a branch of the Manila factory, and that the use of them by
the Hongkong factory after conveyance to the defendant constitutes a false
representation and fraud upon the public purchasing such cigars, and upon
this defendant in particular. That under the laws of Great Britain, United
States and the Philippine Islands, trade-marks and trade names, such as
those in dispute, belong to and follow the product of the factory with which
they are identified, and the use of them upon the products of any other
factory constitutes a fraud upon the public. That under such laws the
acceptance by the former owner of the proceeds of the sale amounts to a
ratification of the sale to all intents and purposes, the same as if the sale
had been made by the owner himself, and that as construed by the laws of
Great Britain, United States and the Philippine Islands, the deed of
conveyance was not reasonably susceptible to the interpretation placed
upon it by the Hongkong court, to the effect that the goodwill and right to
the use of the trade-marks and trade names were limited to the Philippine
Islands.

By way of counterclaim, the defendant alleges all of such material facts,


and that the action in Hongkong court was wrongfully instituted by the
plaintiff against the defendant. That after the rendition of such judgment
and in violation of the terms of the sale and conveyance, the plaintiff,
through his solicitors, agents, and representatives, has been and is still
wrongfully and unlawfully causing to be inserted in the leading newspapers
in China, the Federated Malay States, Straits Settlements, and elsewhere,
newspaper articles notifying the public of the rendition of the judgment in
which he claims and asserts his exclusive right to the use of the trade-
marks and trade names in all of said countries, and threatens to take legal
proceedings against any person, firm, or corporation which has its
possession for sale cigars bearing the said trade-marks and trade names,
which are not manufactured by the branch factory at Hongkong, and also
by giving notices to the tobacco dealers. That by reason of said notices and
the threats, the cigar dealers have cancelled all pending orders and have
refused to make any further purchases of cigars without guaranties,
protecting them against the threatened legal proceedings of plaintiff. That
the goodwill of the cigar business of the defendant and the value of such
trade-marks and trade names have been totally destroyed by the plaintiff,
and that he has wrongfully and unlawfully deprived the defendant of the
use and enjoyment of them, to the defendant's damage in the sum of
P1,000,000 for which it prays judgment with costs.

Upon such issues the parties entered into the following agreed statement of
facts:

Agreed statement of facts

Without prejudice to the introduction of such oral and documentary


evidence as either party may present at the time fixed by the Court
for the trial of this case, and saving all just objections and exceptions
to the admissibility of such facts, or any of them, as evidence in this
case, it is hereby mutually stipulated and agreed by and between the
parties, their counsel and attorneys, as follows:

1. That the defendant, Walter E. Olsen & Co., Inc., is a corporation


duly organized, existing, and doing business under the laws of the
Philippine Islands, having its principal place of business at the City of
Manila, and that the said Walter E. Olsen & Co., Inc., is the same
Walter E. Olsen & Co., Inc., referred to in the judgment of the
Supreme Court of Hongkong sued on herein, a duly certified copy of
which said judgment is hereto attached marked Exhibit A, and made
a part hereof;

2. That the Supreme Court of Hongkong is a court of record of


general jurisdiction, and at the time of the rendition of the judgment
sued on herein (Exhibit A) had jurisdiction over the parties to the
action in which the said judgment was rendered, and of the subject-
matter of the said action;

3. That the defendant Walter E. Olsen & Co., Inc., appeared and was
represented by counsel in the Supreme Court of Hongkong in the
action in which the said judgment (Exhibit A) was rendered;

4. That the defendant has refused to pay to the plaintiff the amount of
the said judgment, to wit, the sum of twenty-six thousand two
hundred forty-four and 23/100 dollars ($26,244.23), Hongkong
currency, equivalent to thirty-one thousand ninety-nine pesos and
forty-one centavos (P31,099.41), Philippine currency;
5. That Exhibit 1 attached to defendant's amended answer and
counterclaim is a true copy of the decision of the Supreme Court of
Hongkong, upon which the judgment referred to in the third
paragraph of plaintiff's complaint was based;

6. That Exhibit 2 attached to defendant's amended answer and


counterclaim is a true copy of the Deed of Transfer executed on the
25th day of January, 1919, by A. Mitchell Palmer, the duly appointed,
qualified and acting Alien Property Custodian of the United States in
favor of the defendant corporation, and that the recitals contained in
said Deed of Transfer were and are true, except that the Syndicat
Oriente mentioned therein was formed under the laws of Belgium with
its head office at Antwerp, by Articles of Agreement dated November
28, a copy of which marked Exhibit B is hereto attached and made a
part hereof. Under the said agreement the plaintiff was the "Gerant"
of the said Syndicat Oriente, and his rights and liabilities as well as
those of the other parties to the said agreement to outsiders and inter
se are governed by said articles and by the laws of Belgium which
are agreed to be substantially the same as the laws of the Philippines
with respect to joint accounts (cuentas en participacion) as provided
by articles 239-243 of the Philippine Code of Commerce. It is
understood however that the defendant will raise no question in this
case as to the authority of the plaintiff to maintain said action before
the Hongkong court;

7. That the Ingenohl mentioned in said Deed of Transfer as C.


Ingenohl, and as Francis Adolfo Ingenohl, is the plaintiff in this action,
and was at the time of the seizure and sale of the property mentioned
in said Deed of Transfer, and from that time up to and including the
time of the receipt by him from the Alien Property Custodian of the
proceeds of said sale, continue to be the "Gerant" of the Syndicat
Oriente mentioned in said Deed of Transfer, with full power and the
authority to claim and receive the proceeds of said sale from the said
Alien Property Custodian of the United States;

8. That as a result of the claim made therefor, the said plaintiff for
himself and as "Gerant" and general representative of the said
Syndicat Oriente, on the 13th day of December, 1920, and 28th day
of March, 1921, collected and received from the Alien Property
Custodian of the United States, the sum of $1,511,124.50, United
States currency, being the equivalent with interest of the purchase
price of the property described in said Deed of Transfer and paid to
said Alien Property Custodian by the defendant corporation, and the
said plaintiff then and there issued to the said Alien Property
Custodian of the United States two receipts, copies of which marked
Exhibits C and D are hereto attached and made a part hereof; that
neither the plaintiff nor the Syndicat Oriente has at any time either
orally or in writing ratified, consented to or agreed to the action of the
Alien Property Custodian in selling the property described in the said
Deed of Transfer, other than as may be deducted from the action of
the said plaintiff in making claim for and receiving the proceeds of the
sale of the said property, and the plaintiff reserves the right to
contend and does contend that such action on his part did not and
does not constitute a ratification of said sale;

9. That at the time of the conveyance of said property by the Alien


Property Custodian of the United States to the defendant corporation
and for many years previous and subsequent thereto, and up to the
time of the rendition by said Supreme Court of Hongkong of the
judgment (Exhibit A), China, the colony of Hongkong, the Federated
Malay States, and the Straits Settlements, were among the markets
in which the output of the cigars manufactured in the cigar factory
known previous to its conveyance to the defendant corporations as
"El Oriente Fabrica de Tabacos," and that among the trade-marks
and trade names under which such cigars were sold in those markets
by the plaintiff previous to said conveyance and by the defendant
subsequent thereto were "La Perla del Oriente," "El Cometa del
Oriente" and "Imperio del Mundo."

10. That at the time of rendering the decision and entering the
judgment (Exhibit A), the said Supreme Court of Hongkong had
before it and under consideration said Deed of Transfer executed by
the Alien Property Custodian in favor of the defendant corporation
and facsimiles of the trade-marks and trade names under which the
output of both the Manila cigar factory and the Hongkong factory
hereinafter mentioned had been sold in Hongkong and the other
markets mentioned, and had also before it and under consideration
the admission of the plaintiff that he had received the proceeds of
said sale by the Alien Property Custodian to the defendant
corporation as evidenced by said Deed of Transfer. That said action
in Hongkong was instituted on the 9th day of October, 1919;

11. That the facsimile of one of the trade-marks or labels presented


as evidence to the said Supreme Court of Hongkong depicted among
other things the head and shoulders of a Filipina woman in a yellow
camisa. The picture is surrounded with green leaves and pink
flowers. Above is a scroll with the words "La Perla del Oriente"
printed on it and underneath is another scroll with the words "El
Oriente Fabrica de Tabacos, Sociedad Anonima, Manila." That a
facsimile of said trade-mark of label marked Exhibit E is hereto
attached and made a part hereof;

12. That subsequent to the transfer of said trade-marks and trade


names by the said "Sociedad Anonima" to the said plaintiff Ingenohl
as hereinafter set forth, the words on the scroll at the foot of said
label mentioned in the preceding paragraph were changed to "El
Oriente Fabrica de Tabacos, Manila," as shown by the facsimile
hereto attached, marked Exhibit E and made a part hereof;

13. That the facsimile of another trade-mark or label likewise


presented as evidence to the said Supreme Court of Hongkong in
part depicted a Filipina woman dressed in a red skirt and loose yellow
camisa, holding in the left hand by its cover an open cigar box full of
cigars, her right hand resting on a Spanish coat of arms. Above are
printed the words "La Perla del Oriente." The Spanish coat of arms is
the Royal Coat of Arms of Spain. Underneath the said arms are the
obverse and reverse of three medals. On one of the medals it is
stated on the reverse to have been awarded to "El Oriente Fabrica de
Tabacos, Manila." The buildings and the back ground are the towers
of the Dominican Church (Walled City, Manila) and the high column is
the Magallanes Monument, Manila. That a facsimile of said trade-
mark or label marked Exhibit G is hereto attached and made a part
hereof;

14. Another facsimile of a trade-mark and trade name also presented


as evidence to the said Supreme Court of Hongkong depicts the old
Bridge of Spain across the Pasig River at Manila, showing in the back
ground the Old Stone Wall of the Walled City, Manila, and the
Dominican Church, Magallanes Monument, and Intendencia Building
and the church towers of the Walled City of Manila and above several
stars and a comet, on the tail of which appear the words "El Cometa
del Oriente." That a copy of said trade-mark or label marked Exhibit H
is hereto attached and made a part hereof;

15. That if further appeared upon the trial of said action in the said
Supreme Court of Hongkong and it is stipulated to be true, that
between the years 1882 and 1905, "El Oriente Fabrica de Tabacos
Sociedad Anonima" (hereinafter referred to as the "Sociedad
Anonima") carried on business as manufacturers of cigars and
cigarettes at Manila, Philippine Islands, and made use in connection
with the sale of its output through the Far East of Trade the marks
which are in dispute in this action. That the head office of the said
"Sociedad Anonima" was at Antwerp, Belgium;

16. That on or about the 21st day of April, 1906, the said "Soceidad
Anonima," being then in liquidation, transferred all of its business
interests and assets together with the goodwill thereof and trade-
marks and trade names of said "Sociedad Anonima" wherever in use
(including the trade-marks and trade names in dispute in this action),
to the plaintiff. That said transfer was effected by means of an
instrument, in writing, a copy of which is hereto attached marked
Exhibit J. That plaintiff, as "Gerant" of said Syndicat Oriente which
had been organized in the meantime for that purpose, carried on
business in the Philippine Islands and throughout the Far East under
the style of "El Fabrica de Tabacos, C. Ingenohl, Manila" (hereinafter
referred to as "El Oriente Fabrica de Tabacos");

17. That in the year 1908 the plaintiff, as "Gerant" of said Syndicat
Oriente, opened the said Hongkong factory for the manufacture and
sale of cigars which were composed, in part, of tobacco supplied by
"El Oriente Fabrica de Tabacos" in the Philippine Islands, and, in
part, of tobacco wrapper imported from Java. That subsequent to the
establishment of the said Hongkong factory its output was sold
throughout the Far East (except in the Philippine Islands)
concurrently with the output of the Manila factory under the trade-
marks and trade names in question, except that one of the outside
labels of each box or package containing the output of the said
Hongkong factory there appeared the words "El Oriente Fabrica de
Tabacos Hongkong, Sucursal de la Fabrica en Manila." That a
facsimile of one of said covering labels marked Exhibit 1 is hereto
attached and made a part hereof;

18. That the only factory belonging to the said "Sociedad Anonima" of
Antwerp as the Manila factory, and the only factory belonging to the
plaintiff personally or as "Gerant" of the Syndicat Oriente was the said
Manila factory up until the time of the establishment of the said
Hongkong factory, and thereafter the only factories owned by the
plaintiff of the said Syndicat Oriente were the said Manila and
Hongkong factories;

19. That the said trade-marks which are in dispute in this action were
registered in the Philippine Islands in the years 1884-1887 as the
property of the said "Sociedad Anonima" and the registration thereof
in the Philippine Islands of said property was renewed in the year
1902;

20. That the said trade-marks were subsequently in the year 1903
registered on the Hongkong Register of Trade-Marks as the property
of the said "Sociedad Anonima;"

21. That on or about April, 1906, the assignment of the said trade-
marks to "El Oriente Fabrica de Tabacos" was registered in the
Philippine Islands and in February, 1910, said trade-marks were
assigned on the Hongkong register with the knowledge and authority
and by direction of the plaintiff to the name of the said Syndicat under
its said style of "El Oriente Fabrica de Tabacos, C. Ingenohl, Manila"
as the proprietor of the said trade-marks;

22. That for many years prior to the sale by the Alien Property
Custodian of the said trade-marks and trade names, the same were
registered in various countries as follows:

In France, Australia, New Zealand, Shanghai, and Hongkong in the


name of "El Oriente Fabrica de Tabacos, C. Ingenohl, Manila," seven
registrations in Belgium, six of which are in the names of "El Oriente
Fabrica de Tabacos, Antwerp," represented by its manager C.
Ingenohl. The seventh registration is of "Imperio del Mundo, C.
Ingenohl, Manila;"
In the English registrations the name is "Carl Ingenohl, Managing
Director of and on behalf of El Oriente Fabrica de Tabacos, Sociedad
Anonima, Antwerp, Belgium and Manila, Philippine Islands;"

There is but one American registration and that is of "El Cometa del
Oriente," "Carl Ingenohl," giving his address at Antwerp and also
conducting business under the trade name of "El Oriente Fabrica de
Tabacos at 124 San Pedro Street, Manila, Philippine Islands;"

The registration for Java and Sumatra reads "El Oriente Fabrica de
Tabacos, C. Ingenohl;"

The German registration is "El Oriente Fabrica de Tabacos, Sociedad


Anonima, Emil Schoett," and one subsequent registration with the
name of C. Ingenohl substituted for Schoett. But counsel for the
defendant objects to the consideration of such registration as wholly
immaterial and for the further reason that the defendant as purchaser
of the factory and business known as "El Oriente Fabrica de
Tabacos, C. Ingenohl, Manila," succeeded to all of the latter's rights
under said registration;

23. That the said plaintiff on the 13th day of March, 1917, renewed
the registration of the said trade-marks on the Hongkong register for
a further period of fourteen years from the 15th of April, 1917, in the
name of "El Oriente Fabrica de Tabacos, C. Ingenohl, Manila,"
Proprietor;

24. That from the time of the establishment of said factory in Manila
by the plaintiff, until the present time, approximately 95 per cent of the
output thereof has been exported;

25. That on or about the 28th day of May, 1919, the said trade-marks
and trade names known as "La Perla del Oriente" and "El Cometa del
Oriente" were registered at Shanghai in the name of the defendant
corporation for all of China, with the exception of the colony of
Hongkong which is British territory and where separate registration
proceedings were and are required. The plaintiff had no knowledge of
the registration of the said trade-marks at Shanghai until requested
by the defendant to enter into this stipulation of facts, and the plaintiff
does not concede the validity of the said registration nor waive his
right to take any action with respect thereto which he may deem
suitable or proper;

The said trade-marks and trade names have been registered in the
name of said Syndicat Oriente under its said style of "El Oriente
Fabrica de Tabacos, C. Ingenohl, Manila" at the Shanghai
Customhouse since January, 1907;

26. That the registrations referred to in the last preceding paragraph


by both the plaintiff and defendant were made in the same manner;

27. That the plaintiff at the time of the acceptance from the Alien
Property Custodian of the proceeds of the sale of said property knew
that the defendant corporation had been, ever since the purchase of
said property, selling the product of said factory under said trade-
marks and trade names in all of said markets hereinbefore
mentioned;

28. The proceeds obtained by the Alien Property Custodian from the
sale made by him as aforesaid were received by the plaintiff after the
commencement of the action resulting in the judgment sued on
herein, but prior to the rendition of the said judgment;

29. That the jurisdiction of the said Supreme Court of Hongkong was
and is limited to the colony of Hongkong;

30. That ever since the rendition of said judgment by the said
Supreme Court of Hongkong, the plaintiff through its solicitors,
agents, and representatives has been and still is causing to be
inserted in the leading newspapers of China, the Federated Malay
States, and the Straits Settlements articles notifying the public of the
rendition of said judgment, asserting the plaintiff's exclusive right to
the use of said trade-marks and trade names in said countries, and
threatening to take legal proceedings against any person, firm, or
corporation having in their possession for sale, cigars bearing the
said trade-marks and trade names which are not manufactured by the
plaintiff in said Hongkong factory, and also causing notices of the
same character to be given to the dealers in said countries in the
cigars manufactured by defendant in said factory at Manila and sold
in said countries under said trade-marks and trade names;
31. That all of the articles published in newspapers of the various
countries mentioned and the notices given to the dealers in
defendant's cigars were in substantially the same form; that Exhibit 3
of defendant's amended answer is a copy of a notice which the
plaintiff caused to be published in the Singapore Free Press on July
11, 1922, and that Exhibit 4 of the same answer is a true copy of a
notice which the plaintiff caused to be published in the North China
Daily News at Shanghai on July 3, 1922, and Exhibit 5 of the same
answer is a true copy of a personal notice which the plaintiff caused
to be given to one of the dealers in defendant's cigars dated August
22, 1922.

The foregoing admissions of fact are made on the part of plaintiff with
the following reservations:

1. That the plaintiff objects to the admission in evidence and


consideration by the court of the facts set forth in paragraphs 6 to 31,
inclusive, on the following grounds:

(a) That this Honorable Court has no jurisdiction to revise or


review the judgment (Exhibit A) of the Supreme Court of
Hongkong;

(b) That no evidence should be received in support of the


defendant's answer and counterclaim, for the reason that the
same do not state facts sufficient to constitute counterclaim or
defense;

(c) That the facts set forth in the said paragraphs 6 to 31,
inclusive, are incompetent, irrelevant and immaterial as
evidence in this case.

2. That the admission of facts set forth in the said paragraphs 6 to 31,
inclusive, are made for the purposes of this case only, and are not to
be used against the plaintiff or defendant for any other purpose or on
any other occasion.

Based thereon and the other evidence in the case, the lower court
rendered judgment for the plaintiff for the full amount of his claim, with
interest at the rate of 6 per cent per annum from August 16, 1922, and
costs, from which the defendant appeals, making the following assignments
of error:

I. The trial court erred in failing to find that the decision of the
Supreme Court of Hongkong and the judgment which are the basis of
plaintiff's complaint in this action were rendered and entered as a
result of a clear mistake of law and of fact.

II. The trial court erred in rendering judgment in favor of the plaintiff
and against the defendant corporation for the amount claimed in the
complaint.

III. The trial court erred in failing to find and to take into consideration
that the Alien Property Custodian of the United States in selling the
Manila Cigar Factory with its goodwill, trade-marks and trade names,
acted as the trustee of the plaintiff, and that the letter by applying for
and accepting from the said Alien Property Custodian the proceeds of
such sale, ratified the same and thereby estopped himself from
denying the defendant's right to the use of said trade-marks and trade
names on the exported output of said cigar factory.

IV. The trial court erred in failing to find and take into consideration
that the business of the Manila Cigar Factory was almost exclusively
an export business, and that the transfer of the goodwill thereof
necessarily carried with it the transfer of said export business and of
the trade-marks and trade names which could not be disconnected
therefrom.

V. The trial court erred in finding and holding that the intention of the
Alien Property Custodian as evidenced by his deed of transfer to the
defendant corporation of January 25, 1919, was to limit the
conveyance to the property and rights of the Syndicat Oriente in the
Philippine Islands and in concluding from such finding and holding
that the defendant corporation was not entitled to recover under its
counterclaim.

VI. The trial court erred in denying defendant's counterclaim.

JOHNS, J.:
The important questions on this appeal are, first, the construction which
should be placed upon the conveyance of the United States Alien Property
Custodian to the defendant; second, the legal force and effect of the
judgment which was rendered by the Hongkong court; and, third, whether
or not the defendant has sustained any damages for which it can recover in
this action.

The conveyance in question was made on the 25th of January, 1919, and,
among other things, recites:

Alien Property Custodian of the United States, acting under authority


of the Trading with the Enemy Act, as amended, and the
proclamations and executive orders issued in pursuance thereof,
does hereby grant, bargain, sell and convey to the said Walter E.
Olsen & Company, its successors and assigns, all the following
described property and business:

All the singular the property, real and personal, rights, claims, titles,
interests, effects and assets of every kind and description whatsoever
(except only as specifically reserved and excepted hereinafter),
whatsoever situate in the Philippine Islands, and all incidents and
appurtenances thereto, including the business as going concern and
the goodwill, trade names and trade-marks thereof, of Syndicat
Oriente, a company formed under the laws of Belgium with its
registered office in Antwerp, Belgium, and heretofore doing business
in the Philippine Islands under the name "El Oriente, Fabrica de
Tabacos, C. Ingenohl; etc." Then follows a long description of certain
lands in the Philippine Islands, after which, the conveyance then
recites:

2. The factories and other buildings located upon the above


described real estate and all furniture, fixtures, machines, tools,
equipment, launches and barges, materials, supplies, labels, brands,
tobacco, cigars, raw stock, stock party or wholly manufactured,
therein or belonging to said business.

3. All accounts receivable or other credits and all contract rights


belonging to said business, except the account owing by the Orient
Tobacco Manufactory of Hongkong.
4. Any interest in the foregoing which may belong to Carlos Francisco
Adolfo Otto Ingenohl.

The undersigned Alien Property Custodian expressly excepts and


reserves from this sale all Liberty Bonds of the United States and the
above account of the Orient Tobacco Manufactory of Hongkong
owned by said business.

Neither the United States nor the Alien Property Custodian nor any
representative or agent or agency thereof shall be held or admitted to
make any representation or guaranty, express or implied, concerning,
or in any way respecting the above property or business.

It is contended by the plaintiff that the words "wheresoever situate in the


Philippine Islands" are words of limitation, and that the future use of the
trade-marks and trade names by the defendant should be confined and
limited to the Philippine Islands.

It appears that the property in question was seized and taken over by the
United States under the terms and provisions of the Trading with the
Enemy Act, and that it was sold and conveyed to the defendant under such
provisions at the agreed purchase price of P2,350,000, and that the
Syndicat Oriente was a company organized under the laws of Belgium with
its registered office in Antwerp, and that it was an enemy of the United
States, as defined in said Act, not holding a license granted by the
President under said Trading with the Enemy Act, "which the President
after investigation has determined was so owing, or so belonged, or was so
held."

At the sale the defendant was the highest and best bidder and paid the
amount of its bid, in consideration of which the deed in question was
executed.

For the purpose of this opinion, we must assume that as a war measure,
the Government of the United States had a legal right to seize and sell the
property, and that the conveyance which it made was valid. That fact is not
and cannot be questioned. It follows that the property sold was owned and
held by an alien enemy.

The primary purpose of the proceeding was to seize, sell and convey any
and all of the property owned and held by the company or Ingenohl within
the jurisdiction of the United States, as a war measure, upon the ground
that they were alien enemies of the United States. While ostensibly the
corporation in question was organized under the laws of Belgium, yet in
truth and in fact it was a one-man corporation in which Ingenohl, who was a
citizen of Germany, owned nearly all of the stock, and to all intents and
purposes was the corporation itself. The conveyance to the defendant must
be construed in the light of the existing and surrounding circumstances,
and the purpose and intent for which it was made.

Although there are no covenants or warranties in the conveyance, the


primary purpose of the whole proceedings on which it was founded was to
wipe Ingenohl and his company out of existence and put them out of
business in so far as the United States had the power to do so. For such
reasons, it should be the policy of the law to sustain rather than defeat the
primary purpose of the proceedings. In other words, the conveyance should
be construed so as to give full force and effect to the nature and purpose of
the proceedings upon which it is founded. It was not the purpose of the
United states to seize and take hold of a portion of plaintiff's property or
that of his company within its jurisdiction. It was the purpose of the United
states to seize all of their property, real, personal, or mixed within its
jurisdiction. The conveyance in question must be construed as intended to
convey to the defendant all property which either Ingenohl or his company
had within the jurisdiction of the United States. Any other construction
would be strained and unnatural and defeat the very purpose for which the
proceedings were initiated.

The remaining question then is, what property did the plaintiff or his
company have within the jurisdiction of the United States, and what
property did the United States seize and convey to the defendant.

The deed to the defendant recites that it conveyed all and singular property
of every kind, nature and description wheresoever situate in the Philippine
Islands, and all incidents and appurtenances thereto, including the
business as a going concern and the goodwill, trade-marks and trade
names of the company doing business in the Philippine Islands under the
name of "El Oriente Fabrica de Tabacos, C. Ingenohl."

It is vigorously contended that the words "trade-marks and trade names,"


as used therein, should be confined and limited to their use in the
Philippine Islands. That when the defendant bought the property, it did not
purchase the right to the use of the trade names or trade-marks of the
company outside of the Philippine Islands. The meaning of such words
should be construed in connection with what follows:

All accounts receivable or other credits and all contract rights


belonging to said business, except the account owing by the Orient
Tobacco Manufactory of Hongkong.

The deed further conveys an express reservation:

The above account of the Orient tobacco Manufactory of Hongkong


owned by said business.

It will be noted that nothing whatever is said about trade names or trade-
marks in such reservations. If it was not the purpose and intent of the
conveyance to sell and convey any and all of the trade names and trade-
marks of the company and to the use thereof wheresoever situate, it would
have been a very easy thing to have made an express reservation of them
of the same tenor as the reservations, "except the account owing by the
Orient Tobacco Manufactory of Hongkong" and "the above account of the
Orient Tobacco Manufactory of Hongkong owned by said business."
Nothing whatever is said about trade-marks or trade names in either one of
them. Yet, at the time the deed was made a number of trade-marks were
registered in other and different countries outside of Hongkong, and the
products of the Manila factory were sold in those foreign countries under
such registered trade names and trade-marks.

Again, it is stipulated that the trade-marks which are in dispute were


registered in the Philippine Islands in the years 1884 and 1887, as the
property of the "Sociedad Anonima," and that such registration was
renewed in the year 1902. That in the year 1903, said trade-marks were
also registered on the Hongkong register of trade-marks as the property of
the said "Sociedad Anonima ." That in April, 1906, the assignment of said
trade-marks to "El Oriente Fabrica de Tabacos" was registered in the
Philippine Islands, and in February, 1910, the same trade-marks were
assigned on the Hongkong register with the knowledge and authority and
by direction of the plaintiff in the name of said Syndicat under the style of
"El Oriente Fabrica de Tabacos, C. Ingenohl, Manila," as proprietor of said
trade-marks. That for many years prior to the sale of the property, the
trade-marks and trade names in question were registered in France,
Australia, New Zealand, Shanghai and Hongkong in the name of "El
Oriente Fabrica de Tabacos, C. Ingenohl, Manila," seven registrations in
Belgium, six of which are in the names of "El Oriente Fabrica de Tabacos,
Antwerp," represented by its manager C. Ingenohl, the seventh registration
of which is of "Imperio del Mundo, C. Ingenohl, Manila."

In the English registrations, the name is "Carl Ingenohl, Managing Director


of and on behalf of El Oriente Fabrica de Tabacos, Sociedad Anonima,
Antwerp, Belgium and Manila, Philippine Islands."

The registration for Java and Sumatra reads: "El Oriente Fabrica de
Tabacos, C. Ingenohl."

The German registration is "El Oriente Fabrica de Tabacos, Sociedad


Anonima, Emil Schoett," and a later one was the name of C. Ingenohl
substituted.

That on March 13, 1917, the plaintiff renewed the registration of the trade-
marks on the Hongkong register for a further period of fourteen years from
the 15th of April, 1917, in the name of "El Oriente Fabrica de Tabacos, C.
Ingenohl, Manila," proprietor.

It is further stipulated:

That from the time of the establishment of said factory in Manila by


the plaintiff, until the present time, approximately 95 per cent of the
output thereof has been exported.

It also appears that the Manila factory was established some time prior to
1884, and that all of the trade-marks in question are typical of some thing,
person or event, and that all of them have some peculiar and distinct
feature typical of the Philippine Islands. But also appears that all of said
trade-marks had their origin and were in use in the factory in the Philippine
Islands long before any factory was established in Hongkong, and that the
products of the Manila factory with such trade-marks on them were sold
throughout the Orient, and even in Hongkong, long before the Hongkong
factory was established. That all of such trade-marks were used in,
connected with, and were a part of, the original business of the company in
the Philippine Islands. That the trade-marks registered in Hongkong were
the identical trade-marks, both in form and substance, which for a number
of years had been previously in use and registered by the Manila factory in
the Philippine Islands. In other words, it clearly appears that all of the trade-
marks in question were created, had their origin, growth and development
in the business of the Manila factory, and were identified, connected with,
and a part of, its business. That any registration of such trade-marks in any
foreign country was based and founded upon original trade-marks which
had their origin and primary use in the Manila factory, and which for many
years had been previously used and registered as such trade-marks in the
Philippine Islands. It must follow that all of the trade-marks in question were
connected with, belonged to, and were a part of, the business of the
company as a going concern in the Philippine Islands.

Upon the question of the territorial limitation of a trade-mark, Ruling Case


Law, volume 26, pages 839-840, says:

12. Territorial limitation. — The right of property in a trade-mark is not


limited in its enjoyment by territorial bounds, but may be asserted and
maintained wherever the common law affords remedies for wrongs,
subject only to such statutory regulations as may be properly made
concerning the use and enjoyment of other property. It is a general
rule that a trade-mark granted in a foreign country to an alien friend
will be protected against infringement. But the doctrine that property
in a trade-mark is not limited in its enjoyment by territorial bounds, but
may be asserted and protected wherever the law affords a remedy for
wrongs, is true only in a limited sense. Into whatever markets the use
of a trade-mark has extended, or its meaning has become known,
there the manufacturer or trader whose trade is pirated by an
infringing use will be entitled to protection and redress. This does not
mean that the proprietor of a trade-mark, good in the markets where it
has been employed, can monopolize markets that his trade has never
reached. The mark, of itself, cannot travel to markets where there is
no article to wear the badge and no trader to offer the article. . . .

We hold that the trade-marks and trade names in question were a part of
the company's business in the Philippine Islands, and that the defendant
acquired title to the use and enjoyment of them by its deed of conveyance,
not only in the Philippine Islands, but in all foreign countries in the same
manner and to the same extent that they were used by the company and
Ingenohl prior to the time that their property was seized by the United
states. That the right and title to all of such trade-marks and to their use
passed by the conveyance made to the defendant.
The stipulation of facts shows that from the time the Manila factory was
established by the plaintiff until the present, approximately 95 per cent of
the gross output of the factory has been exported. To now give the plaintiff
the use and benefit of 95 per cent of the trade-marks and trade names
formerly owned by himself and his company, would be a gross fraud and
would defeat the very purpose for which their property was seized and sold.
That would be especially true, as in this case, where the plaintiff has
received and accepted the net proceeds of the sale which the United
States made to the defendant.

The case of Koppel Industrial Car & Equipment co. vs. Orenstein & Koppel
Aktiengesellschaft, vol. 289, Fed., advance sheets No. 3, p. 446, decides
that:

Where the Alien Property Custodian sold the American business and
goodwill of a going concern, including its trade-marks and trade
names, which company was the outgrowth of a German corporation
which was organized as an American subsidiary corporation, and
which was sold under section 12 of the Training with the Enemy Act,
as enemy owned property, to a new corporation;

Held, that the new corporation was entitled to injunctive relief


restraining the German corporation or its agents from endeavoring to
recapture the business so sold by entering the field after the war,
using the same or similar trade names and representing themselves
to be the successors to the first American concern.

Held, further, that under section 12 of the Trading with the Enemy Act
there vested in the Alien Property Custodian all the powers of a
common-law trustee in respect of all property, and a conveyance by
him of this German owned property as a going concern, which
included the goodwill, registered and unregistered trade-marks,
carried with it an implied covenant against the former owners entering
the field in interference with the trade names and goodwill so
conveyed.

The legal effect of this very recent decision is to hold that in conveyances
made by him, the Alien Property Custodian has all the powers of a
common-law trustee, and that a conveyance of a business as a going
concern, including the goodwill and trade-marks, carried with it an implied
covenant against the former owner entering the field of the former business
or interfering with the trade-marks and the goodwill conveyed.

In the instant case, the plaintiff, after accepting the proceeds of the sale,
has not only become an active competitor of the purchaser of the business,
but is claiming and exercising the right of an absolute owner to the use and
benefit of 95 per cent of all the business evidenced by the trade-marks and
trade names.

It is a matter of common knowledge that trade-marks and trade names are


very often the most valuable assets of any business.

We are construing a deed of conveyance from the United States to the


defendant. The primary purpose of the whole proceeding was to seize and
convey all of the property of the plaintiff or his company within the
jurisdiction of the United States, including trade names and trade-marks as
those of an alien enemy. To now give the defendant the use and benefit of
only 5 per cent of such trade names and trade-marks, and to permit the
plaintiff to have and retain the other 95 per cent to his own use and benefit
after he has ratified and confirmed the sale, would impugn the honor and
good name of the United States in the whole proceeding and defeat the
very purpose for which it seized and sold the property of an alien enemy.

Under the established facts, both plaintiff and his company were alien
enemies, and as a war measure all of their property within its jurisdiction
was seized and held by the United States under the Trading with the
enemy act. As stated, the primary purpose of that proceeding, because
they were alien enemies, was to wipe them out of existence and put them
out of business. As a condition precedent to its purchase, the defendant
had to establish the fact that it was an American citizen and loyal to the
United States.

The reservations made in the deed of conveyance are "except the account
owing by the Orient Tobacco Manufactory of Hongkong" and "the above
account of the Orient Tobacco Manufactory of Hongkong owned by said
business," and they are the only reservations made.

It is very apparent that the purpose and intent of the United States was to
sell and convey all other property of Ingenohl or his company within its
jurisdiction.
The legal force and effect of plaintiff's contention is to claim and assert that
the United States did not seize or take over the most valuable part of his
assets and those of the company within its jurisdiction, and that it did not
sell it to the defendant. In other words, the most valuable part of their
assets was not seized or taken over by the United States. This position is
not tenable. The very fact that the above quoted reservations were made in
the deed of conveyance, and that no other reservations were made, clearly
implies that it was the purpose and intent of the United States to seize and
take over all of the business and assets of the plaintiff and his company,
except "the amount owing by the Orient Tobacco Manufactory of
Hongkong" and "the above account of the Orient Tobacco Manufactory of
Hongkong owned by said business." Any other construction would be
strained and unnatural, and would clearly imply the neglect of official duty
on the part of the United States Government. The trade-marks in question
were the creature of, and had their inception in, the Manila factory, and
were incidental to, connected with, and are a part of, the business of that
factory, and it is very apparent from the nature of the whole proceedings
and the deed itself that it was the purpose and intent of the United States to
convey all of the business of "El Oriente Fabrica de Tabacos, C. Ingenohl,
Manila" as a going concern and that of the plaintiff, together with the right
and title to the trade-marks in question and to their use and enjoyment,
except only as to the reservations which are expressly made in the deed for
"the account owing by the Orient Tobacco Manufactory of Hongkong" and
"the above account of the Orient Tobacco Manufactory of Hongkong owned
by said business."

For such reasons, the first questions should be decided against the plaintiff
and in favor of the defendant. As to the second question, the legal force
and effect of the judgment of the Hongkong court. It is stipulated that it is a
court of general jurisdiction. That the defendant appeared, filed, answered
and contested the action, and that as a result of the trial, that court
rendered the following judgment: First, that the plaintiff is the proprietor of
the trade-marks and trade names, the subject-matter of this action, and is
entitled to the use of them in connection with his business as a cigar
manufacturer. Second, that the defendant be restrained from selling or
exposing for sale in boxes or packages bearing thereon the said trade-
marks and trade names, and from using any labels or stamps or
advertisements in imitation thereof, designed to represent that the cigars
sold by the defendant are the cigars manufactured and sold by the plaintiff
under the trade-marks and trade names in question. Third, that an account
be taken and that based thereon, the defendant should pay to the plaintiff
the amount of damages which he has sustained. Fourth, that the defendant
deliver up upon oath or destroy all articles and things in its possession or
under its control which offend against this injunction, and that plaintiff
recover from the defendant his costs of the action upon the claim or
counterclaim of defendant, including attorney's fees, which are hereby
taxed and allowed in the sum of $26,244.23, as appeared by the registrar's
certificate.

It appears that under the law of the Hongkong court, judgment for
attorney's fees is allowed to the prevailing party against the defendant in
this kind of a case as an incident to the action. In other words, if the
judgment on the merits is sustained, it would carry with it the judgment for
the $26,244.23 as a valid and legal part of it.

The instant case is an action to procure and enforce a judgment in the


Philippine Islands for a like amount founded upon the judgment and
proceedings in the Hongkong court. That judgment having been rendered
by a court of competent jurisdiction which had jurisdiction of the parties and
the subject-matter of the action, it is vigorously contended by the appellee
that he is entitled as a matter of right and of comity under the Law of
Nations, to enforce it in the Philippine Islands, citing and relying upon the
case of Hilton vs. Guyot (159 U.S., 113; 40 Law. ed., 95), in which, among
other things, the court says:

In view of all the authorities upon the subject, and of the trend of
judicial opinion in this country and in England following the lead of
Kent and Story, we are satisfied that where there has been
opportunity for a full and fair trial abroad before a court of competent
jurisdiction, conducting the trial upon regular proceedings, after due
citation or voluntary appearance of the defendant, and under a
system of jurisprudence likely to secure an impartial administration of
justice between the citizens of its own country and those of other
countries, and there is nothing to show either prejudice in the court or
in the system of laws under which it was sitting, or fraud in procuring
the judgment, or any other special reason why the comity of this
nation should not allow it full effect, the merits of the case should not,
in an action brought in this country upon the judgment, be tried
afresh, as on a new trial or an appeal, upon the mere assertion of the
party that the judgment was erroneous in law or in fact. . . .
That is a leading case of the highest court in the land, and the opinion is
exhaustive on the question involved, and we have read it with care.

Among other things, the syllabus says:

1. International law, including questions concerning the rights of


persons within the dominion of one nation by reason of acts done
within the dominion of another, is part of our law, and should be
ascertained and administered by the courts as often as such
questions are duly submitted to their determination.

2. Where there is no written law upon the subject, such as treaty or


statute, questions of international law must be determined by judicial
decisions, the works of jurists, and the acts and usages of civilized
nations.

3. Comity of nations is the recognition which one nation allows within


its territory to the legislative, executive, or judicial acts of another
nation, having due regard to international duty and convenience, and
to the rights of its own citizens or others who are under the protection
of its laws.

xxx xxx xxx

6. A foreign judgment for money in favor of a citizen of the foreign


country against a citizen of this country, rendered by a competent
court having jurisdiction of the cause and of the parties, upon due
allegations and proofs and opportunity to defend according to the
course of a civilized jurisprudence, whose record is clear and formal,
is prima facie evidence, at least, in a suit upon it in this country, and
is conclusive on the merits, unless impeached on special ground, or
shown by international law or the comity of this country not entitled to
full faith and credit.

All of which are sustained in the opinion and must be accepted by this court
as the law.

It will be noted that in section 2, (syllabus) it is said:

Where there is no written law upon the subject, such as treaty or


statute.
It is not claimed that there is any treaty, but section 311 of the Code of Civil
Procedure is as follows:

Effect of other foreign judgment. — The effect of a judgment of any


other tribunal of a foreign country, having jurisdiction to pronounce
the judgment, is as follows:

1. In case of a judgment against a specific thing, the judgment is


conclusive upon the title to the thing;

2. In case of a judgment against a person, the judgment is


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

It is conceded that the Hongkong court had jurisdiction and that the
defendant appeared in the action and contested the case on its merits.
Hence, there was no collusion. Neither is it claimed that there was any
fraud, but it is vigorously contended that the Hongkong judgment was a
clear mistake of both law and fact.

We have read and reread with care the exhaustive opinion rendered by the
Hongkong court, which had before it all of the evidence now before this
court, except as to the proof of the defendant in the instant action on its
counterclaim for damages. The Hongkong court was construing the deed of
conveyance made to the defendant founded upon the proceeding which the
United States took as a war measure against the plaintiff and his company,
as alien enemies, under its Trading with the Enemy Act. For the purposes
of this opinion, all of such proceedings must be construed as legal and
valid, the scope and nature of which is very apparent from the record. The
plaintiff and his company were alien enemies of the United States, and it
was for such reason that their property was seized and sold to the
defendant for P2,350,000, which amount was paid as the purchase price.

The record shows that the original business of the company in the
Philippine Islands was established as early as 1883, and that in connection
with and as a part of its business the company had used and adopted the
trade-marks in question and had them registered in the Philippine Islands
as early as 1883. All of those trade-marks appear upon their face to be
confined to and peculiar of persons or things in the Philippine Islands. On
the strength of their use, adoption and registration in the Philippine Islands,
in succeeding years, they were registered in many foreign countries in
which a large amount of business was done by the company in cigars,
cigarettes, and tobacco manufactured in the Philippine Islands, all of which
were evidenced by such trade-marks.

The stipulated facts show that 95 per cent of all of its business was export,
and that all of its products were designated and labeled with the trade-
marks and trade names in question. That in later years a branch factory of
the business was established in Hongkong. At the sale by the United
States of the business, the defendant paid P2,350,000 in good faith, and
took over the property and assets of the company, including its trade-marks
and trade names and its business as a going concern, except "the account
owing by the Orient Tobacco Manufactory of Hongkong" and "the above
account of the Orient Tobacco Manufactory of Hongkong owned by said
business." After the sale, the plaintiff took and accepted the net proceeds
and put them in his pocket and is now using them in connection with the
Hongkong factory not only as a competitor of the defendant, but claiming to
be the absolute owner and to have the exclusive right to the use and
benefit of the trade-marks and trade names in question.

With all due respect to the Hongkong court, its judgment is a clear mistake
of both law and fact. Exclusive of the provisions of section 311 of the Code
of Civil Procedure, it is very doubtful whether it could be sustained upon the
ground of comity or the Law of Nations.

The proceedings were initiated during the world war, and as a war
measure, by the Government of the United States, an ally of Great Britain,
of whose judiciary the Hongkong court is a branch. Under such conditions
and the law of comity and of Nations, there are many and strong reasons
why the Hongkong court should have upheld and sustained the
proceedings of the United States in the seizure and sale of the property of
an alien enemy. It overlooked the fundamental fact of the primary purpose
and intent with which the seizure was made and the property sold, and that
it was all done as a war measure by an ally of Great Britain. The legal force
and effect of that decision is to defeat and destroy the very purpose for
which the United States seized and sold the property, took and accepted
defendant's money.
As between allied nations and under the law of comity, their mutual policy
should be to sustain and enforce the spirit and intention with which the
seizure and sale of any property of an alien enemy was made rather than
to minimize, destroy or defeat them.

If the decision of the Hongkong court is the law, in legal effect the
defendant paid P2,350,000 for the right and privilege of doing 5 per cent of
the business which was formerly done by the company, and the plaintiff
and his company have received and accepted $1,511,124.50, the full
amount of the purchase price of all of the property, and now have and own
the exclusive right to the remaining 95 per cent of all of the business which
the company owned and operated at the time of the seizure and sale. In its
final analysis, that is the logical result of the Hongkong decision.

We frankly concede that the authorities cited in that opinion are good law,
but they are not in point, for the simple reason that they are founded upon
other and different facts. The purpose and intent of the whole transaction is
apparent upon the face of the deed of conveyance, the stipulated facts and
the nature of the proceedings. It was to seize and take over the property of
an alien enemy as a war measure, and to hold it in the nature of a trust or
as a trustee for it or him, and in the event of a sale of the property, as in
this case, to hold the proceeds in trust.

Be that as it may, this court is bound be section 311 of the Code of Civil
Procedure. In so far as we are advised, the question here is one of first
impression, and no other country has a like statute. That law was enacted
by the Legislature of the Philippine Islands, and as to the Philippine Islands,
it is the law of the land. In the absence of that statute, no matter how
wrongful the judgment of the Hongkong court may be, there would be
strong reasons for holding that it should be enforced by this court.

Such is the legal force of the well considered decision in Godard vs. Gray,
English Ruling Cases, volume 5, p. 726, where it is held:

It is no bar to an action, on a judgment in personam of a foreign court


having jurisdiction over the parties and cause, that the foreign tribunal
has put a construction erroneous, according to English law, on an
English contract.

And in the case of Schibsby vs. Westenholz, in the same volume, p. 734, it
is further held:
A judgment of a foreign court, obtained in default of appearance
against a defendant, cannot be enforced in an English Court, where
the defendant, at the time the suit commenced, was not subject of nor
resident in the country in which the judgment was obtained: for there
existed nothing imposing on the defendant any duty to obey the
judgment.

The distinction is very clear. But in the instant case, the defendant not only
appeared in the Hongkong court, but there contested the case on its merits.

But here we have a statute which clearly defines the specific conditions
upon which a foreign judgment can be enforced in the Philippine Islands,
and we have a decision of the United States Supreme Court which holds
that "where there is no written law upon the subject, such as treaty or
statute, questions of international law must be determined by judicial
decisions, the works of jurists, and the acts and usages of civilized
nations." The converse of that proposition is also true that where you do
have a treaty or statute, to enforce a foreign judgment, it must come under
and within the specific provisions of the treaty or statute.

The judgment which is here sought to be enforced is clearly a mistake of


both law and fact, and was rendered in direct conflict with that comity
between nations, which should exist among those which were allies in the
world war.

Upon the second question, we do not hesitate to say that the judgment
rendered in the Hongkong court was a clear mistake of both law and fact,
and that it ought not to be enforced in the Philippine Islands.

Upon the third question, as to the damages claimed by the defendant, it is


alleged that after obtaining the proceeds from the sale, the plaintiff in
violation of the conveyance to the defendant, which he had ratified,
wrongfully instituted an action in the Supreme Court of the colony of
Hongkong against the defendant in which he claimed to be the sole owner
of the trade-marks in question, which up to that time had been a mere
branch of the Manila factory, and that he secured from that court the
decision in question. That although the judgment of the Hongkong court
has no extraterritorial effect, the plaintiff in violation of the terms of such
sale and conveyance, ever since the rendition of said judgment, through his
agents and solicitors, has been and is still wrongfully causing to be inserted
in the leading newspapers of China, the Federated Malay States, the
Straits Settlements and elsewhere, "articles notifying the public of the
rendition of said judgment, asserting the plaintiff's exclusive right to the use
of said trade-marks and trade names in said countries and threatening to
take legal proceedings against any person, firm, or corporation having in
their possession for sale cigars bearing the said trade-marks or trade
names, which are not manufactured by the said branch factory at
Hongkong, and also causing notices of the same character to be given to
the dealers in said countries in the cigars manufactured by the defendant in
said cigar factory at Manila and sold in said countries under said trade-
marks and trade names." That by reason of the threats made and the
articles published, all the dealers in the cigars of the defendant labeled with
the trade-marks in question were intimidated and deterred from further
dealing in defendant's cigars and that they cancelled all pending orders,
have refused to make further purchases of defendant's cigars without
guaranties for their protection, and that the goodwill of the business and the
value of the trade-marks in question had been totally destroyed, and the
defendant has been wrongfully deprived of the use and enjoyment and the
goodwill of its business to its damages in the sum of P1,000,000.

It is not claimed or alleged that the plaintiff in any manner injured or


interfered with defendant's business prior to the rendition of the Hongkong
judgment. The articles published in the newspapers are attached to and
made a part of defendant's counterclaim for damages. When analyzed they
are nothing more than a statement to the effect that the judgment had been
rendered by the Hongkong court and the nature and extent of the
judgment, and that it was the purpose and intent of the plaintiff to claim the
use and benefit of it and to enforce it. After the judgment was rendered, he
had a legal right to do that.

The law is well stated in Hopkins, on trade-marks, page 374:

It is the general rule that a notice warning the public or specific


dealers or users of a suit for patent infringement is not actionable
unless it appears that the notices were not given in good faith, or that
they were entirely without foundation in the scope of the defendant's
patent. The determination of the question of bona fides in the making
of such threats is obviously of great difficulty at times. "The question
whether the patent owner is acting in good faith in advertising his
claims to the manufacturer's customers by circulars or letters can
seldom be determined from the contents of the communication alone,
and, like all questions of intent, must generally be determined by the
extrinsic facts.". . .

In Clip Bar Manufacturing Co. vs. Steel Protected Concrete Co. (209 Fed.,
874), the court said:

Notices of claims of infringement given by the owner of a patent to


customers of a manufacturer of a similar article, or even threats of
suit, if in good faith, are within its rights and not actionable as acts of
unfair competition.

Facts: The plaintiff moves for a preliminary injunction to restrain the


defendant from making representations to the plaintiff's customers that
defendant's patent No. 727, 233 declared invalid in a suit brought by the
defendant against the Central Improvement & Contracting Company in the
Circuit Court for the Eastern District of Louisiana (155 Fed., 279), affirmed
by the Circuit Court of Appeals in 158 Fed., 1021; 85, C.C.A., 7, is valid, or
being infringed by the plaintiff or its customers, and from threatening orally
or in writing the plaintiff's customers with threats of litigation for
infringement of its patent.

xxx xxx xxx

It nowhere appears on the record that the notices given to the


plaintiff's customers were not in good faith or that they were false or
malicious or for the purpose of destroying the business of the plaintiff.
To the contrary, the defendant, so far as appears, believing its claims
to be valid, has proceeded to bring suit in this district to establish
infringement. Under these circumstances, it must be held for the
purposes of the present motion that the defendant is acting within its
rights. (209 Fed., 874.)

In United Electric Co. vs. Creamery Package Manufacturing Co. (203 Fed.,
53), the court said:

It is within the right of the owner of a patent, notwithstanding the


pendency of suits against the manufacturers of alleged infringing
articles, to notify users of such articles of its claims, and its intention
to protect its rights by suits against users, provided such notices
contain no misstatements of fact and are sent in good faith, and not
for the purpose of unnecessarily injuring defendant's business . . .

As a second basis for the recovery of damage, the plaintiff contends


that the defendant circulated among the agents, users, purchasers
and prospective purchaser of the churns of the plaintiffs, located in
different states, reports and statements that the combined churns and
butter workers sold by plaintiff were infringements of the Desbrow
patents owned and controlled by the defendant and that they
threatened to bring suits against the users of the plaintiff's churn.
That the owner of a patent may notify infringers of his claims and
warn them that unless they desist, suits will be brought to protect him
in his legal rights, is sustained by numerous decisions.

The only limitation on the right to issue such warning is the


requirement of good faith. There is nothing in the warnings given in
this case to show that the letters or notices were false, malicious,
offensive, or opprobrious, or that they were used for the willful
purpose of inflicting injury.

Applying the law to the facts, the plaintiff did nothing more than to advise
the cigar dealers of the force and effect of the Hongkong judgment, and
that defendant was therein enjoined from selling cigars bearing the trade-
marks in question. That was a statement of an actual fact. It is true that the
defendant may have been damaged as a result of such notices and
publications. If so, it was a damage without injury, for which it has no legal
redress.

After a careful consideration, it is the judgment of this court, first, that the
words "wheresoever situate in the Philippine Islands" are not words of
limitation in the deed of conveyance to the defendant company or the
business as a going concern, the goodwill, the trade names or trade-marks
of the Syndicat Oriente or the plaintiff; second, that the defendant is the
exclusive owner of the business of the plaintiff and his company as a going
concern, and has the absolute title and right to all of the trade-marks in
question and to their exclusive use and enjoyment not only in the Philippine
Islands, but in all other countries where they are duly registered, save and
except as to the reservations only of "the account owing by the Orient
Tobacco Manufactory of Hongkong" and "the above account of the Orient
Tobacco Manufactory of Hongkong owned by said business," which were
mad in its deed of conveyance; third, that the judgment of the Hongkong
court is a clear mistake of both law and fact, and for such reason should
not be enforced in the Philippine Islands; fourth, that the defendant is not
entitled to recover any damages on its counterclaim; and fifth, that the
judgment of the lower court should be reversed, and that neither party to
recover costs in the lower court or on this appeal. So ordered.

Villamor, Ostrand, and Romualdez, JJ., concur.


Johnson, J., took no part in the consideration of this case.

Separate Opinions

STREET, J., concurring and dissenting:

I concur except in the disposition made of the cross-complaint, in respect to


which I am of the opinion that the defendant is entitled to damages.

MALCOLM and AVANCEÑA, JJ., dissenting:

The plaintiff was successful in the Court of First Instance of Manila in


enforcing so much of a judgment rendered by the Supreme Court of
Hongkong as allowed him costs, in a case in which the plaintiff herein was
plaintiff and the defendant herein was defendant. On appeal, the prevailing
view in the court denies to the defendant-appellant the right to recover on
its counterclaim, but sets aside the judgment of the trial court for the
principal reason that the judgment of the Supreme Court of Hongkong,
which is the basis of plaintiff's complaint, was entered as a result of a clear
mistake of both law and fact. We agree with the disposition of the appeal as
it affects the counterclaim but disagree as it affects the judgment secured
by the plaintiff in the lower court.

We shall stoutly maintain in this dissent that the Supreme Court of


Hongkong was right in its judgment, but that, even if that judgment be
conceded to be wrong, no such clear mistake of law or fact was committed
as justifies the Supreme Court of the Philippine Islands in, in effect, retrying
the case and reversing the Supreme Court of Hongkong. If for no other
reason than judicial courtesy and international comity, we should, as far as
feasible, try to put ourselves in the position of the distinguished Judge who
handed down the decision in Hongkong and should try, as we think is
proper, to interpret his viewpoint. That will be our purpose. We begin with a
statement of the case.

Carl Franz Adolf Otto Ingenohl, the present plaintiff, is a resident of


Hongkong. In the Supreme Court of Hongkong, he instituted suit to enjoin
the use by Walter E. Olsen and Company, Inc., within the colony of
Hongkong, of certain trade-marks which the defendant claimed to have
acquired by purchase from the United States Alien Property Custodian, and
to secure damages. The defendant, by counterclaim, asked for an
injunction and damages. A trial extending over a considerable period of
time was had, evidence was produced by the parties, and learned counsel
were heard. On May 5, 1922, the Supreme Court of Hongkong, having
acquired jurisdiction over both the plaintiff and the defendant, rendered
judgment in favor of plaintiff and against defendant.

The decision of his Honor, W. Rees Davies, after stating in a fair and
comprehensive manner the respective views of the parties and the facts,
came to the conclusion that the case was covered by the authority of the
Chartreuse Case, Rey vs. Lecouturier ( [1908] 2 Ch., 715; [1910] A.C.,
362). According to the court "To apply the decision to this case the trade-
marks in question had been registered many years before in Hongkong, the
cigars admittedly had for a long time acquired a reputation in the Hongkong
market, and the assignment by the Custodian of the assets in the Manila
firm cannot have any extraterritorial effect so as to affect the rights of the
party concerned in Hongkong whoever that party may be." The court,
further, reached the conclusion that the articles of the "Syndicat Oriente"
should "be construed according to Belgian Law." It was therefore adjudged
that the plaintiff was the sole proprietor of the trade-marks and trade
names, the subject matter of the action, and was entitled to the exclusive
use of the said trade-marks and trade names in connection with his
business as a cigar manufacturer; that the defendant and others acting
under his direction and instruction, be restrained from selling cigars in
boxes bearing the said trade-marks and trade names; that an accounting
be had, and that the plaintiff recover against the first defendant his costs of
action. No appeal from the judgment of the Hongkong Supreme Court was
taken by defendant.

Costs were taxed in the Supreme Court of Hongkong in favor of the plaintiff
and against the defendant in the sum of $26,224.23, Hongkong currency. It
was to recover the equivalent of this sum, computed at P31,099.41,
Philippine currency, that action was begun in the Court of First Instance by
Ingenohl against Olsen and Company.

Walter E. Olsen & Company, Inc., is a Philippine corporation, having its


principal place of business in the City of Manila, Philippine Islands. It was
the defendant as above indicated in Hongkong. It again became defendant
when this suit was instituted in the Philippine courts. Defendant then
presented an answer and a counterclaim. It alleged that the decision of the
Supreme Court of Hongkong was the result of a clear mistake of law and
fact. It relied upon the sale to the defendant at public auction, by the United
States Alien Property Custodian of property belonging to the plaintiff, in
consideration of the sum of P2,350,000, including the cigar and cigarette
factory, situated in the City of Manila, Philippine Islands, known as "El
Oriente Fabrica de Tabacos, C. Ingenohl;" following the sale, the plaintiff
for himself and as gestor and representative of the "Syndicat Oriente"
collected the purchase price of the property from the Alien Property
Custodian. Allegations were also made intended to prove damages in the
amount of P1,000,000.

The plaintiff filed a demurrer to the special defense and counterclaim of the
defendant on the grounds that the court had no jurisdiction of the subject
matter of the action, and that the defense and counterclaim did not state
facts sufficient to constitute a defense or counterclaim. The parties entered
into an agreed statement of facts. Judge Imperial in his decision speaking
of the Hongkong judgment remarked:

"From a careful examination of the decision rendered by the Chief Justice


of the Supreme Court of the Hongkong colony, it will be observed that in
adjudicating the case and rendering judgment in favor of the then and now
plaintiff, a minute examination was made not only of the laws applicable to
the case, but also of the evidence and the facts supporting the complaint. It
will likewise be noted that the principal ground of the judgment consisted in
the interpretation that was given to the contract of sale executed by the
Alien Property Custodian in favor of the defendant Walter E. Olsen and
Co., Inc., it having been established that judging from the very terms of the
deed of transfer, the aforesaid defendant had not acquired any title to, nor
the right to use, the trade-marks and trade names that were being used by
the plaintiff in the City of Hongkong, that the rights acquired by the
defendant had to do with the properties situated in the Philippine Islands
and not in the colony of Hongkong, and that, lastly, the contract of sale was
not to be given an extraterritorial effect." Then after examining the bill of
sale, the trial judge continued:

"In the phraseology of said deed there is nothing tending to show that it
was the intention of the Alien Property Custodian to sell other rights or
properties situated outside of the Philippine Islands or within the Hongkong
colony. For this reason the decision and judgment rendered by the
Supreme Court of said city were in accordance with law and the facts
proven. For this same reason the defense set up by the defendant appears
untenable and must be overruled." By the judgment, the defendant was
ordered to pay the plaintiff the sum of P31,099.41, with legal interest and
costs. The counterclaim of the defendant was dismissed.

On appeal, the major issue is as framed in appellant's first assignment of


error. To quote: "The trial court erred in failing to find that the decision of
the Supreme Court of Hongkong and the judgment which are the basis of
plaintiff's complaint in this action were rendered and entered as a result of
a clear mistake of law and of fact." We turn first to the facts mostly
stipulated and concerning which there is little dispute.

Plaintiff Ingenohl was born in Germany but is a naturalized Belgian subject.


In 1882, he, in conjunction with others, founded in Antwerp, Belgium, a
company under the style of "El Oriente Fabrica de Tabacos Societe
Anonyme." Ingenohl was the "Administrator Directuer" of the society. This
company continued until 1905 when it went into voluntary liquidation. On
November 28 of that year, an "Association in participation governed by the
laws of Belgium under the denomination of Syndicat Oriente" was formed.
The head office of the association was to be at Antwerp, Belgium. In 1906,
the "Societe Anonyme" transferred all of its business interests and assets,
together with the goodwill and the trade-marks and trade names, to
Ingenohl.

The "Societe Anonyme," in 1882, opened a branch factory in Manila under


the same name. It continued until 1905-1906 when, as above stated, it was
taken over by Ingenohl, and called "El Oriente Fabrica de Tabacos, C.
Ingenohl." In 1908 and 1909, Ingenohl, as "Gerant" of the "Syndicat
Oriente," opened a cigar factory in Hongkong under the name of "The
Orient Tobacco Manufactory." The output of the factory was composed in
part of tabacco supplied by "El Oriente Fabrica de Tabacos" in the
Philippines, and in part of tobacco wrapper imported from Java. This
business was carried on in Hongkong until the present.

The trade-marks which are in dispute were registered in the Philippine


Islands in the years 1884-1887 as the property of the "Societe Anonyme."
Registration was renewed in the Philippines in 1902. The trade-marks were
likewise registered in the Hongkong Registry of Trade-Marks as the
property of the "Societe Anonyme." In 1906, the assignment of the trade-
marks to "El Oriente Fabrica de Tabacos" was registered in the Philippine
Islands. In 1910, the assignment of the trade-marks was registered in
Hongkong under the style of "El Oriente Fabrica de Tabacos, C. Ingenohl,
Manila." As to this, the Registrar of Trade-Marks at Hongkong testified,
during the hearing in Hongkong, that the description was regarded as the
name under which Ingenohl was trading, and the Ingenohl had registered
other marks in the name "Orient Tobacco Manufactory, C. Ingenohl, Mong
Kok in the Colony of Hongkong." In 1917, Ingenohl renewed registration of
the trade-marks in Hongkong for a period of fourteen years for "El Oriente
Fabrica de Tabacos, C. Ingenohl, Manila."

The trade-marks and trade names were registered in France, Australia,


New Zealand, Shanghai, and Hongkong in the name of "El Oriente Fabrica
de Tabacos, C. Ingenohl, Manila." Six registrations in Belgium were in the
name of "El Oriente Fabrica de Tabacos, Antwerp" and the seventh
registration was in the name of "Imperio del Mundo, C. Ingenohl, Manila."
In England, the registrations were in the name of "Carl Ingenohl, Managing
Director of and on behalf of El Oriente Fabrica de Tabacos, Sociedad
Anonima, Antwerp, Belgium, and Manila, Philippine Islands." The
registration for Java and Sumatra was in the name of "El Oriente Fabrica
de Tabacos, C. Ingenohl." The registration for Germany was in the name of
"El Oriente Fabrica de Tabacos, Sociedad Anonima, Emil Schoett." The
sole American registration was that of "El Cometa del Oriente," "Carl
Ingenohl" giving his address as Antwerp and also as conducting business
under the trade name of "El Oriente Fabrica de Tabacos at 125 San Pedro
Street, Manila, Philippine Islands."

Subsequent to the establishment of the Hongkong factory, its output was


sold throughout the Far East, except in the Philippine Islands, concurrently
with the output of the Manila factory under the trade-marks and trade
names in question. Approximately 95 per cent of the output of the Manila
factory was exported.
Such in general was the situation until the time of the Great War. Then in
1919, the United States Alien Property Custodian accomplished a sale to
Walter E. Olsen and Co., Inc., "for the benefit of the company known as
Syndicat Oriente, a company formed under the laws of Belgium with its
registered office at Antwerp, Belgium." The sale was of "all ... the property
... of every kind and description whatsoever (except only as specifically
reserved and excepted hereinafter), wheresoever situate in the Philippine
Islands, and all incidents and appurtenances thereto, including the
business as a going concern, and the goodwill, trade names and trade-
marks thereof of Syndicat Oriente, a company formed under the laws of
Belgium, with its registered office in Antwerp, Belgium, and heretofore
doing business in the Philippine Islands under the name of "El Oriente
Fabrica de Tabacos, C. Ingenohl." Also of "all accounts receivable or other
credits and all contract rights belonging to said business, except the
account owing by the Orient Tobacco Manufactory of Hongkong." But "The
undersigned Alien Property Custodian expressly excepts and reserves from
this sale all Liberty Bonds of the United States and the above account of
the Orient Tobacco Manufactory of Hongkong owned by said business."

These facts and others put in issue the question of whether the Hongkong
business was a separate concern, or a branch of the Antwerp business, or
a branch of the Manila business. They also put in issue the question of
whether the sale by the Alien Property Custodian was to have
extraterritorial effect. As to the first general issue, the Hongkong Supreme
Court expressed no definite opinion; as to the second general issue, the
Hongkong Supreme Court held that the assignment "cannot affect any
rights to the trade-marks in question in Hongkong."

We come now to the law, international and local, on which like the facts,
there can be little divergence of opinion. The modern English and American
doctrines are adopted for statement.

Effect is given to foreign judgments as a matter of comity and reciprocity.


But aside from international courtesy, a better and more practical reason
giving greater force and dignity to the records of foreign courts is that,
where parties have once litigated fairly a dispute in the courts of a foreign
country which gives effect to like judgments of the domestic courts, the
same question ought not to be tried anew by the local courts. Parties are
bound by the judgment of the foreign tribunal of competent jurisdiction, and
questions of fact or law settled by the foreign tribunal should not be
reexamined, unless it can be shown that the proceedings were tainted with
fraud.

The source of comity as a basis of recognition of foreign judgments is


identity of position and similarity of institutions. In those countries where the
civil law prevails, much less of international comity has been exhibited. In
the United States and Great Britain, the law as to enforcing foreign
judgments is practically the same. The point last made is of some
importance since the judgment sought to be enforced comes from a court
within the British Empire, and is offered for the plaintiff in a suit in courts
under the jurisdiction of the United States.

A foreign judgment upon a matter within the jurisdiction of the court


rendering it, and in which the court had jurisdiction of the parties, will be
regarded as conclusive between the parties in the courts of the United
States, where there has been a trial upon the merits in the foreign court,
under a system of jurisprudence likely to secure an impartial administration
of justice, and there is no showing of prejudice on the part of the court or
fraud in procuring the judgment, and no special reason why the comity of
this nation should not allow it full credit. Such in effect were the decisions of
the United States Supreme Court in the related cases of Hilton vs. Guyot (
[1895], 159 U.S., 113), and Ritchie vs. McMullen ( [1895], 159 U.S., 235).
In the first cited case, it was held that a judgment for a sum of money
rendered by a court of a foreign country, having jurisdiction of the cause
and of the parties, in a suit brought by one of its citizens against one of
ours, is prima facie only, and not conclusive of the merits of the claim, in an
action brought here upon the judgment, if by the law of the foreign country,
as in France, judgments of our own courts are not recognized as
conclusive. In the second case, it was held that a judgment rendered by a
court having jurisdiction of the cause and of the parties, upon regular
proceedings and due notice or appearance, and not procured by fraud, in a
foreign country, by the law of which, as in England and Canada, a
judgment of one of our own courts, under like circumstances, is held
conclusive of the merits, is conclusive, as between the parties, in an action
brought upon it in this country, as to all matters pleaded and which might
have been tried in the foreign country. (See further Warren vs. Warren
[1917], 73 Fla., 764; Dunstan vs. Higgins [1893], 20 L.R.A., 668.)

In England, as stated, the law is like ours, or, more accurately stated, our
law is like theirs, since greatly influenced in all its history by the
jurisprudence of the mother country. The two English cases occupying the
same relative position as Hilton vs. Guyot, supra, and Ritchie vs. McMullen,
supra, are Godard vs. Gray ([1870], 5 Eng. Ruling Cases, 726), and
Schibsby vs. Westenholz ( [1870], 5 Eng. Ruling Cases, 734). English law
treats as binding, and the English courts will enforce, the judgment of a
foreign court having jurisdiction over the cause of action and over the
person to be bound by the judgment. Such a foreign judgment is as
conclusive upon the parties thereto as a domestic judgment.

The grounds of impeachment of a foreign judgment are want of jurisdiction,


fraud, abuse of process, want of finality, and statute of limitations. As to
errors of law and fact as a ground of impeachment, in England at least, the
defendant in a suit on the judgment of a foreign tribunal having jurisdiction
over him and the cause, is not permitted to set up as a defense that the
judgment proceeded on a mistake as to English law or had come to an
erroneous conclusion as to the facts. Thus in Godard vs. Gray, supra, the
plaintiffs, who were Frenchmen, brought suit in France against the
defendants, who were Englishmen, on a charter party made in England
which contained a clause providing as a penalty for its nonperformance, the
estimated amount of the freight. The French court awarded as damages
the estimated amount of the freight. It was not brought to the notice of the
French court that, according to the interpretation of the English law, a penal
clause of this sort was idle and inoperative, and the court made a mistake
as to the construction of the English contract, and, in consequence,
judgment was given for an amount different from that for which it would
have given if the court had been correctly informed of the English
construction. The question raised was whether this was a bar to the action
brought in England to enforce the judgment, and the court was of the
opinion that it was not. The rule announced was that it is no bar to an
action in personam in a foreign court having jurisdiction over the parties
and cause that the foreign tribunal has put a construction erroneous
according to English law on an English contract. (See also 23 Cyc., 1610,
citing Godard vs. Gray, supra; Scott vs. Pilkington, 2 Best and S., 11;
Newton vs. Hunt [1908], 112 N.Y.S., 573.)

Digressing at this point, before proceeding with a further description of the


law, it is incontestable that should the Hongkong judgment be tested by the
prevailing rules relative to the effect of judgments of foreign courts, it would
be found to be conclusive. Putting the thought in another way, should the
Hongkong judgment be weighed in the balance as the United States
Supreme Court would weigh it, following its own precedents, the Hongkong
judgment would undoubtedly be given full effect. For the Hongkong
judgment comes from a court having jurisdiction of the subject matter and
the parties. For there has been a trial upon the merits in the Hongkong
court under a system of jurisprudence likely to secure an impartial
administration of justice. For there is no showing of prejudice on the part of
the Hongkong court or fraud in procuring the judgment. For there is no
special reason why American courts should not allow that judgment full
credit. And if the highest court in England was to consider a like judgment
of some foreign court, as the United States, it would give the judgment
effect even though it was erroneous in a matter of law or fact, and even
though the foreign court proceeded upon a mistaken application of the
English law to an English contract.

It is quite within the realm of possibility, that the majority in the court would
willingly concede the correctness of the altogether too lengthy a statement
of the facts and the law which has here been attempted, in order that it may
serve as a fit background to our opinion. But having conceded that much,
the majority would insist that the case is governed not by general principle
but by specific statutory law. Concurring with the majority for the moment
so as to be just as eminently fair as they are, we come to consider the local
Philippine law and its applicability to the questions which confront the court.

Section 309 of our Code of Civil Procedure relates to the effect of a judicial
record of a court in the United States. Codal section 310 relates to the
effect of a judicial record of a court of admiralty for a foreign country. Codal
section 311 relates to the effect of other foreign judgments. It reads: "The
effect of a judgment of any other tribunal of a foreign country, having
jurisdiction to pronounce the judgment, is as follows:

1. In case of a judgment against a specific thing, the judgment is


conclusive upon the title to the thing." The appellee argues with some
plausibility that the case comes within the purview of the above
quoted paragraph, and that the paragraph applies to a judgment
rendered in connection with a controversy over any "specific thing," to
wit, certain trade-marks. Not stopping to discuss this debatable point,
we go forward to the second paragraph of section 311 relied upon by
the appellant and the majority, reading as follows:
2. In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment may be
repelled by evidence of a want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.

With the premise that the Hongkong judgment was in personam and under
the further premise that paragraph 2 of section 311 of the Code of Civil
Procedure covers the question at issue, let us analyze the contents of said
paragraph. Admittedly, the judgment of the Hongkong court is presumptive
evidence of a right. That judgment is not sought to be repelled by evidence
of a want of jurisdiction. Nor repelled by evidence of want of notice to the
parties. Nor repelled by evidence of collusion. Nor repelled by evidence of
fraud. On the contrary, all this is admitted. It is simply vigorously asserted
that there was a "clear mistake of law or fact" in the foreign judgment sued
on, and that therefore the Philippine courts should refuse to enforce the
foreign judgment.

Section 311 of the Philippine Code of Civil Procedure was derived from
section 1915 of the California Code of Civil Procedure which, in turn, was
derived from the California Act of March 11, 1872. A careful search has
failed to disclose any other similar statutory provision in the United States
or any interpretative decisions arising in the California courts or elsewhere.
The California provision may, however, have been inspired by the
commentaries of Mr. Justice Story and Chancellor Kent. If so, the word
"mistake" was used "in the stricter sense of misapprehension or oversight,"
and is equivalent to what in Burnham vs. Webster ... Mr. Justice Woodbury
spoke of as "some objection to the judgment's reaching the merits, and
tending to prove that they had not been acted on;" "some accident or
mistake," or "that the court did not decide at all on the merits." These
passages taken from the decision of the United States Supreme Court in
Hilton vs. Guyot, supra, are copied with the suggestion that they are "hardly
consistent with the statement of Chief Justice Marshall" in his decision in
the case of Elmendorf vs. Taylor ( [1825], 10 Wheat., 152). The court then
proceeds to emphasize that the mistake must appear on the face of the
record. Under the conditions named, says the court, "the merits of the case
should not, in an action brought in this court upon the judgment, be tried
afresh, as on a new trial or on appeal, upon the mere assertion of the party
that the judgment was erroneous in law or in fact."
Coordinating more closely the facts and the law, both general and specific,
certain pertinent observations are in order. Possibly, the most apparent
thought with reference to the Hongkong judgment is that no appeal was
attempted to be taken by the losing party. Instead, the defendant indirectly
seeks to appeal to the Philippine courts to reopen and retry the case. In
England at least, it has been irrevocably settled that the home tribunal
cannot act as a court of appeal from the foreign tribunal. In Bank of
Australasia vs. Nias ( [1851], 16 Q.B., 717, 734), Lord Campbell, in
delivering judgment, distinctly put the decision upon the ground that the
defendant might have appealed to the Judicial Committee of the Privy
Council, and thus have procured a review of the colonial judgment. In
Traford vs. Blanc ( [1887], 36 Ch. D., 600), it was said: "... The principle on
which Bank of Australasia vs. Nias was decided appears to be that the
courts of this country do not sit to hear appeals from foreign tribunals, and
that if the judgment of a foreign court is erroneous, the regular mode
provided by every system of jurisprudence of procuring it to be examined
and reversed, ought to be followed. Neither do the courts of this country sit
to rehear causes which have been tried abroad. ..." A trial anew to
reexamine the facts and the law as to a foreign judgment when the losing
party has not exhausted all his remedies abroad and when the judgment is
in reality res adjudicata, should be avoided. This rule is of particular
application where all the evidence is not before us, where the witnesses
were not under observation on the stand, where the effort of the court here
is not concentrated on issues of fact or law, but is given up to a critical
analysis of a foreign judgment, and where all that is in view is a judgment
for costs.

The next thought which comes to mind is that if the Hongkong judgment
had been rendered by a Court of First Instance in the Philippine Islands,
the Supreme Court of the Philippine Islands would proceed to decide the
appeal guided by the well-known principle that in order to reverse the
decision it must be plainly and manifestly against the weight of the
evidence. Here, there is ample evidence to support the findings of Mr.
Justice Davies. It would be doubtful if, sitting as a court of appeal, this
judgment would be modified or reversed.

Indeed, we would go farther and would hold that the judgment of the
Hongkong court is correct in fact and law. The judgment is "presumptive
evidence of a right." The case was "decided on the merits." There was no
"misapprehension or oversight" as to the facts or the law. There is no "clear
mistake of law or fact" appearing on the face of the record.

In the first place, the bill of sale executed by the United States Alien
Property Custodian was only of property "wherever situate in the Philippine
Islands" of a company "heretofore doing business in the Philippine Islands."
It expressly excepted and reserved the "account owing by the Orient
Tobacco Manufactory of Hongkong."

The intent of the parties to the conveyance is made clear by the language
of the instrument. The limited operation of the conveyance is clearly
expressed by its language. The phraseology of the deed was used
advisedly, since the Alien Property Custodian had no desire to do what it
would be futile to attempt — to convey property outside the Philippine
Islands and the United States. There is in the instrument an entire absence
of reference to trade-marks in foreign countries. In a case relied upon by
the majority, where a similar provision of a deed was under observation,
the court emphasized that the purchaser took by conveyance "the
exclusive right to carry on the business in the United States," and was
entitled to protection against unfair competition. (Koppel Industrial Car and
Equipment Co. vs. Orenstein & Koppel Aktiengesellschaft [1923], 289 Fed.,
446. See also Bourjois & Co. vs. Katzel [1923], 260 U.S., 689.)

In the next place, it is apparent that the "Syndicat Oriente" was a Belgian
corporation, with its head office at Antwerp. As such Belgian corporation, it
was permitted to transact business in the Philippine Islands as a foreign
corporation. Although the Hongkong court did not find it necessary to so
decide, this Belgian corporation undoubtedly had two branches, one in
Hongkong, and one in the Philippine Islands, but both with connections with
the home office. All that the United States Government attempted to sell
was the Philippine business of the Belgian corporation. It did not care to do
more for Great Britain and Belgium were allies of the United States in the
Great War. Great Britain could have taken over the "Orient Tobacco
Manufactory" of Hongkong if it had so desired, and the Belgian
Government could have taken over the "Syndicat Oriente" in Belgium if it
had so desired. With the seizure by either Great Britain or Belgium, would
have passed the trade-marks of the respective companies.

As to the alleged mistake of law committed by the Hongkong court, it will be


recalled that the Chartreuse case was given application. Now, this may
have been error and again it may not. Lord Macnaghten in that case
reached the conclusion "that the sale by the liquidator of the property
bought by the appellant company has not carried with it the English trade-
marks." And the United States Supreme Court in the case of Baglin vs.
Cusenier Co. ( [1911], 221 U.S., 580), likewise quoting approvingly from
the Chartreuse case, among other things, decided: "...The French law
cannot be conceded to have any extraterritorial effect to detach the trade-
marks in this country from the product of the Monks, which they are still
manufacturing."

But why stop here. Why not go the full length of the majority decision and
admit that there may have been a "mistake of law or fact" in the Hongkong
judgment. Even then, the modifying word "clear" should not be forgotten. It
is only a "clear" mistake which suffices to warrant our courts in interfering
with a foreign judgment. The legislative precaution suggests that this right
of revision should be exercised only for most cogent and conclusive
reasons. A trial judge of long experience and two members of this court, in
effect concurring with the views of the Hongkong magistrate, at least
weaken the argument relative to a "clear" mistake of law or fact.

Let us now suppose that this court had ruled in favor of appellant on its
counterclaim, as indeed one member would have us do. The defendant
would then be forced to have recourse to the Hongkong courts for the
enforcement of any judgment it might recover against the plaintiff. The
Philippine courts having failed in reciprocal regard for a judgment rendered
in Hongkong, the Hongkong court in turn would be justified in reopening
and retrying the case, with the probable result that its former views would
be maintained and the Philippine judgment nullified.

For many years, the fullest reciprocity has prevailed between England and
the United States with respect to allowing full and conclusive effect to the
judgments of each by the other. This reciprocity should be maintained
between integral parts of the British Empire and the United States in such
close proximity as are the ports of Manila and Hongkong. But this
reciprocity will be blotted out entirely if any jurisdiction in either the British
Empire or the United States, with jealous regard for its own dignity, breaks
away from the practice which reason and comity have long sanctioned.

It may well be doubted if the Government of the United States ever


intended that the Philippine Commission, acting under war powers, should
enact legislation at variance with the foreign policies and relations of the
United States. It is questionable, if it is not beyond the power of the local
legislature, to provide peculiar legislation so entirely out of harmony with
international comity. If forced to take the stand, we would debate long
before holding that this provision in Philippine law is valid and
constitutional.

It is a most serious responsibility which this court assumes when it ventures


to set at naught the full effect of reciprocity between two great states of the
world, gravely acknowledged in both, and fulfilled everywhere else in the
two countries with the most scrupulous regard for the rights of the other.

The proportions of this dissent are appalling. Our excuse must be the
gravity of the question at bar and the earnestness of our convictions. This
opinion has been drafted separate and apart in the main from the majority
decision, as the vehicle for the expression of our individual views. We hope
that we have made it clear that under any and every aspect of the case, the
Hongkong judgment should be given force and effect.

Our vote is for the affirmance of the judgment of the lower court.

INGENOHL vs. OLSEN AND COMPANY, INC


G.R. No. L-22288
January 12, 1925
FACTS: In 1919, the acting Alien Property Custodian of
the United States, by virtue of the Trading with the Enemy
Act as amended, required and caused to be conveyed to
him the property and business then belonging to the
company known as Syndicat Oriente, formed under the
laws of Belgium, of which the plaintiff was the “gestor,”
and an enemy as defined in said Act. The primary purpose
of the proceeding was to seize, sell and convey any and all
of the property owned and held by the company within the
jurisdiction of the United States, as a war measure, upon
the ground that they were alien enemies of the United
States.
During the public sale, defendant corporation was the
highest bidder. The said Alien Property Custodian of the
United States having thereafter accepted said bid and
received from the defendant corporation in cash the
amount of said bid, did execute in favor of the defendant
corporation a deed of conveyance. The defendant paid in
good faith, and took over the property and assets of the
company, including its trade-marks and trade names and
its business as a going concern

After obtaining the proceeds from the sale, the plaintiff in


violation of the conveyance, wrongfully instituted an
action in the Supreme Court of Hongkong against the
defendant in which the plaintiff claimed to be the sole
owner of the trade-marks for the exports of the business.
The Supreme Court of Hongkong ruled in favor of the
plaintiff, allegedly through misrepresentation, ordering
defendant to pay the former for costs and AF. The Court
ruled that the deed of conveyance limited the sale of the
business to the trademarks within the Philippines,
implying that the plaintiff is still entitled to the sell the
cigars under the same trademarks through exporting,
which accounts to 95% of the total sales of the company.
(This means that the plaintiff paid the cash equivalent of
the whole of the business but only entitled to 5% of the
such, the sales within the Philippines)- UNFAIR TALAGA!

The CFI rendered judgment for the plaintiff for the full
amount of his claim, with interest, from which the
defendant appeals. Defendant company alleges that when
he purchased the property and business, all trademarks
are included; that the subject of the sale is not only those
trademarks for sales within the Philippines.

ISSUE: Should the judgment rendered by the Hongkong


court be enforced by Philippine courts?
HELD: NO; we do not hesitate to say that the judgment
rendered in the Hongkong court was a clear mistake of
both law and fact, and that it ought not to be enforced in
the Philippine Islands.
The business of the plaintiff is almost exclusively an export
business, and that the transfer of the goodwill thereof
necessarily carried with it the transfer of said export
business and of the trade-marks and trade names which
could not be disconnected therefrom
—- It is conceded that the Hongkong court had jurisdiction
and that the defendant appeared in the action and
contested the case on its merits. Hence, there was no
collusion. Neither is it claimed that there was any fraud,
but it is vigorously contended that the Hongkong
judgment was a clear mistake of both law and fact.
Exclusive of the provisions of section 311 of the Code of
Civil Procedure, it is very doubtful whether it could be
sustained upon the ground of comity or the Law of
Nations. As between allied nations and under the law of
comity, their mutual policy should be to sustain and
enforce the spirit and intention with which the seizure and
sale of any property of an alien enemy was made rather
than to minimize, destroy or defeat them.

We are construing a deed of conveyance from the United


States to the defendant. The primary purpose of the whole
proceeding was to seize and convey all of the property of
the plaintiff or his company within the jurisdiction of the
United States, including trade names and trade-marks as
those of an alien enemy. To now give the defendant the use
and benefit of only 5 per cent of such trade names and
trade-marks, and to permit the plaintiff to have and retain
the other 95 per cent to his own use and benefit after he
has ratified and confirmed the sale, would impugn the
honor and good name of the United States in the whole
proceeding and defeat the very purpose for which it seized
and sold the property of an alien enemy, to wipe Ingenohl
and his company out of existence and put them out of
business in so far as the United States had the power to do
so

Be that as it may, this court is bound be section 311 of the


Code of Civil Procedure. That law was enacted by the
Legislature of the Philippine Islands, and as to the
Philippine Islands, it is the law of the land. In the absence
of that statute, no matter how wrongful the judgment of
the Hongkong court may be, there would be strong reasons
for holding that it should be enforced by this court.

Pilapil vs Ibay-Somera
TITLE: Imelda Manalaysay Pilapil v Hon. Corona Ibay-Somera
CITATION: GR No. 80116, June 30, 1989| 174 SCRA 653
FACTS:

Imelda M. Pilapil, a Filipino citizen, was married with private respondent,


Erich Ekkehard Geiling, a German national before the Registrar of Births,
Marriages and Deaths at Friedensweiler, Federal Republic of Germany.
They have a child who was born on April 20, 1980 and named Isabella
Pilapil Geiling. Conjugal disharmony eventuated in private respondent
and he initiated a divorce proceeding against petitioner in Germany before
the Schoneberg Local Court in January 1983. The petitioner then filed an
action for legal separation, support and separation of property before the
RTC Manila on January 23, 1983.
The decree of divorce was promulgated on January 15, 1986 on the ground
of failure of marriage of the spouses. The custody of the child was granted
to the petitioner.
On June 27, 1986, private respondent filed 2 complaints for adultery before
the City Fiscal of Manila alleging that while still married to Imelda, latter
“had an affair with William Chia as early as 1982 and another man named
Jesus Chua sometime in 1983”.

ISSUE: Whether private respondent can prosecute petitioner on the ground


of adultery even though they are no longer husband and wife as decree of
divorce was already issued.

HELD:
The law specifically provided that in prosecution for adultery and
concubinage, the person who can legally file the complaint should be the
offended spouse and nobody else. Though in this case, it appeared that
private respondent is the offended spouse, the latter obtained a valid
divorce in his country, the Federal Republic of Germany, and said divorce
and its legal effects may be recognized in the Philippines in so far as he is
concerned. Thus, under the same consideration and rationale, private
respondent is no longer the husband of petitioner and has no legal standing
to commence the adultery case under the imposture that he was the
offended spouse at the time he filed suit.

G.R. No. 142840 May 7, 2001

ANTONIO BENGSON III, petitioner,


vs.
HOUSE OF REPRESENTATIVES ELECTORAL TRIBUNAL and
TEODORO C. CRUZ, respondents.

CONCURRING OPINION

DISSENTING OPINION

KAPUNAN, J.:

The citizenship of respondent Teodoro C. Cruz is at issue in this case, in


view of the constitutional requirement that "no person shall be a Member of
the House of Representative unless he is a natural-born citizen."1

Respondent Cruz was a natural-born citizen of the Philippines. He was


born in San Clemente, Tarlac, on April 27, 1960, of Filipino parents. The
fundamental law then applicable was the 1935 Constitution.2

On November 5, 1985, however, respondent Cruz enlisted in the United


States Marine Corps and without the consent of the Republic of the
Philippines, took an oath of allegiance to the United States. As a
Consequence, he lost his Filipino citizenship for under Commonwealth Act
No. 63, section 1(4), a Filipino citizen may lose his citizenship by, among
other, "rendering service to or accepting commission in the armed forces of
a foreign country." Said provision of law reads:

SECTION 1. How citizenship may be lost. – A Filipino citizen may


lose his citizenship in any of the following ways and/or events:
xxx

(4) By rendering services to, or accepting commission in, the armed


of a foreign country: Provided, That the rendering of service to, or the
acceptance of such commission in, the armed forces of a foreign
country, and the taking of an oath of allegiance incident thereto, with
the consent of the Republic of the Philippines, shall not divest a
Filipino of his Philippine citizenship if either of the following
circumstances is present:

(a) The Republic of the Philippines has a defensive and/or offensive


pact of alliance with said foreign country; or

(b) The said foreign country maintains armed forces on Philippine


territory with the consent of the Republic of the
Philippines: Provided, That the Filipino citizen concerned, at the time
of rendering said service, or acceptance of said commission, and
taking the oath of allegiance incident thereto, states that he does so
only in connection with his service to said foreign country; And
provided, finally, That any Filipino citizen who is rendering service to,
or is commissioned in, the armed forces of a foreign country under
any of the circumstances mentioned in paragraph (a) or (b), shall not
be Republic of the Philippines during the period of his service to, or
commission in, the armed forces of said country. Upon his discharge
from the service of the said foreign country, he shall be automatically
entitled to the full enjoyment of his civil and politically entitled to the
full enjoyment of his civil political rights as a Filipino citizen x x x.

Whatever doubt that remained regarding his loss of Philippine citizenship


was erased by his naturalization as a U.S. citizen on June 5, 1990, in
connection with his service in the U.S. Marine Corps.

On March 17, 1994, respondent Cruz reacquired his Philippine citizenship


through repatriation under Republic Act No. 2630.3 He ran for and was
elected as the Representative of the Second District of Pangasinan in the
May 11, 1998 elections. He won by a convincing margin of 26,671 votes
over petitioner Antonio Bengson III, who was then running for reelection. 1âwphi 1.nêt

Subsequently, petitioner filed a case for Quo Warranto Ad Cautelam with


respondent House of Representatives Electoral Tribunal (HRET) claiming
that respondent Cruz was not qualified to become a member of the House
of Representatives since he is not a natural-born citizen as required under
Article VI, section 6 of the Constitution.4

On March 2, 2000, the HRET rendered its decision5 dismissing the petition
for quo warranto and declaring Cruz the duly elected Representative of the
Second District of Pangasinan in the May 1998 elections. The HRET
likewise denied petitioner's motion for reconsideration of the decision in its
resolution dated April 27, 2000.6

Petitioner thus filed the present petition for certiorari assailing the HRET's
decision on the following grounds:

1. The HRET committed serious errors and grave abuse of discretion,


amounting to excess of jurisdiction, when it ruled that private
respondent is a natural-born citizen of the Philippines despite the fact
that he had ceased being such in view of the loss and renunciation of
such citizenship on his part.

2. The HRET committed serious errors and grave abuse of discretion,


amounting to excess of jurisdiction, when it considered private
respondent as a citizen of the Philippines despite the fact he did not
validly acquire his Philippine citizenship.

3. Assuming that private respondent's acquisition of Philippine


citizenship was invalid, the HRET committed serious errors and grave
abuse of discretion, amounting to excess of jurisdiction, when it
dismissed the petition despite the fact that such reacquisition could
not legally and constitutionally restore his natural-born status.7

The issue now before us is whether respondent Cruz, a natural-born


Filipino who became an American citizen, can still be considered a natural-
born Filipino upon his reacquisition of Philippine citizenship.

Petitioner asserts that respondent Cruz may no longer be considered a


natural-born Filipino since he lost h is Philippine citizenship when he swore
allegiance to the United States in 1995, and had to reacquire the same by
repatriation. He insists that Article citizens are those who are from birth with
out having to perform any act to acquire or perfect such citizenship.

Respondent on the other hand contends that he reacquired his status as


natural-born citizen when he was repatriated since the phrase "from birth"
in Article IV, Section 2 refers to the innate, inherent and inborn
characteristic of being a natural-born citizen.

The petition is without merit.

The 1987 Constitution enumerates who are Filipino citizens as follow:

(1) Those who are citizens of the Philippines at the time of the
adoption of this Constitution;

(2) Those whose fathers or mothers are citizens of the Philippines;

(3) Those born before January 17, 1973 of Filipino mother, who elect
Philippine citizenship upon reaching the age of majority, and

(4) Those who are naturalized in accordance with law.8

There are two ways of acquiring citizenship: (1) by birth, and (2) by
naturalization. These ways of acquiring citizenship correspond to the two
kinds of citizens: the natural-born citizen, and the naturalized citizen. A
person who at the time of his birth is a citizen of a particular country, is a
natural-born citizen thereof.9

As defined in the same Constitution, natural-born citizens "are those


citizens of the Philippines from birth without having to perform any act to
acquire or perfect his Philippine citezenship."10

On the other hand, naturalized citizens are those who have become Filipino
citizens through naturalization, generally under Commonwealth Act No.
473, otherwise known as the Revised Naturalization Law, which repealed
the former Naturalization Law (Act No. 2927), and by Republic Act No.
530.11 To be naturalized, an applicant has to prove that he possesses all
the qualifications12 and none of the disqualification13 provided by law to
become a Filipino citizen. The decision granting Philippine citizenship
becomes executory only after two (2) years from its promulgation when the
court is satisfied that during the intervening period, the applicant has (1) not
left the Philippines; (2) has dedicated himself to a lawful calling or
profession; (3) has not been convicted of any offense or violation of
Government promulgated rules; or (4) committed any act prejudicial to the
interest of the nation or contrary to any Government announced policies.14
Filipino citizens who have lost their citizenship may however reacquire the
same in the manner provided by law. Commonwealth Act. No. (C.A. No.
63), enumerates the three modes by which Philippine citizenship may be
reacquired by a former citizen: (1) by naturalization, (2) by repatriation, and
(3) by direct act of Congress.15

Naturalization is mode for both acquisition and reacquisition of Philippine


citizenship. As a mode of initially acquiring Philippine citizenship,
naturalization is governed by Commonwealth Act No. 473, as amended. On
the other hand, naturalization as a mode for reacquiring Philippine
citizenship is governed by Commonwealth Act No. 63.16 Under this law, a
former Filipino citizen who wishes to reacquire Philippine citizenship must
possess certain qualifications17and none of the disqualification mentioned
in Section 4 of C.A. 473.18

Repatriation, on the other hand, may be had under various statutes by


those who lost their citizenship due to: (1) desertion of the armed
forces;19 services in the armed forces of the allied forces in World War
II;20 (3) service in the Armed Forces of the United States at any other
time,21 (4) marriage of a Filipino woman to an alien;22 and (5) political
economic necessity.23

As distinguished from the lengthy process of naturalization, repatriation


simply consists of the taking of an oath of allegiance to the Republic of the
Philippine and registering said oath in the Local Civil Registry of the place
where the person concerned resides or last resided.

In Angat v. Republic,24 we held:

xxx. Parenthetically, under these statutes [referring to RA Nos. 965


and 2630], the person desiring to reacquire Philippine citizenship
would not even be required to file a petition in court, and all that he
had to do was to take an oath of allegiance to the Republic of the
Philippines and to register that fact with the civil registry in the place
of his residence or where he had last resided in the Philippines.
[Italics in the original.25

Moreover, repatriation results in the recovery of the original


nationality.26 This means that a naturalized Filipino who lost his citizenship
will be restored to his prior status as a naturalized Filipino citizen. On the
other hand, if he was originally a natural-born citizen before he lost his
Philippine citizenship, he will be restored to his former status as a natural-
born Filipino.

In respondent Cruz's case, he lost his Filipino citizenship when he rendered


service in the Armed Forces of the United States. However, he
subsequently reacquired Philippine citizenship under R.A. No. 2630, which
provides:

Section 1. Any person who had lost his Philippine citizenship by


rendering service to, or accepting commission in, the Armed Forces
of the United States, or after separation from the Armed Forces of the
United States, acquired United States citizenship, may reacquire
Philippine citizenship by taking an oath of allegiance to the Republic
of the Philippines and registering the same with Local Civil Registry in
the place where he resides or last resided in the Philippines. The said
oath of allegiance shall contain a renunciation of any other
citizenship.

Having thus taken the required oath of allegiance to the Republic and
having registered the same in the Civil Registry of Magantarem,
Pangasinan in accordance with the aforecited provision, respondent Cruz is
deemed to have recovered his original status as a natural-born citizen, a
status which he acquired at birth as the son of a Filipino father.27 It bears
stressing that the act of repatriation allows him to recover, or return to,
his original status before he lost his Philippine citizenship.

Petitioner's contention that respondent Cruz is no longer a natural-born


citizen since he had to perform an act to regain his citizenship is untenable.
As correctly explained by the HRET in its decision, the term "natural-born
citizen" was first defined in Article III, Section 4 of the 1973 Constitution as
follows:

Sec. 4. A natural-born citizen is one who is a citizen of the Philippines


from birth without having to perform any act to acquire or perfect his
Philippine citizenship.

Two requisites must concur for a person to be considered as such: (1) a


person must be a Filipino citizen birth and (2) he does not have to perform
any act to obtain or perfect his Philippine citizenship.
Under the 1973 Constitution definition, there were two categories of Filipino
citizens which were not considered natural-born: (1) those who were
naturalized and (2) those born before January 17, 1973,38 of Filipino
mothers who, upon reaching the age of majority, elected Philippine
citizenship. Those "naturalized citizens" were not considered natural-born
obviously because they were not Filipino at birth and had to perform an act
to acquire Philippine citizenship. Those born of Filipino mothers before the
effectively of the 1973 Constitution were likewise not considered natural-
born because they also had to perform an act to perfect their Philippines
citizenship.

The present Constitution, however, now consider those born of Filipino


mothers before the effectivity of the 1973 Constitution and who elected
Philippine citizenship upon reaching the majority age as natural-born. After
defining who re natural-born citizens, Section 2 of Article IV adds a
sentence: "Those who elect Philippine citizenship in accordance with
paragraph (3), Section 1 hereof shall be deemed natural-born citizens."
Consequently, only naturalized Filipinos are considered not natural-born
citizens. It is apparent from the enumeration of who are citizens under the
present Constitution that there are only two classes of citizens: (1) those
who are natural-born and (2) those who are naturalized in accordance with
law. A citizen who is not a naturalized Filipino, i.e., did not have to undergo
the process of naturalization to obtain Philippine citizenship, necessarily is
natural-born Filipino. Noteworthy is the absence in said enumeration of a
separate category for persons who, after losing Philippine citizenship,
subsequently reacquire it. The reason therefor is clear: as to such persons,
they would either be natural-born or naturalized depending on the reasons
for the loss of their citizenship and the mode prescribed by the applicable
law for the reacquisition thereof. As respondent Cruz was not required by
law to go through naturalization proceeding in order to reacquire his
citizenship, he is perforce a natural-born Filipino. As such, he possessed all
the necessary qualifications to be elected as member of the House of
Representatives.

A final point. The HRET has been empowered by the Constitution to be the
"sole judge" of all contests relating to the election, returns, and
qualifications of the members of the House.29 The Court's jurisdiction over
the HRET is merely to check "whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction" on the part of the
latter.30 In the absence thereof, there is no occasion for the Court to
exercise its corrective power and annul the decision of the HRET nor to
substitute the Court's judgement for that of the latter for the simple reason
that it is not the office of a petition for certiorari to inquire into the
correctness of the assailed decision.31 There is no such showing of grave
abuse of discretion in this case.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, and JJ., concur.

Melo, Vitug, Mendoza, no part.

Panganiban, concurring opinion.

Quisumbing, Buena, De Leon, Jr., on leave.

Sandoval-Gutierrez, dissenting opinion.

Pardo, Gonzaga-Reyes, concur on this and the concurring opinion of J.


Panganiban

Ynares-Santiago, certify majority opinion of J. Kapunan.

Footnote
1 1987 Constitution, Article IV, Section 6.
2 Article IV, Section 1 of the 1935 Constitution states:

The following are citizens of the Philippines:

1) Those who are citizens of the Philippine Islands at the time


of the adoption of the Constitution;

2) Those born in the Philippine Islands of foreign parents who,


before the adoption of this Constitution had been elected to
public office in the Philippine Islands;
3) Those whose fathers are citizens of the Philippines;

4) Those whose mothers are citizens of the Philippines and,


upon reaching the age of majority, elected Philippine
citizenship; and

5) Those who are naturalized in accordance with law.


3An Act Providing for Reacquisition of Philippine Citizenship by
Persons Who Lost Such Citizenship by Rendering Service To, or
Accepting Commission In, the Armed Forces of the United States
(1960).
4 Said provision reads:

No person shall be a member of the House of Representatives


unless he is a natural-born citizen of the Philippines and, on the
day of the election, is at least twenty-five years of age, able to
read and write, and except the party-list representatives, a
registered voter in the district in which he shall be elected, and
a resident thereof for a period of not less than one year
immediately preceding the day of the election.
5 Rollo, p. 36.
6 Id., at 69.
7 Id., at 13.
8 Article IV, Section 1.
9TOLENTINO, COMMETARIES AND JURISPRUDENCE ON THE
CIVIL CODE OF THE PHILIPPINES 188, 1990 Ed.
10 1987 Constitution, Article IV, Section 2.
11During the period under Martial Law declared by President
Ferdinand E. Marcos, thousands of aliens were naturalized by
Presidential Decree where the screening of the applicants was
undertaken by special committee under Letter of Instructions No. 270,
dated April 11,1975, as amended.
12 Section 2, Act 473 provides the following qualifications:

(a) He must be not less than 21 years of age on the day of the
hearing of the petition;

(b) He must have resided in the Philippines for a continuous


period of not less than ten years;

(c) He must be of good moral character and believes in the


principles underlying the Philippine Constitution, and must have
conducted himself in a proper and irreproachable manner
during the entire period of his residence in the Philippines in his
relation with the constituted government and well as with the
community in which he is living;

(d) He must own real estate in the Philippines worth not less
than five thousand pesos, Philippine currency, or must have
some known lucrative trade, profession, or lawful occupation;

(e) He must be able to speak and write English or Spanish and


any of the principal languages; and

(f) He must have enrolled his minor children of school age, in


any of the public schools or private schools recognized by the
Bureau of Private Schools of the Philippines where Philippine
history, government and civic are taught or prescribed as part
of the school curriculum, during the entire period of the
residence in the Philippines required of him prior to the learning
of his petition for naturalization as Philippine citizen.
13 Section 4, Act 473, provides the following disqualifications:

(a) He must not be opposed to organized government or


affiliated with any association or group of persons who uphold
and teach doctrines opposing all organized governments;

(b) He must not be defending or teaching the necessity or


propriety of violence, personal assault, or assassination for the
success and predominance of their ideas;
(c) He must not be polygamist or believer in the practice of
polygamy;

(d) He must not have been convicted of any crime involving


moral turpitude;

(e) He must not be suffering from mental alienation or incurable


contagious diseases;

(f) He must have, during the period of his residence in the


Philippines (of not less than six months before filing his
application), mingled socially with the Filipinos, or who have not
evinced a sincere desire to learn and embrace the customs,
traditions and ideal s of the Filipinos;

(g) He must not be a citizen or subject of a nation with whom


the Philippines is at war, during the period of such war;

(h) He must not be citizen or subject of foreign country whose


laws do not grant Filipinos the right to become naturalized
citizens or subjects thereof.
14 Section 1, R.A. 530.
15 Section 2, C.A. No. 63.

An Act Providing for the Ways in Which Philippine Citizenship May


16

Be Lost or Reacquired (1936).


17 1. The applicant must have lost his original Philippine citizenship by
naturalization in a foreign country or by express renunciation of his
citizenship (Sec. 1 [1] and [2], C.A. No. 63);

2. He must be at least twenty-one years of age and shall have


resided in the Philippines at least six months before he applies for
naturalization (Sec. 3[1], C.A. No. 63);

3. He must have conducted himself in a proper and irreproachable


manner during the entire period of his residence (of at least six
months prior to the filing of the application) in the Philippines, in his
relations with the constituted government as well as with the
community in which he is living (Sec. 3[2], C.A. No. 63);

4. He subscribes to an oath declaring his intention to renounce


absolutely and perpetually al faith and allegiance to the foreign
authority, state or sovereignty of which he was a citizen or subject
(Sec. 3[3], C.A. No. 63).
18 See note 13.
19 Sec 4, C.a. No. 63.
20 Sec. 1, Republic Act No. 965 (1953).
21 Sec. 1, Republic Act No. 2630 (1960).
22 Sec. 1, Republic Act No. 8171 (1995).
23 Ibid.
24 314 SCRA 438 (1999)
25 Id., at 450.
26 Jovito R. Salonga, Private International Law, p. 165 (1995)
27 See Art. IV, Sec. 1, 1935 Constitution.
28 The date of effectivity of the 1973 Constitution.
29 Article IV, Section 17 of the 1987 Constitution provides thus:

Sec. 17. The Senate and the House of Representative shall


each have an Electoral Tribunal which shall be the sole judge of
all contests relating to the election, returns, and qualifications of
their respective Members. Each Electoral Tribunal shall be
composed of nine Members three of whom shall be Justices of
the Supreme Court to be designated by the Chief Justice, and
the remaining six shall be Members of the Senate of the House
of Representatives, as the case may be, who shall be chosen
on the basis of proportional representation from the political
parties and the parties or organizations registered under the
party-list system represented therein. The senior Justice in the
Electoral Tribunal shall be its Chairman.
30Garcia vs. House of Representatives Electoral Tribunal, 312 SCRA
353, 364 (1999).

EN BANC

G.R. No. 142840 May 7, 2001

ANTONIO BENGSON III, petitioner,


vs.
HOUSE OF REPRESENTATIVES ELECTORAL TRIBUNAL and
TEODORO C. CRUZ, respondents.

CONCURRING OPINION

PANGANIBAN, J.:

I concur in the ponencia of Mr. Justice Santiago M. Kapunan, holding that


the House Electoral Tribunal did not gravely abuse its discretion in ruling
that Private Respondent Teodoro C. Cruz remains a natural-born Filipino
citizen and is eligible to continue being a member of Congress. Let me just
add a few points.

The Facts in Brief

It is undisputed that Congressman Cruz was born on April 27, 1960 in San
Clemente, Tarlac, to Filipino parents. He was, therefore, a Filipino citizen,
pursuant to Section 1 (2),1 Article IV of the Constitution. Furthermore, not
having done any act to acquire or perfect the Philippine citizenship he
obtained from birth, he was a natural-born Filipino citizen, in
accordance with Section 22 of the same Article IV.

It is not disputed either that private respondent rendered military service to


the United States Marine Corps from November 1958 to October 1993. On
June 5, 1990, he was naturalized as an American citizen, in connection
with his US military service. Consequently, under Section 1 (4)3 of CA No.
63, he lost his Philippine citizenship.

Upon his discharge from the US Marine Corps, private respondent returned
to the Philippines and decided to regain his Filipino citizenship. Thus, on
March 17, 1994, availing himself of the benefits of Republic Act (RA) No.
2630, entitled "An Act Providing for Reacquisition of Philippine Citizenship
by Persons Who Lost Such by Rendering Service to, or Accepting
Commission in, the Armed Force of the United States,"4 Cruz took his oath
of allegiance to the Republic and registered the same with the Local Civil
Registry of Mangatarem, Pangasinan. On the same day, he also executed
an Affidavit of Reacquisition of Philippine Citizenship.

Main Issue

The main question here is: Did the House of Representatives Electoral
Tribunal (HRET) commit grave abuse of discretion in holding that, by
reason of his repatriation, Congressman Teodoro C. Cruz had reverted to
his original status as a natural-born citizen? I respectfully submit that the
answer is "No." In fact, I believe that the HRET was correct in its ruling.

1. Repatriation Is Recovery of Original Citizenship

First, repatriation is simply the recovery of original citizenship. Under


Section 1 of RA 2630, a person "who ha[s] lost his citizenship" may
"reacquire" it by " taking an oath of allegiance to the Republic of the
Philippines." Former Senate President Jovito R. Salonga, a noted authority
on the subject, explains this method more precisely in his treatise, Private
International Law.5 He defines repatriation as "the recovery of
the original nationality upon fulfillment of certain condition."6 Webster
buttresses this definition by describing the ordinary or common usage
of repatriate, as "to restore or return to one's country of origin, allegiance,
or citizenship; x x x."7 In relation to our subject matter, repatriation, then,
means restoration of citizenship. It is not a grant of a new citizenship, but a
recovery of one's former or original citizenship.

To "reacquire" simply means "to get back as one's own again."8 Ergo, since
Cruz, prior to his becoming a US citizen, was a natural-born Filipino citizen,
he "reacquired" the same status upon repatriation. To rule otherwise – that
Cruz became a non-natural-born citizen – would not be consistent whit the
legal and ordinary meaning of repatriation. It would be akin to
naturalization, which is the acquisition of a new citizenship. "New."
Because it is not the same as the with which he has previously been
endowed.

In any case, "the leaning, in questions of citizenship, should always be in


favor of [its] claimant x x x."9 Accordingly, the same should be construed in
favor of private respondent, who claims to be a natural-born citizen.

2. Not Being Naturalized, Respondent Is Natural Born

Second, under the present Constitution, private respondent should be


deemed natural-born, because was not naturalized. Let me explain.

There are generally two classes of citizens: (1) natural-born citizens and (2)
naturalized citizens.10 While CA 63 provides that citizenship may also be
acquired by direct act of the Legislature, I believe that those who do
become citizens through such procedure would properly fall under the
second category (naturalized).11

Naturalized citizens are former aliens or foreigners who had to undergo a


rigid procedure, in which they had to adduce sufficient evidence to prove
that they possessed all the qualifications and none of the disqualifications
provided by law in order to become Filipino citizens. In contrast, as stated
in the early case Roa v. Collector of Customs,12 a natural-born citizen is a
citizen "who has become such at the moment of his birth."

The assailed HRET Decision, penned by Mr. Justice Vicente V. Mendoza,


explains clearly who are considered natural-born Filipino citizens. He traces
the concept as first defined in Article III of the 1973 Constitution, which
simply provided as follows:

"Sec 4. A natural-born citizen is one who is a citizen of the Philippines


from birth without having to perform any act to acquire or perfect his
Philippine citizenship."

Under the above definition, there are two requisites in order that a Filipino
citizen may be considered "natural-born": (1) one must be a citizen of the
Philippines from birth, and (2) one does not have to do anything to acquire
or perfect one's Philippine citizenship.13 Thus, under the 1973 Constitution,
excluded from the class of "natural-born citizens" were (1) those who were
naturalized and (2) those born before January 17, 1973, of Filipino mothers
who, upon reaching the age of majority, elected Philippine citizenship.14

The present Constitution, however, has expanded the scope of natural-


born citizens to include "[t]hose who elect Philippine citizenship in
accordance with paragraph (3), Section 1 hereof," meaning those covered
under class (2) above. Consequently, only naturalized Filipino citizens are
not considered natural-born citizens. Premising therefrom, respondent –
being clearly and concededly not naturalized – is, therefore, a natural-born
citizen of the Philippines.15

With respect to repatriates, since the Constitution does not classify them
separately, they naturally reacquire their original classification before the
loss of their Philippine citizenship. In the case of Congressman Teodoro C.
Cruz, upon his repatriation in1994, he reacquired his lost citizenship. In
other words, he regained his original status as a natural-born Filipino
citizen, nothing less.

3. No Grave Abuse of Discretion on the Part of HRET

Third, the HRET did not abuse, much less gravely abuse, its discretion in
holding that Respondent Cruz is a natural-born Filipino citizen who is
qualified to be a member of Congress. I stress that the Court, in this
certiorari proceeding before us, is limited to determining whether the HRET
committed grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing its assailed Decision. The Court has no power to
reverse or modify HRET's rulings, simply because it differs in its perception
of controversies. It cannot substitute its discretion for that of HRET, an
independent, constitutional body with its own specific mandate.

The Constitution explicitly states that the respective Electoral Tribunals of


the chambers of Congress "shall be the sole judges of all contests relating
to the election, returns, and qualifications their respective members."16 In
several cases,17 this Court has held that the power and the jurisdiction of
the Electoral Tribunals are original and exclusive, as if they remained in the
legislature, a coequal branch of government. Their judgment are beyond
judicial interference, unless rendered without or in excess of their
jurisdiction or with grave abuse of discretion.18 In the elegant words of Mr.
Justice Hugo E. Gutierrez Jr.:19
"The Court does not venture into the perilous area of trying to correct
perceived errors of independent branches of the Government. It
comes in only when it has to vindicate a denial of due process or
correct an abuse of discretion so grave or glaring that no less than
the Constitution calls for remedial action."

True, there is no settled judicial doctrine on the exact effect of repatriation.


But, as earlier explained, the legal and common definition of repatriation is
the reacquisition of the former citizenship. How then can the HRET be
rebuked with grave abuse of discretion? At best, I can concede that the
legal definition is not judicially settled or is even doubtful. But
an interpretation made in good faith and grounded o reason one way or the
other cannot be the source of grave abuse amounting to lack or excess of
jurisdiction. The HRET did not violate the Constitution or the law or any
settled judicial doctrine. It was definitely acting within its exclusive domain.

Be it remembered that our Constitution vests upon the HRET the power to
be the sole judge of the qualifications of members of the House of
Representatives, one of which is citizenship. Absent any clear showing of a
manifest violation of the Constitution or the law or nay judicial decision, this
Court cannot impute grave abuse of discretion to the HRET in the latter's
actions on matters over which full discretionary authority is lodged upon it
by our fundamental law.20 Even assuming that we disagree with the
conclusion of public respondent, we cannot ipso facto attribute to it "grave
abuse of discretion." Verily, there is a line between perceived error and
grave abuse.21

By grave abuse of discretion is meant such capricious and whimsical


exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of
discretion is not enough. "It must be grave abuse of discretion as when the
power is exercised in an arbitrary or despotic manner by reason of passion
or personal hostility, and must be so patent and so gross as to amount to
an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law."22

That the HRET, after careful deliberation and purposeful study, voted 7 to 2
to issue its Decision upholding the qualifications of Congressman Cruz
could not in any wise be condemned as gravely abusive. Neither can I find
any "patent or gross" arbitrariness or despotism "by reason of passion or
hostility" in such exercise.
4. In Case of Doubt, Popular Will Prevails

Fourth, the court has a solemn duty to uphold the clear and unmistakable
mandate of the people. It cannot supplant the sovereign will of the Second
District of Pangasinan with fractured legalism. The people of the District
have clearly spoken. They overwhelmingly and unequivocally voted for
private respondent to represent them in the House of Representatives. The
votes that Cruz garnered (80, 119) in the last elections were much more
than those of all his opponents combined (66, 182).23 In such instances, all
possible doubts should be resolved in favor of the winning candidate's
eligibility; to rule otherwise would be to defeat the will of the people.24

Well-entrenched in our jurisprudence is the doctrine that in case of doubt,


political laws must be so constructed as to give life and spirit to the popular
mandate freely expressed through the ballot.25 Public interest and the
sovereign will should, at all times, be the paramount considerations in
election controversies.26 For it would be better to err in favor of the people's
choice than to be right in complex but little understood legalisms.27

"Indeed, this Court has repeatedly stressed the importance of giving effect
to the sovereign will in order to ensure the survival of our democracy. In
any action involving the possibility of a reversal of the popular electoral
choice, this Court must exert utmost effort to resolve the issues in a
manner that would give effect to the will of the majority, for it is merely
sound public policy to cause elective offices to be filled by those who are
the choice of the majority. To successfully challenge a winning candidate's
qualifications, the petitioner must clearly demonstrative that the ineligibility
is so patently antagonistic to constitutional and legal principles that
overriding such ineligibility and thereby giving effect to the apparent will of
the people would ultimately create greater prejudice to the very democratic
institutions and juristic traditions that our Constitution and laws so zealously
protect and promote."28

5. Current Trend Towards Globalization

Fifth, the current trend, economically as well as politically, is towards


globalization.29 Protectionist barriers dismantled. Whereas, in the past,
governments frowned upon the opening of their doors to aliens who wanted
to enjoy the same privileges as their citizens, the current era is adopting a
more liberal perspective. No longer are applicants for citizenship eyed with
the suspicion that they merely want to exploit local resources for
themselves. They are now being considered potential sources of
developmental skills, know-how and capital. 1âwphi1.nêt

More so should our government open its doors to former Filipinos, like
Congressman Cruz, who want to rejoin the Filipino community as citizens
again. They are not "aliens" in the true sense of the law. They are actually
Filipino by blood, by origin and by culture, who want to reacquire their
former citizenship.

It cannot be denied that most Filipinos go abroad and apply for


naturalization in foreign countries, because of the great economic or social
opportunities there. Hence, we should welcome former Filipino citizens
desirous of not simply returning to the country or regaining Philippine
citizenship, but of serving the Filipino people as well. One of these
admirable Filipino is private respondent who, in only a year after being
absent from the Philippines for about eight (8) years, was already voted
municipal mayor of Mangatarem, Pangasinan. And after serving as such for
just one term, he was overwhelmingly chosen by the people to be their
representative in Congress.

I reiterate, the people have spoken. Let not a restrictive and parochial
interpretation of the law bar the sovereign will. Let not grave abuse be
imputed on the legitimate exercise of HRET's prerogatives.

WHEREFORE, I vote to DISMISS the petition.

Facts: The citizenship of Teodoro Cruz, a member of the HOR, is being


questioned on the ground that he is not a natural-born citizen of the Philippines.

Cruz was born in the Philippines in 1960, the time when the acquisition of
citizenship rule was still jus soli. However, he enlisted to the US Marine Corps
and he was naturalized as US citizen in connection therewith. He reacquired
Philippine citizenship through repatriation under RA 2630 and ran for and was
elected as a representative. When his nationality was questioned by petitioner,
the HRET decided that Cruz was a natural born citizen of the Philippines.

Issue: WON Cruz is a natural born citizen of the Philippines.

Held: YES. Natural-born citizens "are those citizens of the Philippines from birth
without having to perform any act to acquire or perfect his Philippine citezenship."
On the other hand, naturalized citizens are those who have become Filipino
citizens through naturalization, generally under Commonwealth Act No. 473,
otherwise known as the Revised Naturalization Law, which repealed the former
Naturalization Law (Act No. 2927), and by Republic Act No. 530.11 To be
naturalized, an applicant has to prove that he possesses all the qualifications12
and none of the disqualification.

Filipino citizens who have lost their citizenship may however reacquire the same
in the manner provided by law. Commonwealth Act. No. (C.A. No. 63),
enumerates the three modes by which Philippine citizenship may be reacquired
by a former citizen: (1) by naturalization, (2) by repatriation, and (3) by direct act
of Congress.

Naturalization is mode for both acquisition and reacquisition of Philippine


citizenship. As a mode of initially acquiring Philippine citizenship, naturalization is
governed by Commonwealth Act No. 473, as amended. On the other hand,
naturalization as a mode for reacquiring Philippine citizenship is governed by
Commonwealth Act No. 63.16 Under this law, a former Filipino citizen who
wishes to reacquire Philippine citizenship must possess certain qualifications and
none of the disqualification mentioned in Section 4 of C.A. 473.

Repatriation, on the other hand, may be had under various statutes by those who
lost their citizenship due to: (1) desertion of the armed forces; services in the
armed forces of the allied forces in World War II; (3) service in the Armed Forces
of the United States at any other time, (4) marriage of a Filipino woman to an
alien; and (5) political economic necessity.

As distinguished from the lengthy process of naturalization, repatriation simply


consists of the taking of an oath of allegiance to the Republic of the Philippine
and registering said oath in the Local Civil Registry of the place where the person
concerned resides or last resided.

Moreover, repatriation results in the recovery of the original nationality. This


means that a naturalized Filipino who lost his citizenship will be restored to his
prior status as a naturalized Filipino citizen. On the other hand, if he was
originally a natural-born citizen before he lost his Philippine citizenship, he will be
restored to his former status as a natural-born Filipino.

In respondent Cruz's case, he lost his Filipino citizenship when he rendered


service in the Armed Forces of the United States. However, he subsequently
reacquired Philippine citizenship under R.A. No. 2630.

Having thus taken the required oath of allegiance to the Republic and having
registered the same in the Civil Registry of Magantarem, Pangasinan in
accordance with the aforecited provision, respondent Cruz is deemed to have
recovered his original status as a natural-born citizen, a status which he acquired
at birth as the son of a Filipino father. It bears stressing that the act of repatriation
allows him to recover, or return to, his original status before he lost his Philippine
citizenship

ALICE REYES VAN DORN, petitioner,


vs.
HON. MANUEL V. ROMILLO, JR., as Presiding Judge of Branch CX,
Regional Trial Court of the National Capital Region Pasay City and
RICHARD UPTON respondents.

MELENCIO-HERRERA, J.:\
In this Petition for certiorari and Prohibition, petitioner Alice Reyes Van Dorn seeks to set aside the Orders, dated September 15, 1983 and
August 3, 1984, in Civil Case No. 1075-P, issued by respondent Judge, which denied her Motion to Dismiss said case, and her Motion for
Reconsideration of the Dismissal Order, respectively.

The basic background facts are that petitioner is a citizen of the Philippines
while private respondent is a citizen of the United States; that they were
married in Hongkong in 1972; that, after the marriage, they established
their residence in the Philippines; that they begot two children born on April
4, 1973 and December 18, 1975, respectively; that the parties were
divorced in Nevada, United States, in 1982; and that petitioner has re-
married also in Nevada, this time to Theodore Van Dorn.

Dated June 8, 1983, private respondent filed suit against petitioner in Civil
Case No. 1075-P of the Regional Trial Court, Branch CXV, in Pasay City,
stating that petitioner's business in Ermita, Manila, (the Galleon Shop, for
short), is conjugal property of the parties, and asking that petitioner be
ordered to render an accounting of that business, and that private
respondent be declared with right to manage the conjugal property.
Petitioner moved to dismiss the case on the ground that the cause of action
is barred by previous judgment in the divorce proceedings before the
Nevada Court wherein respondent had acknowledged that he and
petitioner had "no community property" as of June 11, 1982. The Court
below denied the Motion to Dismiss in the mentioned case on the ground
that the property involved is located in the Philippines so that the Divorce
Decree has no bearing in the case. The denial is now the subject of this
certiorari proceeding.

Generally, the denial of a Motion to Dismiss in a civil case is interlocutory


and is not subject to appeal. certiorari and Prohibition are neither the
remedies to question the propriety of an interlocutory order of the trial
Court. However, when a grave abuse of discretion was patently committed,
or the lower Court acted capriciously and whimsically, then it devolves
upon this Court in a certiorari proceeding to exercise its supervisory
authority and to correct the error committed which, in such a case, is
equivalent to lack of jurisdiction. 1 Prohibition would then lie since it would
be useless and a waste of time to go ahead with the
proceedings. 2 Weconsider the petition filed in this case within the
exception, and we have given it due course.

For resolution is the effect of the foreign divorce on the parties and their
alleged conjugal property in the Philippines.

Petitioner contends that respondent is estopped from laying claim on the


alleged conjugal property because of the representation he made in the
divorce proceedings before the American Court that they had no
community of property; that the Galleon Shop was not established through
conjugal funds, and that respondent's claim is barred by prior judgment.

For his part, respondent avers that the Divorce Decree issued by the
Nevada Court cannot prevail over the prohibitive laws of the Philippines
and its declared national policy; that the acts and declaration of a foreign
Court cannot, especially if the same is contrary to public policy, divest
Philippine Courts of jurisdiction to entertain matters within its jurisdiction.

For the resolution of this case, it is not necessary to determine whether the
property relations between petitioner and private respondent, after their
marriage, were upon absolute or relative community property, upon
complete separation of property, or upon any other regime. The pivotal fact
in this case is the Nevada divorce of the parties.

The Nevada District Court, which decreed the divorce, had obtained
jurisdiction over petitioner who appeared in person before the Court during
the trial of the case. It also obtained jurisdiction over private respondent
who, giving his address as No. 381 Bush Street, San Francisco, California,
authorized his attorneys in the divorce case, Karp & Gradt Ltd., to agree to
the divorce on the ground of incompatibility in the understanding that there
were neither community property nor community obligations. 3 As explicitly
stated in the Power of Attorney he executed in favor of the law firm of
KARP & GRAD LTD., 336 W. Liberty, Reno, Nevada, to represent him in
the divorce proceedings:

xxx xxx xxx

You are hereby authorized to accept service of Summons, to


file an Answer, appear on my behalf and do an things
necessary and proper to represent me, without further
contesting, subject to the following:

1. That my spouse seeks a divorce on the ground of


incompatibility.

2. That there is no community of property to be adjudicated by


the Court.

3. 'I'hat there are no community obligations to be adjudicated by


the court.

xxx xxx xxx 4

There can be no question as to the validity of that Nevada divorce in any of


the States of the United States. The decree is binding on private
respondent as an American citizen. For instance, private respondent
cannot sue petitioner, as her husband, in any State of the Union. What he
is contending in this case is that the divorce is not valid and binding in this
jurisdiction, the same being contrary to local law and public policy.

It is true that owing to the nationality principle embodied in Article 15 of the


Civil Code, 5 only Philippine nationals are covered by the policy against
absolute divorces the same being considered contrary to our concept of
public police and morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they are valid
according to their national law. 6 In this case, the divorce in Nevada
released private respondent from the marriage from the standards of
American law, under which divorce dissolves the marriage. As stated by
the Federal Supreme Court of the United States in Atherton vs. Atherton,
45 L. Ed. 794, 799:
The purpose and effect of a decree of divorce from the bond of
matrimony by a court of competent jurisdiction are to change
the existing status or domestic relation of husband and wife,
and to free them both from the bond. The marriage tie when
thus severed as to one party, ceases to bind either. A husband
without a wife, or a wife without a husband, is unknown to the
law. When the law provides, in the nature of a penalty. that the
guilty party shall not marry again, that party, as well as the
other, is still absolutely freed from the bond of the former
marriage.

Thus, pursuant to his national law, private respondent is no longer the


husband of petitioner. He would have no standing to sue in the case below
as petitioner's husband entitled to exercise control over conjugal assets. As
he is bound by the Decision of his own country's Court, which validly
exercised jurisdiction over him, and whose decision he does not repudiate,
he is estopped by his own representation before said Court from asserting
his right over the alleged conjugal property.

To maintain, as private respondent does, that, under our laws, petitioner


has to be considered still married to private respondent and still subject to a
wife's obligations under Article 109, et. seq. of the Civil Code cannot be
just. Petitioner should not be obliged to live together with, observe respect
and fidelity, and render support to private respondent. The latter should not
continue to be one of her heirs with possible rights to conjugal property.
She should not be discriminated against in her own country if the ends of
justice are to be served.

WHEREFORE, the Petition is granted, and respondent Judge is hereby


ordered to dismiss the Complaint filed in Civil Case No. 1075-P of his
Court.

Without costs.

SO ORDERED.
VAN DORN vs. ROMILLO, G.R. No. L-
68470 October 8, 1985
ALICE REYES VAN DORN, petitioner, VS. HON. MANUEL ROMILLO JR., as
Presiding Judge of
Branch CX, Regional Trial Court of the National Capital Region Pasay City and
RICHARD
UPTON, respondents
October 8, 1985

FACTS:
Alice Reyes, the petitioner is a citizen of the Philippines while private respondent
Richard Upton is a citizen of the United States. They were married in Hong Kong
in 1972 and they established residence in the Philippines. They had two children
and they were divorced in Nevada, USA in 1982. The petitioner remarried in
Nevada to Theodore Van Dorn. The private responded filed against petitioner
stating that the petitioner’s business is a conjugal property of the parties and that
respondent is declared with right to manage the conjugal property. Petitioner
moved to dismiss the case on the ground that the cause of action is barred by
previous judgment in the divorce proceedings before the Nevada Court, where
respondent acknowledged that they had no community property as of June 11,
1982.

ISSUE:
Whether or not the private respondent as petitioner’s husband is entitled to
exercise control over conjugal assets?

RULING:
The petition is granted. Complaint is dismissed.
The policy against absolute divorce cover only Philippine nationals. However,
aliens may obtain divorce abroad, which may be recognized in the Philippines
provided they are valid according to their national law.
From the standards of American law, under which divorce dissolves marriage,
the divorce in Nevada released private respondent from the marriage between
them with the petitioner. Thus, pursuant to his national law, private respondent is
no longer the husband of petitioner. He would have no standing to sue in the
case as petitioner’s husband entitled to exercise control over conjugal assets. He
is estopped by his own representation before said court from asserting his right
over the alleged conjugal property.

THE GOVT OF THE PHILIPPINE ISLANDS vs. FRANK


G. R. No. 2935
March 23, 1909
FACTS: In 1903, in the city of Chicago, Illinois, Frank
entered into a contract for a period of 2 years with the
Plaintiff, by which Frank was to receive a salary as a
stenographer in the service of the said Plaintiff, and in
addition thereto was to be paid in advance the expenses
incurred in traveling from the said city of Chicago to
Manila, and one-half salary during said period of travel.

Said contract contained a provision that in case of a


violation of its terms on the part of Frank, he should
become liable to the Plaintiff for the amount expended by
the Government by way of expenses incurred in traveling
from Chicago to Manila and the one-half salary paid
during such period.

Frank entered upon the performance of his contract and


was paid half-salary from the date until the date of his
arrival in the Philippine Islands.

Thereafter, Frank left the service of the Plaintiff and


refused to make a further compliance with the terms of the
contract.

The Plaintiff commenced an action in the CFI-Manila to


recover from Frank the sum of money, which amount the
Plaintiff claimed had been paid to Frank as expenses
incurred in traveling from Chicago to Manila, and as half-
salary for the period consumed in travel.

It was expressly agreed between the parties to said


contract that Laws No. 80 and No. 224 should constitute a
part of said contract.

The Defendant filed a general denial and a special defense,


alleging in his special defense that
(1) the Government of the Philippine Islands had amended
Laws No. 80 and No. 224 and had thereby materially
altered the said contract, and also that
(2) he was a minor at the time the contract was entered
into and was therefore not responsible under the law.
the lower court rendered a judgment against Frank and in
favor of the Plaintiff for the sum of 265. 90 dollars

ISSUE:
1. Did the amendment of the laws altered the tenor of the
contract entered into between Plaintiff and Defendant?
2. Can the defendant allege minority/infancy?

HELD: the judgment of the lower court is affirmed


1. NO; It may be said that the mere fact that the legislative
department of the Government of the Philippine Islands
had amended said Acts No. 80 and No. 224 by Acts No.
643 and No. 1040 did not have the effect of changing the
terms of the contract made between the Plaintiff and the
Defendant. The legislative department of the Government
is expressly prohibited by section 5 of the Act of Congress
of 1902 from altering or changing the terms of a contract.
The right which the Defendant had acquired by virtue of
Acts No. 80 and No. 224 had not been changed in any
respect by the fact that said laws had been amended. These
acts, constituting the terms of the contract, still
constituted a part of said contract and were enforceable in
favor of the Defendant.

2. NO; The Defendant alleged in his special defense that he


was a minor and therefore the contract could not be
enforced against him. The record discloses that, at the
time the contract was entered into in the State of Illinois,
he was an adult under the laws of that State and had full
authority to contract. Frank claims that, by reason of the
fact that, under that laws of the Philippine Islands at the
time the contract was made, made persons in said Islands
did not reach their majority until they had attained the age
of 23 years, he was not liable under said contract,
contending that the laws of the Philippine Islands
governed.

It is not disputed — upon the contrary the fact is admitted


— that at the time and place of the making of the contract
in question the Defendant had full capacity to make the
same. No rule is better settled in law than that matters
bearing upon the execution, interpretation and validity of
a contract are determined b the law of the place where the
contract is made. Matters connected with its performance
are regulated by the law prevailing at the place of
performance. Matters respecting a remedy, such as the
bringing of suit, admissibility of evidence, and statutes of
limitations, depend upon the law of the place where the
suit is brought.

G.R. No. L-2935 March 23, 1909

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellee,


vs.
GEORGE I. FRANK, defendant-appellant.

Bishop and O'Brien for appellant.


Attorney-General Wilfley for appellee.

JOHNSON, J.:

Judgment was rendered in the lower court on the 5th day of September,
1905. The defendant appealed. On the 12th day of October, 1905, the
appellant filed his printed bill of exceptions with the clerk of the Supreme
Court. On the 5th day of December, 1905, the appellant filed his brief with
the clerk of the Supreme Court. On the 19th day of January, 1906, the
Attorney-General filed his brief in said cause. Nothing further was done in
said cause until on or about the 30th day of January, 1909, when the
respective parties were requested by this court to prosecute the appeal
under the penalty of having the same dismissed for failure so to do;
whereupon the appellant, by petition, had the caused placed upon the
calendar and the same was heard on the 2d day of February, 1909.

The facts from the record appear to be as follows:

First. That on or about the 17th day of April, 1903, in the city of Chicago, in
the state of Illinois, in the United States, the defendant, through a
respective of the Insular Government of the Philippine Islands, entered into
a contract for a period of two years with the plaintiff, by which the defendant
was to receive a salary of 1,200 dollars per year as a stenographer in the
service of the said plaintiff, and in addition thereto was to be paid in
advance the expenses incurred in traveling from the said city of Chicago to
Manila, and one-half salary during said period of travel.
Second. Said contract contained a provision that in case of a violation of its
terms on the part of the defendant, he should become liable to the plaintiff
for the amount expended by the Government by way of expenses incurred
in traveling from Chicago to Manila and one-half salary paid during such
period.

Third. The defendant entered upon the performance of his contract upon
the 30th day of April, 1903, and was paid half-salary from that date until
June 4, 1903, the date of his arrival in the Philippine Islands.

Fourth. That on the 11th day of February, 1904, the defendant left the
service of the plaintiff and refused to make further compliance with the
terms of the contract.

Fifth. On the 3d day of December, 1904, the plaintiff commenced an action


in the Court of First Instance of the city of Manila to recover from the
defendant the sum of 269.23 dollars, which amount the plaintiff claimed
had been paid to the defendant as expenses incurred in traveling from
Chicago to Manila, and as half salary for the period consumed in travel.

Sixth. It was expressly agreed between the parties to said contract that
Laws No. 80 and No. 224 should constitute a part of said contract.

To the complaint of the plaintiff the defendant filed a general denial and a
special defense, alleging in his special defense that the Government of the
Philippine Islands had amended Laws No. 80 and No. 224 and had thereby
materially altered the said contract, and also that he was a minor at the
time the contract was entered into and was therefore not responsible under
the law.

To the special defense of the defendant the plaintiff filed a demurrer, which
demurrer the court sustained.

Upon the issue thus presented, and after hearing the evidence adduced
during the trial of the cause, the lower court rendered a judgment against
the defendant and in favor of the plaintiff for the sum of 265.90 dollars. The
lower court found that at the time the defendant quit the service of the
plaintiff there was due him from the said plaintiff the sum of 3.33 dollars,
leaving a balance due the plaintiff in the sum of 265.90 dollars. From this
judgment the defendant appealed and made the following assignments of
error:
1. The court erred in sustaining plaintiff's demurrer to defendant's special
defenses.

2. The court erred in rendering judgment against the defendant on the


facts.

With reference to the above assignments of error, it may be said that the
mere fact that the legislative department of the Government of the
Philippine Islands had amended said Acts No. 80 and No. 224 by the Acts
No. 643 and No. 1040 did not have the effect of changing the terms of the
contract made between the plaintiff and the defendant. The legislative
department of the Government is expressly prohibited by section 5 of the
Act of Congress of 1902 from altering or changing the terms of the contract.
The right which the defendant had acquired by virtue of Acts No. 80 and
No. 224 had not been changed in any respect by the fact that said laws had
been amended. These acts, constituting the terms of the contract, still
constituted a part of said contract and were enforceable in favor of the
defendant.

The defendant alleged in his special defense that he was a minor and
therefore the contract could not be enforced against him. The record
discloses that, at the time the contract was entered into in the State of
Illinois, he was an adult under the laws of that State and had full authority
to contract. The plaintiff [the defendant] claims that, by reason of the fact
that, under the laws of the Philippine Islands at the time the contract was
made, male persons in said Islands did not reach their majority until they
had attained the age of 23 years, he was not liable under said contract,
contending that the laws of the Philippine Islands governed. It is not
disputed — upon the contrary the fact is admitted — that at the time and
place of the making of the contract in question the defendant had full
capacity to make the same. No rule is better settled in law than that matters
bearing upon the execution, interpretation and validity of a contract are
determined by the law of the place where the contract is made.
(Scudder vs. Union National Bank, 91 U. S., 406.) Matters connected with
its performance are regulated by the law prevailing at the place of
performance. Matters respecting a remedy, such as the bringing of suit,
admissibility of evidence, and statutes of limitations, depend upon the law
of the place where the suit is brought. (Idem.)
The defendant's claim that he was an adult when he left Chicago but was a
minor when he arrived at Manila; that he was an adult at the time he made
the contract but was a minor at the time the plaintiff attempted to enforce
the contract, more than a year later, is not tenable.

Our conclusions with reference to the first above assignment of error are,
therefore:

First. That the amendments to Acts No. 80 and No. 224 in no way affected
the terms of the contract in question; and

Second. The plaintiff [defendant] being fully qualified to enter into the
contract at the place and time the contract was made, he can not plead
infancy as a defense at the place where the contract is being enforced.

We believe that the above conclusions also dispose of the second


assignment of error.

For the reasons above stated, the judgment of the lower court is affirmed,
with costs.