G.R. No.

L-18164 January 23, 1967 Wherefore, the decision appealed from should be, is hereby, reversed, and the case remanded to the lower court for
proceedings, with the costs of this instance defendants-appellees. It is so ordered.
WILLIAM F. GEMPERLE, plaintiff-appellant,
vs. Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.
HELEN SCHENKER and PAUL SCHENKER as her husband, defendants-appellees.

Gamboa & Gamboa for plaintiff-appellant.

A. R. Narvasa for defendants-appellees.

CONCEPCION, C. J.:

Appeal, taken by plaintiff, William F. Gemperle, from a decision of the Court of First Instance of Rizal dismissing this
case for lack of jurisdiction over the person of defendant Paul Schenker and for want of cause of action against his wife
and co-defendant, Helen Schenker said Paul Schenker "being in no position to be joined with her as party defendant,
because he is beyond the reach of the magistracy of the Philippine courts."

The record shows that sometime in 1952, Paul Schenker-hereinafter referred to as Schenker — acting through his
wife and attorney-in-fact, Helen Schenker — herein-after referred to as Mrs. Schenker — filed with the Court of First
Instance of Rizal, a complaint — which was docketed as Civil Case No. Q-2796 thereof — against herein plaintiff
William F. Gemperle, for the enforcement of Schenker's allegedly initial subscription to the shares of stock of the
Philippines-Swiss Trading Co., Inc. and the exercise of his alleged pre-emptive rights to the then unissued original
capital stock of said corporation and the increase thereof, as well as for an accounting and damages. Alleging that, in
connection with said complaint, Mrs. Schenker had caused to be published some allegations thereof and other
matters, which were impertinent, irrelevant and immaterial to said case No. Q-2796, aside from being false and
derogatory to the reputation, good name and credit of Gemperle, "with the only purpose of attacking" his" honesty,
integrity and reputation" and of bringing him "into public hatred, discredit, disrepute and contempt as a man and a
businessman", Gemperle commenced the present action against the Schenkers for the recovery of P300,000 as
damages, P30,000 as attorney's fees, and costs, in addition to praying for a judgment ordering Mrs. Schenker "to
retract in writing the said defamatory expressions". In due course, thereafter, the lower court, rendered the decision
above referred to. A reconsiderating thereof having been denied, Gemperle interposed the present appeal.

The first question for determination therein is whether or not the lower court had acquired jurisdiction over the
person of Schenker. Admittedly, he, a Swiss citizen, residing in Zurich, Switzerland, has not been actually served with
summons in the Philippines, although the summons address to him and Mrs. Schenker had been served personally
upon her in the Philippines. It is urged by plaintiff that jurisdiction over the person of Schenker has been secured
through voluntary appearance on his part, he not having made a special appearance to assail the jurisdiction over his
person, and an answer having been filed in this case, stating that "the defendants, by counsel, answering the plaintiff's
complaint, respectfully aver", which is allegedly a general appearance amounting to a submission to the jurisdiction of
the court, confirmed, according to plaintiff, by a P225,000 counterclaim for damages set up in said answer; but this
counterclaim was set up by Mrs. Schenker alone, not including her husband. Moreover, said answer contained several
affirmative defenses, one of which was lack of jurisdiction over the person of Schenker, thus negating the alleged
waiver of this defense. Nevertheless, We hold that the lower court had acquired jurisdiction over said defendant,
through service of the summons addressed to him upon Mrs. Schenker, it appearing from said answer that she is the
representative and attorney-in-fact of her husband aforementioned civil case No. Q-2796, which apparently was filed
at her behest, in her aforementioned representative capacity. In other words, Mrs. Schenker had authority to sue, and
had actually sued on behalf of her husband, so that she was, also, empowered to represent him in suits filed against
him, particularly in a case, like the of the one at bar, which is consequence of the action brought by her on his behalf.

Inasmuch as the alleged absence of a cause of action against Mrs. Schenker is premised upon the alleged lack of
jurisdiction over the person of Schenker, which cannot be sustained, it follows that the conclusion drawn therefore
from is, likewise, untenable.
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.
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 Ducat's obligation under an Agreement, dated January 27, 1983, whereby
1488, Inc. executed a Warranty Deed with Vendor's 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, PHILSEC's 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 Ducat's 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 Daic's 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-IFL's 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 Ducat's 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 offorum 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 COURT'S 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. 6Thus, 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 appellant's 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 Philippines 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 plaintiff's 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 court's 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 court's 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 court's 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 latter's 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 Guevara's 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.
G.R. No. L-13141 May 22, 1959
VICENTA PANTALEON, plaintiff-appellee,
vs.
HONORATO ASUNCION, defendant-appellant.
Feliciano R. Bautista for appellee.
Servando Cleto for appellant.
CONCEPCION, J.:
This is an appeal, taken by defendant Honorato Asuncion from an order denying a petition for relief from an order
declaring him in default and a judgment by default.
On June 12, 1953, plaintiff, Vicenta Pantaleon, instituted this action, in the Court of First Instance of Nueva Ecija, to
recover from said Asuncion, the sum of P2,000.00, with interest thereon, in addition to attorney's fees. The summons
originally issued was returned by the sheriff of Nueva Ecija unserved, with the statement that, according to reliable
information, Asuncion was residing in B-24 Tala Estate, Caloocan, Rizal. An alias summons was issued, therefore, for
service in the place last mentioned. However, the provincial sheriff of Rizal returned it unserved, with information
that Asuncion had left the Tala Estate since February 18, 1952, and that diligent efforts to locate him proved to no
avail. On plaintiff's motion, the court ordered, on March 9, 1955, that defendant be summoned by publication, and the
summons was published on March 21 and 28, and April 4, 1955, in the "Examiner", said to be a newspaper of general
circulation in Nueva Ecija. Having failed to appear or answer the complaint within the period stated in the summons,
defendant was, by an order dated July 12, 1955, declared in default. Subsequently, or on September 8, 1955, after a
hearing held in the absence of the defendant and without notice to him, the court rendered judgment for the plaintiff
and against said defendant, for the sum of P2,300.00, with interest thereon at the legal rate, from October 28, 1948,
and costs.
About forty-six (46) days later, or on October 24, 1955, the defendant filed a petition for relief from said order of July
12, 1955, and from said judgment, dated September 8, 1955, and upon the ground of mistake and excusable
negligence. Annexed to said petition were defendant's affidavit and his verified answer. In the affidavit, Asuncion
stated that, on September 26, 1955, at 34 Pitimine Street, San Francisco del Monte Quezon City, which is his residence,
he received notice of a registered letter at the Post Office in San Jose, Nueva Ecija, his old family residence; that he
proceeded immediately to the latter municipality to claim said letter, which he received on September 28, 1955; that
the letter contained copy of said order of July 12, 1955, and of the judgment of September 8, 1955, much to his
surprise, for he had not been summoned or notified of the hearing of this case; that had copy of the summons and of
the order for its publication been sent to him by mail, as provided in Rule 7, section 21, of the Rules of Court said
summons and order would have reached him, "as the judgment herein had"; and that his failure to appear before the
court is excusable it being due to the mistake of the authorities concerned in not complying with the provisions of said
section. Upon denial of said petition for relief, defendant perfected his present appeal, which is predicated upon the
theory that the aforementioned summons by publication had not been made in conformity with the Rules of Court.
More specifically, defendant maintains that copy of the summons and of the order for the publication thereof were not
deposited "in the post office, postage prepaid, directed to the defendant by ordinary mail to his last known address",
in violation of Rule 7, section 21, of the Rules of Court, and that, had this provision been complied with, said summons
and order of publication would have reached him, as had the decision appealed from. Said section 21 reads:
If the service has been made by publication, service may be proved by the affidavit of the printer, his foreman or
principal clerk, or of the editor, business or advertising manager, to which affidavit a copy of the publication shall be
attached, and by an affidavit showing the deposit of a copy of the summons and order for publication in the post office,
postage prepaid, directed to the defendant by ordinary mail to his last known address. (Emphasis supplied.).
Plaintiff alleges, however, that the provision applicable to the case at bar is not this section 21, but section 16, of Rule
7, of the Rules of Court, which provides:
Whenever the defendant is designated as an unknown owner, or the like, or whenever the address of a defendant is
unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effect upon him by
publication in such places and for such times as the court may order.
It is, moreover, urged by the plaintiff that the requirement, in said section 21, of an affidavit showing that copy of the
summons and of the order for its publication had been sent by mail to defendant's last known address, refers to the
extraterritorial service of summons, provided for in section 17 of said Rule 7, pursuant to which:
When the defendant does not reside and is not found in the Philippines and the action affects the personal status of
the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or
claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding
the defendant from any interest therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by
registered mail; or by publication in such places and for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by ordinary mail to the last known address of the defendant; or in any
other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which
shall not be less than sixty (60) days after notice, within which the defendant must answer.
Said section 21, however, is unqualified. It prescribes the "proof of service by publication", regardless of whether the
defendant is a resident of the Philippines or not. Section 16 must be read in relation to section 21, which complements
it. Then, too, we conceive of no reason, and plaintiff has suggested none, why copy of the summons and of the order
for its publication should be mailed to non-resident defendants, but not to resident defendants. We can not even say
that defendant herein, who, according to the return of the Sheriff of Nueva Ecija, was reportedly residing in Rizal —
where he, in fact (San Francisco del Monte and Quezon City used to be part of Rizal), was residing — could reasonably
be expected to read the summons published in a newspaper said to be a general circulation in Nueva Ecija.
Considering that strict compliance with the terms of the statute is necessary to confer jurisdiction through service by
publication (Bachrach Garage and Taxi Co. vs. Hotchkiss and Co., 34 Phil., 506; Banco Español-Filipino vs.Palanca, 37
Phil., 921; Mills vs. Smiley, 9 Idaho 317, 325, 76 Pac. 785; Charles vs. Marrow, 99 Mo. 638; Sunderland, Cases on
Procedure, Annotated, Trial Practice, p. 51), the conclusion is inescapable that the lower court had no authority
whatsoever to issue the order of July 12, 1955, declaring the defendant in default and to render the decision of
September 8, 1955, and that both are null and void ad initio.
Apart from the foregoing, it is a well-settled principle of Constitutional Law that, in an action strictly in personam, like
the one at bar, personal service of summons, within the forum, is essential to the acquisition of jurisdiction over the
person of the defendant, who does not voluntarily submit himself to the authority of the court. In other words,
summons by publication cannot — consistently with the due process clause in the Bill of Rights — confer upon the
court jurisdiction over said defendant.
Due process of law requires personal service to support a personal judgment, and, when the proceeding is strictly in
personam brought to determine the personal rights and obligations of the parties, personal service within the state or
a voluntary appearance in the case is essential to the acquisition of jurisdiction so as to constitute compliance with the
constitutional requirement of due process. . . .
Although a state legislature has more control over the form of service on its own residents than nonresidents, it has November 1951— 10.00 paid personally
been held that in action in personam . . . service by publication on resident defendants, who are personally within the December 1951— 10.00 paid personally
state and can be found therein is not "due process of law", and a statute allowing it is unconstitutional. (16A C.J.S., pp. September 1952— 30.00 paid personally
786, 789; Emphasis ours.) December 1952— 20.00 paid personally
January 1953— 10.00 paid personally
Lastly, from the viewpoint of substantial justice and equity, we are of the opinion that defendant's petition for relief February 1953— 10.00 paid personally
should have been granted. To begin with, it was filed well within the periods provided in the Rules of Court. Secondly, March 1953— 10.00 paid personally
and, this is more important, defendant's verified answer, which was attached to said petition, contains allegations April 1953— 10.00 paid personally
which, if true, constitute a good defense. Thus, for instance, in paragraph (2) of the "special denials" therein, he May 1953— 10.00
alleged: Total paid — P460.00

That it is not true that he failed to pay the said indebtedness of his said wife, as alleged in paragraph 3 of the
complaint, for as a matter of fact, plaintiff and defendant agreed upon a settlement of the said indebtedness of the
latter's deceased wife on December 5, 1948, whereby defendant was allowed to pay it out of his monthly salary by
instalment of P10.00 monthly beginning January, 1949, and in accordance therewith, defendant paid unto plaintiff the
following sums:
Instalment for January-February, 1948
The specification of the dates of payment, of the amounts paid each time, of the manner in which each payment was
made, and of the number of the money orders in which eighteen (18) payments had been effected, constitutes a strong
indication of the probable veracity of said allegation, fully justifying the grant of an opportunity to prove the same.
Wherefore, said order of July 12, 1955, and the aforementioned decision of September 8, 1955, are hereby set aside
and annulled, and let the record of this case be remanded to the lower court for further proceedings with costs against
plaintiff-appellee. It is so ordered.

March 1949— P30.00 paid personally Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador and Endencia, JJ., concur.
April 2, 1949— 10.00 by money order 7488
May 11, 1949— 10.00 by money order 7921
June 10, 1949— 10.00 by money order 8230
July 11, 1949— 10.00 by money order 8595
August 10, 1949— 10.00 by money order 8943
September 1949— 10.00 paid personally
October 1949— 10.00 paid personally
November 14, 1949— 10.00 by money order 9776
December 13, 1949— 10.00 by money order 0076
January 10, 1950— 10.00 by money order 0445
February 9, 1950— 10.00 by money order 0731
March 10, 1950— 10.00 by money order 1149
April 10, 1950— 10.00 by money order 1387
May 11, 1950— 10.00 by money order 1990
June 12, 1950— 10.00 by money order 1055
July 11, 1950— 10.00 by money order 8850
August 11, 1950— 10.00 by money order 9293
September 6, 1950— 10.00 by money order 9618
October 10, 1950— 10.00 by money order 0008
November 8, 1950— 10.00 by money order 0369
December 1950— 10.00 paid personally
January 2, 1951— 10.00 paid personally
February 10, 1951— 10.00 paid personally
March 12, 1951— 10.00 paid personally
April 1951— 10.00 paid personally
May 1951— 10.00 paid personally
June 1951— 10.00 paid personally
July 1951— 10.00 paid personally
August 1951— 10.00 paid personally
September 1951— 10.00 paid personally
Republic of the Philippines In an order dated February 6, 2004, the trial court denied petitioner’s motion for reconsideration of the September 11,
SUPREME COURT 2003 order. It held that the rules did not require the affidavit of complementary service by registered mail to be
Manila executed by the clerk of court. It also ruled that due process was observed as a copy of the September 11, 2003 order
FIRST DIVISION was actually mailed to petitioner at his last known address. It also denied the motion to admit petitioner’s answer
PEDRO T. SANTOS, JR., G.R. No. 170943 because the same was filed way beyond the reglementary period.
Petitioner,
Present: Aggrieved, petitioner assailed the September 11, 2003 and February 6, 2004 orders of the trial court in the Court of
PUNO, C.J., Chairperson, Appeals via a petition for certiorari. He contended that the orders were issued with grave abuse of discretion. He
CARPIO, imputed the following errors to the trial court: taking cognizance of the case despite lack of jurisdiction due to
- v e r s u s - CORONA, improper service of summons; failing to furnish him with copies of its orders and processes, particularly the
AZCUNA and September 11, 2003 order, and upholding technicality over equity and justice.
LEONARDO-DE CASTRO, JJ.
PNOC EXPLORATION
CORPORATION, During the pendency of the petition in the Court of Appeals, the trial court rendered its decision in Civil Case No.
Respondent. Promulgated: 69262. It ordered petitioner to pay P698,502.10 plus legal interest and costs of suit. 7
September 23, 2008
x---------------------------------------------------x Meanwhile, on September 22, 2005, the Court of Appeals rendered its decision 8 sustaining the September 11, 2003
DECISION and February 6, 2004 orders of the trial court and dismissing the petition. It denied reconsideration.9 Thus, this
CORONA, J.: petition.
This is a petition for review1 of the September 22, 2005 decision2 and December 29, 2005 resolution3 of the Court of
Appeals in CA-G.R. SP No. 82482.
Petitioner essentially reiterates the grounds he raised in the Court of Appeals, namely, lack of jurisdiction over his
person due to improper service of summons, failure of the trial court to furnish him with copies of its orders and
On December 23, 2002, respondent PNOC Exploration Corporation filed a complaint for a sum of money against processes including the September 11, 2003 order and preference for technicality rather than justice and equity. In
petitioner Pedro T. Santos, Jr. in the Regional Trial Court of Pasig City, Branch 167. The complaint, docketed as Civil particular, he claims that the rule on service by publication under Section 14, Rule 14 of the Rules of Court applies
Case No. 69262, sought to collect the amount of P698,502.10 representing petitioner’s unpaid balance of the car only to actions in rem, not actions in personam like a complaint for a sum of money. He also contends that the affidavit
loan4 advanced to him by respondent when he was still a member of its board of directors. of service of a copy of the summons should have been prepared by the clerk of court, not respondent’s messenger.

Personal service of summons to petitioner failed because he could not be located in his last known address despite The petition lacks merit.
earnest efforts to do so. Subsequently, on respondent’s motion, the trial court allowed service of summons by
publication.
ProprietyOf

Respondent caused the publication of the summons in Remate, a newspaper of general circulation in the Philippines,
on May 20, 2003. Thereafter, respondent submitted the affidavit of publication of the advertising manager of Service By Publication
Remate5 and an affidavit of service of respondent’s employee6 to the effect that he sent a copy of the summons by
registered mail to petitioner’s last known address. Section 14, Rule 14 (on Summons) of the Rules of Court provides:

When petitioner failed to file his answer within the prescribed period, respondent moved that the case be set for the
reception of its evidence ex parte. The trial court granted the motion in an order dated September 11, 2003.
Respondent proceeded with the ex parte presentation and formal offer of its evidence. Thereafter, the case was
deemed submitted for decision on October 15, 2003.
On October 28, 2003, petitioner filed an "Omnibus Motion for Reconsideration and to Admit Attached Answer." He
sought reconsideration of the September 11, 2003 order, alleging that the affidavit of service submitted by respondent
failed to comply with Section 19, Rule 14 of the Rules of Court as it was not executed by the clerk of court. He also
claimed that he was denied due process as he was not notified of the September 11, 2003 order. He prayed that
respondent’s evidence ex parte be stricken off the records and that his answer be admitted.
Respondent naturally opposed the motion. It insisted that it complied with the rules on service by publication.
Moreover, pursuant to the September 11, 2003 order, petitioner was already deemed in default for failure to file an
answer within the prescribed period.
SEC. 14. Service upon defendant whose identity or whereabouts are unknown. – In any action where the defendant is
designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be
ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a
newspaper of general circulation and in such places and for such times as the court may order. (emphasis supplied)
Since petitioner could not be personally served with summons despite diligent efforts to locate his whereabouts,
respondent sought and was granted leave of court to effect service of summons upon him by publication in a
newspaper of general circulation. Thus, petitioner was properly served with summons by publication.
Petitioner invokes the distinction between an action in rem and an action in personam and claims that substituted
service may be availed of only in an action in rem. Petitioner is wrong. The in rem/in personam distinction was
significant under the old rule because it was silent as to the kind of action to which the rule was applicable.10 Because
of this silence, the Court limited the application of the old rule to in rem actions only.11
This has been changed. The present rule expressly states that it applies "[i]n any action where the defendant is
designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained
by diligent inquiry." Thus, it now applies to anyaction, whether in personam, in rem or quasi in rem.12
Regarding the matter of the affidavit of service, the relevant portion of Section 19, 13 Rule 14 of the Rules of Court
simply speaks of the following:
… an affidavit showing the deposit of a copy of the summons and order for publication in the post office, postage
prepaid, directed to the defendant by registered mail to his last known address.
Service of summons by publication is proved by the affidavit of the printer, his foreman or principal clerk, or of the
editor, business or advertising manager of the newspaper which published the summons. The service of summons
by publication is complemented by service of summons by registered mail to the defendant’s last known address. This
complementary service is evidenced by an affidavit "showing the deposit of a copy of the summons and order for
publication in the post office, postage prepaid, directed to the defendant by registered mail to his last known address."
The rules, however, do not require that the affidavit of complementary service be executed by the clerk of court. While
the trial court ordinarily does the mailing of copies of its orders and processes, the duty to make the complementary
service by registered mail is imposed on the party who resorts to service by publication.
Moreover, even assuming that the service of summons was defective, the trial court acquired jurisdiction over the
person of petitioner by his own voluntary appearance in the action against him. In this connection, Section 20,
Rule 14 of the Rules of Court states:
SEC. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to
service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the
person of the defendant shall not be deemed a voluntary appearance. (emphasis supplied)
Petitioner voluntarily appeared in the action when he filed the "Omnibus Motion for Reconsideration and to Admit
Attached Answer."14This was equivalent to service of summons and vested the trial court with jurisdiction over the
person of petitioner.
EntitlementTo
Notice Of Proceedings
The trial court allowed respondent to present its evidence ex parte on account of petitioner’s failure to file his answer
within the prescribed period. Petitioner assails this action on the part of the trial court as well as the said court’s
failure to furnish him with copies of orders and processes issued in the course of the proceedings.
The effects of a defendant’s failure to file an answer within the time allowed therefor are governed by Sections 3 and
4, Rule 9 (on Effect of Failure to Plead) of the Rules of Court:
SEC. 3. Default; declaration of. – If the defending party fails to answer within the time allowed therefor, the court
shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare
the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such
relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such
reception of evidence may be delegated to the clerk of court.
SEC. 4. Effect of order of default. – A party in default shall be entitled to notice of subsequent proceedings but not
to take part in the trial. (emphasis supplied)
If the defendant fails to file his answer on time, he may be declared in default upon motion of the plaintiff with notice
to the said defendant. In case he is declared in default, the court shall proceed to render judgment granting the
plaintiff such relief as his pleading may warrant, unless the court in its discretion requires the plaintiff to submit
evidence. The defaulting defendant may not take part in the trial but shall be entitled to notice of subsequent
proceedings.
In this case, even petitioner himself does not dispute that he failed to file his answer on time. That was in fact why he
had to file an "Omnibus Motion for Reconsideration and to Admit Attached Answer." But respondent moved only for
the ex parte presentation of evidence, not for the declaration of petitioner in default. In its February 6, 2004 order, the
trial court stated:
The disputed Order of September 11, 2003 allowing the presentation of evidence ex-parte precisely ordered that
"despite and notwithstanding service of summons by publication, no answer has been filed with the Court within the
required period and/or forthcoming.["] Effectively[,] that was a finding that the defendant [that is, herein
petitioner] was in default for failure to file an answer or any responsive pleading within the period fixed in the
publication as precisely the defendant [could not] be found and for which reason, service of summons by publication
was ordered. It is simply illogical to notify the defendant of the Order of September 11, 2003 simply on account of the
reality that he was no longer residing and/or found on his last known address and his whereabouts unknown – thus
the publication of the summons. In other words, it was reasonable to expect that the defendant will not receive any
notice or order in his last known address. Hence, [it was] impractical to send any notice or order to him. Nonetheless,
the record[s] will bear out that a copy of the order of September 11, 2003 was mailed to the defendant at his
last known address but it was not claimed. (emphasis supplied)
As is readily apparent, the September 11, 2003 order did not limit itself to permitting respondent to present its
evidence ex parte but in effect issued an order of default. But the trial court could not validly do that as an order of
default can be made only upon motion of the claiming party. 15 Since no motion to declare petitioner in default was
filed, no default order should have been issued.
To pursue the matter to its logical conclusion, if a party declared in default is entitled to notice of subsequent
proceedings, all the more should a party who has not been declared in default be entitled to such notice. But what
happens if the residence or whereabouts of the defending party is not known or he cannot be located? In such a case,
there is obviously no way notice can be sent to him and the notice requirement cannot apply to him. The law does not
require that the impossible be done.16 Nemo tenetur ad impossibile. The law obliges no one to perform an
impossibility.17 Laws and rules must be interpreted in a way that they are in accordance with logic, common sense,
reason and practicality.18
Hence, even if petitioner was not validly declared in default, he could not reasonably demand that copies of orders and
processes be furnished him. Be that as it may, a copy of the September 11, 2003 order was nonetheless still mailed to
petitioner at his last known address but it was unclaimed.
CorrectnessOf
Non-Admission Of Answer
Petitioner failed to file his answer within the required period. Indeed, he would not have moved for the admission of
his answer had he filed it on time. Considering that the answer was belatedly filed, the trial court did not abuse its
discretion in denying its admission.
Petitioner’s plea for equity must fail in the face of the clear and express language of the rules of procedure and of the
September 11, 2003 order regarding the period for filing the answer. Equity is available only in the absence of law, not
as its replacement.19 Equity may be applied only in the absence of rules of procedure, never in contravention thereof.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
G.R. No. L-11390 March 26, 1918
EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,
vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca Tanquinyeng, defendant-appellant.
Aitken and DeSelms for appellant.
Hartigan and Welch for appellee.
STREET, J.:
This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a mortgage upon various
parcels of real property situated in the city of Manila. The mortgage in question is dated June 16, 1906, and was
executed by the original defendant herein, Engracio Palanca Tanquinyeng y Limquingco, as security for a debt owing
by him to the bank. Upon March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8
per centum per annum, payable at the end of each quarter. It appears that the parties to this mortgage at that time
estimated the value of the property in question at P292,558, which was about P75,000 in excess of the indebtedness.
After the execution of this instrument by the mortgagor, he returned to China which appears to have been his native
country; and he there died, upon January 29, 1810, without again returning to the Philippine Islands.
As the defendant was a nonresident at the time of the institution of the present action, it was necessary for the
plaintiff in the foreclosure proceeding to give notice to the defendant by publication pursuant to section 399 of the
Code of Civil Procedure. An order for publication was accordingly obtained from the court, and publication was made
in due form in a newspaper of the city of Manila. At the same time that the order of the court should deposit in the
post office in a stamped envelope a copy of the summons and complaint directed to the defendant at his last place of
residence, to wit, the city of Amoy, in the Empire of China. This order was made pursuant to the following provision
contained in section 399 of the Code of Civil Procedure:
In case of publication, where the residence of a nonresident or absent defendant is known, the judge must direct a
copy of the summons and complaint to be forthwith deposited by the clerk in the post-office, postage prepaid,
directed to the person to be served, at his place of residence
Whether the clerk complied with this order does not affirmatively appear. There is, however, among the papers
pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo Chan y Garcia, an employee of the
attorneys of the bank, showing that upon that date he had deposited in the Manila post-office a registered letter,
addressed to Engracio Palanca Tanquinyeng, at Manila, containing copies of the complaint, the plaintiff's affidavit, the
summons, and the order of the court directing publication as aforesaid. It appears from the postmaster's receipt that
Bernardo probably used an envelope obtained from the clerk's office, as the receipt purports to show that the letter
emanated from the office.
The cause proceeded in usual course in the Court of First Instance; and the defendant not having appeared, judgment
was, upon July 2, 1908, taken against him by default. Upon July 3, 1908, a decision was rendered in favor of the
plaintiff. In this decision it was recited that publication had been properly made in a periodical, but nothing was said
about this notice having been given mail. The court, upon this occasion, found that the indebtedness of the defendant
amounted to P249,355. 32, with interest from March 31, 1908. Accordingly it was ordered that the defendant should,
on or before July 6, 1908, deliver said amount to the clerk of the court to be applied to the satisfaction of the judgment,
and it was declared that in case of the failure of the defendant to satisfy the judgment within such period, the
mortgage property located in the city of Manila should be exposed to public sale. The payment contemplated in said
order was never made; and upon July 8, 1908, the court ordered the sale of the property. The sale took place upon July
30, 1908, and the property was bought in by the bank for the sum of P110,200. Upon August 7, 1908, this sale was
confirmed by the court.
About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a motion was made in this
cause by Vicente Palanca, as administrator of the estate of the original defendant, Engracio Palanca Tanquinyeng y
Limquingco, wherein the applicant requested the court to set aside the order of default of July 2, 1908, and the
judgment rendered upon July 3, 1908, and to vacate all the proceedings subsequent thereto. The basis of this
application, as set forth in the motion itself, was that the order of default and the judgment rendered thereon were
void because the court had never acquired jurisdiction over the defendant or over the subject of the action.
At the hearing in the court below the application to vacate the judgment was denied, and from this action of the court
Vicente Planca, as administrator of the estate of the original defendant, has appealed. No other feature of the case is
here under consideration than such as related to the action of the court upon said motion.
The case presents several questions of importance, which will be discussed in what appears to be the sequence of
most convenient development. In the first part of this opinion we shall, for the purpose of argument, assume that the
clerk of the Court of First Instance did not obey the order of the court in the matter of mailing the papers which he
was directed to send to the defendant in Amoy; and in this connection we shall consider, first, whether the court
acquired the necessary jurisdiction to enable it to proceed with the foreclosure of the mortgage and, secondly,
whether those proceedings were conducted in such manner as to constitute due process of law.
The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several different, though
related, senses since it may have reference (1) to the authority of the court to entertain a particular kind of action or
to administer a particular kind of relief, or it may refer to the power of the court over the parties, or (2) over the
property which is the subject to the litigation.
The sovereign authority which organizes a court determines the nature and extent of its powers in general and thus
fixes its competency or jurisdiction with reference to the actions which it may entertain and the relief it may grant.
Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his submission to its
authority, or it is acquired by the coercive power of legal process exerted over the person.
Jurisdiction over the property which is the subject of the litigation may result either from a seizure of the property
under legal process, whereby it is brought into the actual custody of the law, or it may result from the institution of
legal proceedings wherein, under special provisions of law, the power of the court over the property is recognized and
made effective. In the latter case the property, though at all times within the potential power of the court, may never
be taken into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in attachment
proceedings, where the property is seized at the beginning of the action, or some subsequent stage of its progress, and
held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over the res, is
found in the proceeding to register the title of land under our system for the registration of land. Here the court,
without taking actual physical control over the property assumes, at the instance of some person claiming to be
owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the petitioner against
all the world.
In the terminology of American law the action to foreclose a mortgage is said to be a proceeding quasi in rem, by
which is expressed the idea that while it is not strictly speaking an action in rem yet it partakes of that nature and is
substantially such. The expression "action in rem" is, in its narrow application, used only with reference to certain
proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation
upon which the proceedings are based. The action quasi rem differs from the true action in rem in the circumstance
that in the former an individual is named as defendant, and the purpose of the proceeding is to subject his interest
therein to the obligation or lien burdening the property. All proceedings having for their sole object the sale or other
disposition of the property of the defendant, whether by attachment, foreclosure, or other form of remedy, are in a
general way thus designated. The judgment entered in these proceedings is conclusive only between the parties.
In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has said:
Though nominally against person, such suits are to vindicate liens; they proceed upon seizure; they treat property as
primarily indebted; and, with the qualification above-mentioned, they are substantially property actions. In the civil
law, they are styled hypothecary actions, and their sole object is the enforcement of the lien against the res; in the
common law, they would be different in chancery did not treat the conditional conveyance as a mere hypothecation,
and the creditor's right ass an equitable lien; so, in both, the suit is real action so far as it is against property, and seeks
the judicial recognition of a property debt, and an order for the sale of the res. (Waples, Proceedings In Rem. sec. 607.)
It is true that in proceedings of this character, if the defendant for whom publication is made appears, the action
becomes as to him a personal action and is conducted as such. This, however, does not affect the proposition that
where the defendant fails to appear the action is quasi in rem; and it should therefore be considered with reference to
the principles governing actions in rem.
There is an instructive analogy between the foreclosure proceeding and an action of attachment, concerning which
the Supreme Court of the United States has used the following language:
If the defendant appears, the cause becomes mainly a suit in personam, with the added incident, that the property
attached remains liable, under the control of the court, to answer to any demand which may be established against the
defendant by the final judgment of the court. But, if there is no appearance of the defendant, and no service of process
on him, the case becomes, in its essential nature, a proceeding in rem, the only effect of which is to subject the
property attached to the payment of the defendant which the court may find to be due to the plaintiff. (Cooper vs.
Reynolds, 10 Wall., 308.)
In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary seizure is to, be
considered necessary in order to confer jurisdiction upon the court. In this case the lien on the property is acquired by
the seizure; and the purpose of the proceedings is to subject the property to that lien. If a lien already exists, whether
created by mortgage, contract, or statute, the preliminary seizure is not necessary; and the court proceeds to enforce
such lien in the manner provided by law precisely as though the property had been seized upon attachment. (Roller
vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere circumstance that in an attachment the property
may be seized at the inception of the proceedings, while in the foreclosure suit it is not taken into legal custody until
the time comes for the sale, does not materially affect the fundamental principle involved in both cases, which is that
the court is here exercising a jurisdiction over the property in a proceeding directed essentially in rem.
Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage foreclosure, it is evident
that the court derives its authority to entertain the action primarily from the statutes organizing the court. The
jurisdiction of the court, in this most general sense, over the cause of action is obvious and requires no comment.
Jurisdiction over the person of the defendant, if acquired at all in such an action, is obtained by the voluntary
submission of the defendant or by the personal service of process upon him within the territory where the process is
valid. If, however, the defendant is a nonresident and, remaining beyond the range of the personal process of the
court, refuses to come in voluntarily, the court never acquires jurisdiction over the person at all. Here the property
itself is in fact the sole thing which is impleaded and is the responsible object which is the subject of the exercise of
judicial power. It follows that the jurisdiction of the court in such case is based exclusively on the power which, under
the law, it possesses over the property; and any discussion relative to the jurisdiction of the court over the person of
the defendant is entirely apart from the case. The jurisdiction of the court over the property, considered as the
exclusive object of such action, is evidently based upon the following conditions and considerations, namely: (1) that
the property is located within the district; (2) that the purpose of the litigation is to subject the property by sale to an
obligation fixed upon it by the mortgage; and (3) that the court at a proper stage of the proceedings takes the property
into custody, if necessary, and expose it to sale for the purpose of satisfying the mortgage debt. An obvious corollary is
that no other relief can be granted in this proceeding than such as can be enforced against the property.
We may then, from what has been stated, formulated the following proposition relative to the foreclosure proceeding
against the property of a nonresident mortgagor who fails to come in and submit himself personally to the jurisdiction
of the court: (I) That the jurisdiction of the court is derived from the power which it possesses over the property; (II)
that jurisdiction over the person is not acquired and is nonessential; (III) that the relief granted by the court must be
limited to such as can be enforced against the property itself.
It is important that the bearing of these propositions be clearly apprehended, for there are many expressions in the
American reports from which it might be inferred that the court acquires personal jurisdiction over the person of the
defendant by publication and notice; but such is not the case. In truth the proposition that jurisdiction over the person
of a nonresident cannot be acquired by publication and notice was never clearly understood even in the American
courts until after the decision had been rendered by the Supreme Court of the United States in the leading case of
Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and of other decisions which have
subsequently been rendered in that and other courts, the proposition that jurisdiction over the person cannot be thus
acquired by publication and notice is no longer open to question; and it is now fully established that a personal
judgment upon constructive or substituted service against a nonresident who does not appear is wholly invalid. This
doctrine applies to all kinds of constructive or substituted process, including service by publication and personal
service outside of the jurisdiction in which the judgment is rendered; and the only exception seems to be found in the
case where the nonresident defendant has expressly or impliedly consented to the mode of service. (Note to Raher vs.
Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312
The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process from the tribunals of one
State cannot run into other States or countries and that due process of law requires that the defendant shall be
brought under the power of the court by service of process within the State, or by his voluntary appearance, in order
to authorize the court to pass upon the question of his personal liability. The doctrine established by the Supreme
Court of the United States on this point, being based upon the constitutional conception of due process of law, is
binding upon the courts of the Philippine Islands. Involved in this decision is the principle that in proceedings in rem
or quasi in rem against a nonresident who is not served personally within the state, and who does not appear, the
relief must be confined to the res, and the court cannot lawfully render a personal judgment against him. (Dewey vs.
Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore
in an action to foreclose a mortgage against a nonresident, upon whom service has been effected exclusively by
publication, no personal judgment for the deficiency can be entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg vs.
Birch, 99 Cal., 416.)
It is suggested in the brief of the appellant that the judgment entered in the court below offends against the principle
just stated and that this judgment is void because the court in fact entered a personal judgment against the absent
debtor for the full amount of the indebtedness secured by the mortgage. We do not so interpret the judgment.
In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all cases of foreclosure, to
ascertain the amount due, as prescribed in section 256 of the Code of Civil Procedure, and to make an order requiring
the defendant to pay the money into court. This step is a necessary precursor of the order of sale. In the present case
the judgment which was entered contains the following words:
Because it is declared that the said defendant Engracio Palanca Tanquinyeng y Limquingco, is indebted in the amount
of P249,355.32, plus the interest, to the 'Banco Espanol-Filipino' . . . therefore said appellant is ordered to deliver the
above amount etc., etc.
This is not the language of a personal judgment. Instead it is clearly intended merely as a compliance with the
requirement that the amount due shall be ascertained and that the evidence of this it may be observed that according
to the Code of Civil Procedure a personal judgment against the debtor for the deficiency is not to be rendered until
after the property has been sold and the proceeds applied to the mortgage debt. (sec. 260).
The conclusion upon this phase of the case is that whatever may be the effect in other respects of the failure of the
clerk of the Court of First Instance to mail the proper papers to the defendant in Amoy, China, such irregularity could
in no wise impair or defeat the jurisdiction of the court, for in our opinion that jurisdiction rest upon a basis much
more secure than would be supplied by any form of notice that could be given to a resident of a foreign country.
Before leaving this branch of the case, we wish to observe that we are fully aware that many reported cases can be
cited in which it is assumed that the question of the sufficiency of publication or notice in a case of this kind is a
question affecting the jurisdiction of the court, and the court is sometimes said to acquire jurisdiction by virtue of the
publication. This phraseology was undoubtedly originally adopted by the court because of the analogy between
service by the publication and personal service of process upon the defendant; and, as has already been suggested,
prior to the decision of Pennoyer vs. Neff (supra) the difference between the legal effects of the two forms of service
was obscure. It is accordingly not surprising that the modes of expression which had already been molded into legal
tradition before that case was decided have been brought down to the present day. But it is clear that the legal
principle here involved is not effected by the peculiar language in which the courts have expounded their ideas.
We now proceed to a discussion of the question whether the supposed irregularity in the proceedings was of such
gravity as to amount to a denial of that "due process of law" which was secured by the Act of Congress in force in these
Islands at the time this mortgage was foreclosed. (Act of July 1, 1902, sec. 5.) In dealing with questions involving the
application of the constitutional provisions relating to due process of law the Supreme Court of the United States has
refrained from attempting to define with precision the meaning of that expression, the reason being that the idea
expressed therein is applicable under so many diverse conditions as to make any attempt ay precise definition
hazardous and unprofitable. As applied to a judicial proceeding, however, it may be laid down with certainty that the
requirement of due process is satisfied if the following conditions are present, namely; (1) There must be a court or
tribunal clothed with judicial power to hear and determine the matter before it; (2) jurisdiction must be lawfully
acquired over the person of the defendant or over the property which is the subject of the proceeding; (3) the
defendant must be given an opportunity to be heard; and (4) judgment must be rendered upon lawful hearing.
Passing at once to the requisite that the defendant shall have an opportunity to be heard, we observe that in a
foreclosure case some notification of the proceedings to the nonresident owner, prescribing the time within which
appearance must be made, is everywhere recognized as essential. To answer this necessity the statutes generally
provide for publication, and usually in addition thereto, for the mailing of notice to the defendant, if his residence is
known. Though commonly called constructive, or substituted service of process in any true sense. It is merely a means
provided by law whereby the owner may be admonished that his property is the subject of judicial proceedings and
that it is incumbent upon him to take such steps as he sees fit to protect it. In speaking of notice of this character a
distinguish master of constitutional law has used the following language:
. . . if the owners are named in the proceedings, and personal notice is provided for, it is rather from tenderness to
their interests, and in order to make sure that the opportunity for a hearing shall not be lost to them, than from any
necessity that the case shall assume that form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S.,
79, 80.)
It will be observed that this mode of notification does not involve any absolute assurance that the absent owner shall
thereby receive actual notice. The periodical containing the publication may never in fact come to his hands, and the
chances that he should discover the notice may often be very slight. Even where notice is sent by mail the probability
of his receiving it, though much increased, is dependent upon the correctness of the address to which it is forwarded
as well as upon the regularity and security of the mail service. It will be noted, furthermore, that the provision of our
law relative to the mailing of notice does not absolutely require the mailing of notice unconditionally and in every
event, but only in the case where the defendant's residence is known. In the light of all these facts, it is evident that
actual notice to the defendant in cases of this kind is not, under the law, to be considered absolutely necessary.
The idea upon which the law proceeds in recognizing the efficacy of a means of notification which may fall short of
actual notice is apparently this: Property is always assumed to be in the possession of its owner, in person or by agent;
and he may be safely held, under certain conditions, to be affected with knowledge that proceedings have been
instituted for its condemnation and sale.
It is the duty of the owner of real estate, who is a nonresident, to take measures that in some way he shall be
represented when his property is called into requisition, and if he fails to do this, and fails to get notice by the
ordinary publications which have usually been required in such cases, it is his misfortune, and he must abide the
consequences. (6 R. C. L., sec. 445 [p. 450]).
It has been well said by an American court:
If property of a nonresident cannot be reached by legal process upon the constructive notice, then our statutes were
passed in vain, and are mere empty legislative declarations, without either force, or meaning; for if the person is not
within the jurisdiction of the court, no personal judgment can be rendered, and if the judgment cannot operate upon
the property, then no effective judgment at all can be rendered, so that the result would be that the courts would be
powerless to assist a citizen against a nonresident. Such a result would be a deplorable one. (Quarl vs. Abbett, 102
Ind., 233; 52 Am. Rep., 662, 667.)
It is, of course universally recognized that the statutory provisions relative to publication or other form of notice
against a nonresident owner should be complied with; and in respect to the publication of notice in the newspaper it
may be stated that strict compliance with the requirements of the law has been held to be essential. In Guaranty Trust
etc. Co. vs. Green Cove etc., Railroad Co. (139 U. S., 137, 138), it was held that where newspaper publication was made
for 19 weeks, when the statute required 20, the publication was insufficient.
With respect to the provisions of our own statute, relative to the sending of notice by mail, the requirement is that the
judge shall direct that the notice be deposited in the mail by the clerk of the court, and it is not in terms declared that
the notice must be deposited in the mail. We consider this to be of some significance; and it seems to us that, having
due regard to the principles upon which the giving of such notice is required, the absent owner of the mortgaged
property must, so far as the due process of law is concerned, take the risk incident to the possible failure of the clerk
to perform his duty, somewhat as he takes the risk that the mail clerk or the mail carrier might possibly lose or
destroy the parcel or envelope containing the notice before it should reach its destination and be delivered to him.
This idea seems to be strengthened by the consideration that placing upon the clerk the duty of sending notice by
mail, the performance of that act is put effectually beyond the control of the plaintiff in the litigation. At any rate it is
obvious that so much of section 399 of the Code of Civil Procedure as relates to the sending of notice by mail was
complied with when the court made the order. The question as to what may be the consequences of the failure of the
record to show the proof of compliance with that requirement will be discussed by us further on.
The observations which have just been made lead to the conclusion that the failure of the clerk to mail the notice, if in
fact he did so fail in his duty, is not such an irregularity, as amounts to a denial of due process of law; and hence in our
opinion that irregularity, if proved, would not avoid the judgment in this case. Notice was given by publication in a
newspaper and this is the only form of notice which the law unconditionally requires. This in our opinion is all that
was absolutely necessary to sustain the proceedings.
It will be observed that in considering the effect of this irregularity, it makes a difference whether it be viewed as a
question involving jurisdiction or as a question involving due process of law. In the matter of jurisdiction there can be
no distinction between the much and the little. The court either has jurisdiction or it has not; and if the requirement as
to the mailing of notice should be considered as a step antecedent to the acquiring of jurisdiction, there could be no
escape from the conclusion that the failure to take that step was fatal to the validity of the judgment. In the application
of the idea of due process of law, on the other hand, it is clearly unnecessary to be so rigorous. The jurisdiction being
once established, all that due process of law thereafter requires is an opportunity for the defendant to be heard; and
as publication was duly made in the newspaper, it would seem highly unreasonable to hold that failure to mail the
notice was fatal. We think that in applying the requirement of due process of law, it is permissible to reflect upon the
purposes of the provision which is supposed to have been violated and the principle underlying the exercise of judicial
power in these proceedings. Judge in the light of these conceptions, we think that the provision of Act of Congress
declaring that no person shall be deprived of his property without due process of law has not been infringed.
In the progress of this discussion we have stated the two conclusions; (1) that the failure of the clerk to send the
notice to the defendant by mail did not destroy the jurisdiction of the court and (2) that such irregularity did not
infringe the requirement of due process of law. As a consequence of these conclusions the irregularity in question is in
some measure shorn of its potency. It is still necessary, however, to consider its effect considered as a simple
irregularity of procedure; and it would be idle to pretend that even in this aspect the irregularity is not grave enough.
From this point of view, however, it is obvious that any motion to vacate the judgment on the ground of the
irregularity in question must fail unless it shows that the defendant was prejudiced by that irregularity. The least,
therefore, that can be required of the proponent of such a motion is to show that he had a good defense against the
action to foreclose the mortgage. Nothing of the kind is, however, shown either in the motion or in the affidavit which
accompanies the motion.
An application to open or vacate a judgment because of an irregularity or defect in the proceedings is usually required
to be supported by an affidavit showing the grounds on which the relief is sought, and in addition to this showing also
a meritorious defense to the action. It is held that a general statement that a party has a good defense to the action is
insufficient. The necessary facts must be averred. Of course if a judgment is void upon its face a showing of the
existence of a meritorious defense is not necessary. (10 R. C. L., 718.)
The lapse of time is also a circumstance deeply affecting this aspect of the case. In this connection we quote the
following passage from the encyclopedic treatise now in course of publication:
Where, however, the judgment is not void on its face, and may therefore be enforced if permitted to stand on the
record, courts in many instances refuse to exercise their quasi equitable powers to vacate a judgement after the lapse
of the term ay which it was entered, except in clear cases, to promote the ends of justice, and where it appears that the
party making the application is himself without fault and has acted in good faith and with ordinary diligence. Laches
on the part of the applicant, if unexplained, is deemed sufficient ground for refusing the relief to which he might
otherwise be entitled. Something is due to the finality of judgments, and acquiescence or unnecessary delay is fatal to
motions of this character, since courts are always reluctant to interfere with judgments, and especially where they
have been executed or satisfied. The moving party has the burden of showing diligence, and unless it is shown
affirmatively the court will not ordinarily exercise its discretion in his favor. (15 R. C. L., 694, 695.)
It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died January 29, 1910. The
mortgage under which the property was sold was executed far back in 1906; and the proceedings in the foreclosure
were closed by the order of court confirming the sale dated August 7, 1908. It passes the rational bounds of human
credulity to suppose that a man who had placed a mortgage upon property worth nearly P300,000 and had then gone
away from the scene of his life activities to end his days in the city of Amoy, China, should have long remained in
ignorance of the fact that the mortgage had been foreclosed and the property sold, even supposing that he had no
knowledge of those proceedings while they were being conducted. It is more in keeping with the ordinary course of
things that he should have acquired information as to what was transpiring in his affairs at Manila; and upon the basis
of this rational assumption we are authorized, in the absence of proof to the contrary, to presume that he did have, or
soon acquired, information as to the sale of his property.
The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things have happened
according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive of a situation more appropriate than
this for applying the presumption thus defined by the lawgiver. In support of this presumption, as applied to the
present case, it is permissible to consider the probability that the defendant may have received actual notice of these
proceedings from the unofficial notice addressed to him in Manila which was mailed by an employee of the bank's
attorneys. Adopting almost the exact words used by the Supreme Court of the United States in Grannis vs. Ordeans
(234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-known skill of postal officials and employees in
making proper delivery of letters defectively addressed, we think the presumption is clear and strong that this notice
reached the defendant, there being no proof that it was ever returned by the postal officials as undelivered. And if it
was delivered in Manila, instead of being forwarded to Amoy, China, there is a probability that the recipient was a
person sufficiently interested in his affairs to send it or communicate its contents to him.
Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon the mailing of the
notice by the clerk, the reflections in which we are now indulging would be idle and frivolous; but the considerations
mentioned are introduced in order to show the propriety of applying to this situation the legal presumption to which
allusion has been made. Upon that presumption, supported by the circumstances of this case, ,we do not hesitate to
found the conclusion that the defendant voluntarily abandoned all thought of saving his property from the obligation
which he had placed upon it; that knowledge of the proceedings should be imputed to him; and that he acquiesced in
the consequences of those proceedings after they had been accomplished. Under these circumstances it is clear that
the merit of this motion is, as we have already stated, adversely affected in a high degree by the delay in asking for
relief. Nor is it an adequate reply to say that the proponent of this motion is an administrator who only qualified a few
months before this motion was made. No disability on the part of the defendant himself existed from the time when
the foreclosure was effected until his death; and we believe that the delay in the appointment of the administrator and
institution of this action is a circumstance which is imputable to the parties in interest whoever they may have been.
Of course if the minor heirs had instituted an action in their own right to recover the property, it would have been
different.
It is, however, argued that the defendant has suffered prejudice by reason of the fact that the bank became the
purchaser of the property at the foreclosure sale for a price greatly below that which had been agreed upon in the
mortgage as the upset price of the property. In this connection, it appears that in article nine of the mortgage which
was the subject of this foreclosure, as amended by the notarial document of July 19, 1906, the parties to this mortgage
made a stipulation to the effect that the value therein placed upon the mortgaged properties should serve as a basis of
sale in case the debt should remain unpaid and the bank should proceed to a foreclosure. The upset price stated in
that stipulation for all the parcels involved in this foreclosure was P286,000. It is said in behalf of the appellant that
when the bank bought in the property for the sum of P110,200 it violated that stipulation.
It has been held by this court that a clause in a mortgage providing for a tipo, or upset price, does not prevent a
foreclosure, nor affect the validity of a sale made in the foreclosure proceedings. (Yangco vs. Cruz Herrera and Wy
Piaco, 11 Phil. Rep., 402; Banco-Español Filipino vs. Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both the cases here
cited the property was purchased at the foreclosure sale, not by the creditor or mortgagee, but by a third party.
Whether the same rule should be applied in a case where the mortgagee himself becomes the purchaser has
apparently not been decided by this court in any reported decision, and this question need not here be considered,
since it is evident that if any liability was incurred by the bank by purchasing for a price below that fixed in the
stipulation, its liability was a personal liability derived from the contract of mortgage; and as we have already
demonstrated such a liability could not be the subject of adjudication in an action where the court had no jurisdiction
over the person of the defendant. If the plaintiff bank became liable to account for the difference between the upset
price and the price at which in bought in the property, that liability remains unaffected by the disposition which the
court made of this case; and the fact that the bank may have violated such an obligation can in no wise affect the
validity of the judgment entered in the Court of First Instance.
In connection with the entire failure of the motion to show either a meritorious defense to the action or that the
defendant had suffered any prejudice of which the law can take notice, we may be permitted to add that in our opinion
a motion of this kind, which proposes to unsettle judicial proceedings long ago closed, can not be considered with
favor, unless based upon grounds which appeal to the conscience of the court. Public policy requires that judicial
proceedings be upheld. The maximum here applicable is non quieta movere. As was once said by Judge Brewer,
afterwards a member of the Supreme Court of the United States:
Public policy requires that judicial proceedings be upheld, and that titles obtained in those proceedings be safe from
the ruthless hand of collateral attack. If technical defects are adjudged potent to destroy such titles, a judicial sale will
never realize that value of the property, for no prudent man will risk his money in bidding for and buying that title
which he has reason to fear may years thereafter be swept away through some occult and not readily discoverable
defect. (Martin vs. Pond, 30 Fed., 15.)
In the case where that language was used an attempt was made to annul certain foreclosure proceedings on the
ground that the affidavit upon which the order of publication was based erroneously stated that the State of Kansas,
when he was in fact residing in another State. It was held that this mistake did not affect the validity of the
proceedings.
In the preceding discussion we have assumed that the clerk failed to send the notice by post as required by the order
of the court. We now proceed to consider whether this is a proper assumption; and the proposition which we propose
to establish is that there is a legal presumption that the clerk performed his duty as the ministerial officer of the court,
which presumption is not overcome by any other facts appearing in the cause.
In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a presumption "that official
duty has been regularly performed;" and in subsection 18 it is declared that there is a presumption "that the ordinary
course of business has been followed." These presumptions are of course in no sense novelties, as they express ideas
which have always been recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium.
There is therefore clearly a legal presumption that the clerk performed his duty about mailing this notice; and we
think that strong considerations of policy require that this presumption should be allowed to operate with full force
under the circumstances of this case. A party to an action has no control over the clerk of the court; and has no right to
meddle unduly with the business of the clerk in the performance of his duties. Having no control over this officer, the
litigant must depend upon the court to see that the duties imposed on the clerk are performed.
Other considerations no less potent contribute to strengthen the conclusion just stated. There is no principle of law
better settled than that after jurisdiction has once been required, every act of a court of general jurisdiction shall be
presumed to have been rightly done. This rule is applied to every judgment or decree rendered in the various stages
of the proceedings from their initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S.,
449); and if the record is silent with respect to any fact which must have been established before the court could have
rightly acted, it will be presumed that such fact was properly brought to its knowledge. (The Lessee of Grignon vs.
Astor, 2 How., 319; 11 L. ed., 283.)
In making the order of sale [of the real state of a decedent] the court are presumed to have adjudged every question
necessary to justify such order or decree, viz: The death of the owners; that the petitioners were his administrators;
that the personal estate was insufficient to pay the debts of the deceased; that the private acts of Assembly, as to the
manner of sale, were within the constitutional power of the Legislature, and that all the provisions of the law as to
notices which are directory to the administrators have been complied with. . . . The court is not bound to enter upon
the record the evidence on which any fact was decided. (Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially
does all this apply after long lapse of time.
Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive discussion in a case
analogous to that which is now before us. It there appeared that in order to foreclose a mortgage in the State of
Kentucky against a nonresident debtor it was necessary that publication should be made in a newspaper for a
specified period of time, also be posted at the front door of the court house and be published on some Sunday,
immediately after divine service, in such church as the court should direct. In a certain action judgment had been
entered against a nonresident, after publication in pursuance of these provisions. Many years later the validity of the
proceedings was called in question in another action. It was proved from the files of an ancient periodical that
publication had been made in its columns as required by law; but no proof was offered to show the publication of the
order at the church, or the posting of it at the front door of the court-house. It was insisted by one of the parties that
the judgment of the court was void for lack of jurisdiction. But the Supreme Court of the United States said:
The court which made the decree . . . was a court of general jurisdiction. Therefore every presumption not inconsistent
with the record is to be indulged in favor of its jurisdiction. . . . It is to be presumed that the court before making its
decree took care of to see that its order for constructive service, on which its right to make the decree depended, had
been obeyed.
It is true that in this case the former judgment was the subject of collateral , or indirect attack, while in the case at bar
the motion to vacate the judgment is direct proceeding for relief against it. The same general presumption, however, is
indulged in favor of the judgment of a court of general jurisdiction, whether it is the subject of direct or indirect attack
the only difference being that in case of indirect attack the judgment is conclusively presumed to be valid unless the
record affirmatively shows it to be void, while in case of direct attack the presumption in favor of its validity may in
certain cases be overcome by proof extrinsic to the record.
The presumption that the clerk performed his duty and that the court made its decree with the knowledge that the
requirements of law had been complied with appear to be amply sufficient to support the conclusion that the notice
was sent by the clerk as required by the order. It is true that there ought to be found among the papers on file in this
cause an affidavit, as required by section 400 of the Code of Civil Procedure, showing that the order was in fact so sent
by the clerk; and no such affidavit appears. The record is therefore silent where it ought to speak. But the very
purpose of the law in recognizing these presumptions is to enable the court to sustain a prior judgment in the face of
such an omission. If we were to hold that the judgment in this case is void because the proper affidavit is not present
in the file of papers which we call the record, the result would be that in the future every title in the Islands resting
upon a judgment like that now before us would depend, for its continued security, upon the presence of such affidavit
among the papers and would be liable at any moment to be destroyed by the disappearance of that piece of paper. We
think that no court, with a proper regard for the security of judicial proceedings and for the interests which have by
law been confided to the courts, would incline to favor such a conclusion. In our opinion the proper course in a case of
this kind is to hold that the legal presumption that the clerk performed his duty still maintains notwithstanding the
absence from the record of the proper proof of that fact.
In this connection it is important to bear in mind that under the practice prevailing in the Philippine Islands the word
"record" is used in a loose and broad sense, as indicating the collective mass of papers which contain the history of all
the successive steps taken in a case and which are finally deposited in the archives of the clerk's office as a memorial
of the litigation. It is a matter of general information that no judgment roll, or book of final record, is commonly kept
in our courts for the purpose of recording the pleadings and principal proceedings in actions which have been
terminated; and in particular, no such record is kept in the Court of First Instance of the city of Manila. There is,
indeed, a section of the Code of Civil Procedure which directs that such a book of final record shall be kept; but this
provision has, as a matter of common knowledge, been generally ignored. The result is that in the present case we do
not have the assistance of the recitals of such a record to enable us to pass upon the validity of this judgment and as
already stated the question must be determined by examining the papers contained in the entire file.
But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing that upon April 4,
1908, he sent a notification through the mail addressed to the defendant at Manila, Philippine Islands, should be
accepted as affirmative proof that the clerk of the court failed in his duty and that, instead of himself sending the
requisite notice through the mail, he relied upon Bernardo to send it for him. We do not think that this is by any
means a necessary inference. Of course if it had affirmatively appeared that the clerk himself had attempted to comply
with this order and had directed the notification to Manila when he should have directed it to Amoy, this would be
conclusive that he had failed to comply with the exact terms of the order; but such is not this case. That the clerk of the
attorneys for the plaintiff erroneously sent a notification to the defendant at a mistaken address affords in our opinion
very slight basis for supposing that the clerk may not have sent notice to the right address.
There is undoubtedly good authority to support the position that when the record states the evidence or makes an
averment with reference to a jurisdictional fact, it will not be presumed that there was other or different evidence
respecting the fact, or that the fact was otherwise than stated. If, to give an illustration, it appears from the return of
the officer that the summons was served at a particular place or in a particular manner, it will not be presumed that
service was also made at another place or in a different manner; or if it appears that service was made upon a person
other than the defendant, it will not be presumed, in the silence of the record, that it was made upon the defendant
also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97 U. S., 444, 449). While we believe that these
propositions are entirely correct as applied to the case where the person making the return is the officer who is by
law required to make the return, we do not think that it is properly applicable where, as in the present case, the
affidavit was made by a person who, so far as the provisions of law are concerned, was a mere intermeddler.
The last question of importance which we propose to consider is whether a motion in the cause is admissible as a
proceeding to obtain relief in such a case as this. If the motion prevails the judgment of July 2, 1908, and all
subsequent proceedings will be set aside, and the litigation will be renewed, proceeding again from the date
mentioned as if the progress of the action had not been interrupted. The proponent of the motion does not ask the
favor of being permitted to interpose a defense. His purpose is merely to annul the effective judgment of the court, to
the end that the litigation may again resume its regular course.
There is only one section of the Code of Civil Procedure which expressly recognizes the authority of a Court of First
Instance to set aside a final judgment and permit a renewal of the litigation in the same cause. This is as follows:
SEC. 113. Upon such terms as may be just the court may relieve a party or legal representative from the judgment,
order, or other proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect;
Provided, That application thereof be made within a reasonable time, but in no case exceeding six months after such
judgment, order, or proceeding was taken.
An additional remedy by petition to the Supreme Court is supplied by section 513 of the same Code. The first
paragraph of this section, in so far as pertinent to this discussion, provides as follows:
When a judgment is rendered by a Court of First Instance upon default, and a party thereto is unjustly deprived of a
hearing by fraud, accident, mistake or excusable negligence, and the Court of First Instance which rendered the
judgment has finally adjourned so that no adequate remedy exists in that court, the party so deprived of a hearing
may present his petition to the Supreme Court within sixty days after he first learns of the rendition of such judgment,
and not thereafter, setting forth the facts and praying to have judgment set aside. . . .
It is evident that the proceeding contemplated in this section is intended to supplement the remedy provided by
section 113; and we believe the conclusion irresistible that there is no other means recognized by law whereby a
defeated party can, by a proceeding in the same cause, procure a judgment to be set aside, with a view to the renewal
of the litigation.
The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it contains provisions
describing with much fullness the various steps to be taken in the conduct of such proceedings. To this end it defines
with precision the method of beginning, conducting, and concluding the civil action of whatever species; and by
section 795 of the same Code it is declared that the procedure in all civil action shall be in accordance with the
provisions of this Code. We are therefore of the opinion that the remedies prescribed in sections 113 and 513 are
exclusive of all others, so far as relates to the opening and continuation of a litigation which has been once concluded.
The motion in the present case does not conform to the requirements of either of these provisions; and the
consequence is that in our opinion the action of the Court of First Instance in dismissing the motion was proper.
If the question were admittedly one relating merely to an irregularity of procedure, we cannot suppose that this
proceeding would have taken the form of a motion in the cause, since it is clear that, if based on such an error, the
came to late for relief in the Court of First Instance. But as we have already seen, the motion attacks the judgment of
the court as void for want of jurisdiction over the defendant. The idea underlying the motion therefore is that
inasmuch as the judgment is a nullity it can be attacked in any way and at any time. If the judgment were in fact void
upon its face, that is, if it were shown to be a nullity by virtue of its own recitals, there might possibly be something in
this. Where a judgment or judicial order is void in this sense it may be said to be a lawless thing, which can be treated
as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head.
But the judgment in question is not void in any such sense. It is entirely regular in form, and the alleged defect is one
which is not apparent upon its face. It follows that even if the judgment could be shown to be void for want of
jurisdiction, or for lack of due process of law, the party aggrieved thereby is bound to resort to some appropriate
proceeding to obtain relief. Under accepted principles of law and practice, long recognized in American courts, a
proper remedy in such case, after the time for appeal or review has passed, is for the aggrieved party to bring an
action to enjoin the judgment, if not already carried into effect; or if the property has already been disposed of he may
institute suit to recover it. In every situation of this character an appropriate remedy is at hand; and if property has
been taken without due process, the law concedes due process to recover it. We accordingly old that, assuming the
judgment to have been void as alleged by the proponent of this motion, the proper remedy was by an original
proceeding and not by motion in the cause. As we have already seen our Code of Civil Procedure defines the
conditions under which relief against a judgment may be productive of conclusion for this court to recognize such a
proceeding as proper under conditions different from those defined by law. Upon the point of procedure here
involved, we refer to the case of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not lie to
vacate a judgment after the lapse of the time limited by statute if the judgment is not void on its face; and in all cases,
after the lapse of the time limited by statute if the judgment is not void on its face; and all cases, after the lapse of such
time, when an attempt is made to vacate the judgment by a proceeding in court for that purpose an action regularly
brought is preferable, and should be required. It will be noted taken verbatim from the California Code (sec. 473).
The conclusions stated in this opinion indicate that the judgment appealed from is without error, and the same is
accordingly affirmed, with costs. So ordered.
G.R. No. 46631 November 16, 1939
IDONAH SLADE PERKINS, petitioner,
vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE ARTHUR PERKINS, and BENGUET
CONSOLIDATED MINING COMPANY, respondents.
Alva J. Hill for petitioner.
Ross, Lawrence, Selph & Carrascoso for respondent Judge and Benguet Consolidated Mining Company.
DeWitt, Perkins & Ponce Enrile for respondent Perkins.
MORAN, J.:
On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of First Instance of Manila
against the Benguet Consolidated Mining Company for dividends amounting to P71,379.90 on 52,874 shares of stock
registered in his name, payment of which was being withheld by the company; and, for the recognition of his right to
the control and disposal of said shares, to the exclusion of all others. To the complaint, the company filed its answer
alleging, by way of defense, that the withholding of such dividends and the non-recognition of plaintiff's right to the
disposal and control of the shares were due to certain demands made with respect to said shares by the petitioner
herein, Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that the adverse claimants be made
parties to the action and served with notice thereof by publication, and that thereafter all such parties be required to
interplead and settle the rights among themselves. On September 5, 1938, the trial court ordered respondent Eugene
Arthur Perkins to include in his complaint as parties defendant petitioner, Idonah Slade Perkins, and George H.
Engelhard. The complaint was accordingly amended and in addition to the relief prayed for in the original complaint,
respondent Perkins prayed that petitioner Idonah Slade Perkins and George Engelhard be adjudged without interest
in the shares of stock in question and excluded from any claim they assert thereon. Thereafter, summons by
publication were served upon the non-resident defendants, Idonah Slade Perkins and George H. Engelhard, pursuant
to the order of the trial court. On December 9, 1938, Engelhard filed his answer to the amended complaint, and on
December 10, 1938, petitioner Idonah Slade Perkins, through counsel, filed her pleading entitled "objection to venue,
motion to quash, and demurrer to jurisdiction" wherein she challenged the jurisdiction of the lower court over her
person. Petitioner's objection, motion and demurrer having been overruled as well as her motion for reconsideration
of the order of denial, she now brought the present petition for certiorari, praying that the summons by publication
issued against her be declared null and void, and that, with respect to her, respondent Judge be permanently
prohibited from taking any action on the case.
The controlling issue here involved is whether or not the Court of First Instance of Manila has acquired jurisdiction
over the person of the present petitioner as a non-resident defendant, or, notwithstanding the want of such
jurisdiction, whether or not said court may validly try the case. The parties have filed lengthy memorandums relying
on numerous authorities, but the principles governing the question are well settled in this jurisdiction.
Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is sued in the Philippine
courts and it appears, by the complaint or by affidavits, that the action relates to real or personal property within the
Philippines in which said defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding such person from any interest therein, service of summons maybe
made by publication.
We have fully explained the meaning of this provision in El Banco Español Filipino vs. Palanca, 37 Phil., 921, wherein
we laid down the following rules:
(1) In order that the court may validly try a case, it must have jurisdiction over the subject-matter and over the
persons of the parties. Jurisdiction over the subject-matter is acquired by concession of the sovereign authority which
organizes a court and determines the nature and extent of its powers in general and thus fixes its jurisdiction with
reference to actions which it may entertain and the relief it may grant. Jurisdiction over the persons of the parties is
acquired by their voluntary appearance in court and their submission to its authority, or by the coercive power of
legal process exerted over their persons.
(2) When the defendant is a non-resident and refuses to appear voluntary, the court cannot acquire jurisdiction over
his person even if the summons be served by publication, for he is beyond the reach of judicial process. No tribunal
established by one State can extend its process beyond its territory so as to subject to its decisions either persons or
property located in another State. "There are many expressions in the American reports from which it might be
inferred that the court acquires personal jurisdiction over the person of the defendant by publication and notice; but
such is not the case. In truth, the proposition that jurisdiction over the person of a non-resident cannot be acquired by
publication and notice was never clearly understood even in the American courts until after the decision had been
rendered by the Supreme Court of the United States in the leading case of Pennoyer v. Neff (95 U.S., 714; 24 Law. ed.,
565). In the light of that decisions which have subsequently been rendered in that and other courts, the proposition
that jurisdiction over the person cannot be thus acquired by publication and notice is no longer open to question; and
it is now fully established that a personal judgment upon constructive or substituted service against a non-resident
who does not appear is wholly invalid. This doctrine applies to all kinds of constructive or substituted process,
including service by publication and personal service outside of the jurisdiction in which the judgment is rendered;
and the only exception seems to be found in the case where the non-resident defendant has expressly or impliedly
consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S.], 292; see also L.R.A. 585; 35 L.R.A. [N.S.],
312.)
(3) The general rule, therefore, is that a suit against a non-resident cannot be entertained by a Philippine court.
Where, however, the action is in rem or quasi in rem in connection with property located in the Philippines, the court
acquires jurisdiction over the res, and its jurisdiction over the person of the non-resident is non-essential. In order
that the court may exercise power over the res, it is not necessary that the court should take actual custody of the
property, potential custody thereof being sufficient. There is potential custody when, from the nature of the action
brought, the power of the court over the property is impliedly recognized by law. "An illustration of what we term
potential jurisdiction over the res, is found in the proceeding to register the title of land under our system for the
registration of land. Here the court, without taking actual physical control over the property , assumes, at the instance
of some person claiming to be owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in
favor of the petitioner against all the world."
(4) As before stated, in an action in rem or quasi in rem against a non-resident defendant, jurisdiction over his person
is non-essential, and if the law requires in such case that the summons upon the defendant be served by publication, it
is merely to satisfy the constitutional requirement of due process. If any be said, in this connection, that "may reported
cases can be cited in which it is assumed that the question of the sufficiency of publication or notice in the case of this
kind is a question affecting the jurisdiction of the court, and the court is sometimes said to acquire jurisdiction by
virtue of the publication. This phraseology was undoubtedly originally adopted by the court because of the analogy
between service by publication and personal service of process upon the defendant; and, as has already been
suggested, prior to the decision of Pennoyer v. Neff (supra), the difference between the legal effects of the two forms of
service was obscure. It is accordingly not surprising that the modes of expression which had already been moulded
into legal tradition before that case was decided have been brought down to the present day. But it is clear that the
legal principle here involved is not affected by the peculiar languages in which the courts have expounded their
ideas."lawphi1.net
The reason for the rule that Philippine courts cannot acquire jurisdiction over the person of a non-resident, as laid
down by the Supreme Court of the United States in Pennoyer v. Neff, supra, may be found in a recognized principle of
public law to the effect that "no State can exercise direct jurisdiction and authority over persons or property without
its territory. Story, Confl. L., ch. 2; Wheat, Int. L., pt. 2, ch. 2. The several States are of equal dignity and authority, and
the independence of one implies the exclusion of power from all others. And so it is laid down by jurists, as an
elementary principle, that the laws of one State have no operation outside of its territory, except so far as is allowed
by comity; and that no tribunal established by it can extend its process beyond that territory so as to subject either
persons or property to its decisions. "Any exertion of authority of this sort beyond this limit," says Story, "is a mere
nullity, and incapable of binding such persons or property in any other tribunals." Story, Confl. L., sec. 539." (Pennoyer
v. Neff, 95 U.S., 714; 24 Law. ed., 565, 568-569.).
When, however, the action relates to property located in the Philippines, the Philippine courts may validly try the
case, upon the principle that a "State, through its tribunals, may subject property situated within its limits owned by
non-residents to the payment of the demand of its own citizens against them; and the exercise of this jurisdiction in no
respect infringes upon the sovereignty of the State where the owners are domiciled. Every State owes protection to its
citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority to hold and
appropriate any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the State's
jurisdiction over the property of the non-resident situated within its limits that its tribunals can inquire into the non-
resident's obligations to its own citizens, and the inquiry can then be carried only to the extent necessary to control
the disposition of the property. If the non-resident has no property in the State, there is nothing upon which the
tribunals can adjudicate." (Pennoyer v. Neff, supra.)
In the instant case, there can be no question that the action brought by Eugene Arthur Perkins in his amended
complaint against the petitioner, Idonah Slade Perkins, seeks to exclude her from any interest in a property located in
the Philippines. That property consists in certain shares of stocks of the Benguet Consolidated Mining Company,
a sociedad anonima, organized in the Philippines under the provisions of the Spanish Code of Commerce, with its
principal office in the City of Manila and which conducts its mining activities therein. The situs of the shares is in the
jurisdiction where the corporation is created, whether the certificated evidencing the ownership of those shares are
within or without that jurisdiction. (Fletcher Cyclopedia Corporations, Permanent ed. Vol. 11, p. 95). Under these
circumstances, we hold that the action thus brought is quasi in rem, for while the judgement that may be rendered
therein is not strictly a judgment in rem, "it fixes and settles the title to the property in controversy and to that extent
partakes of the nature of the judgment in rem." (50 C.J., p 503). As held by the Supreme Court of the United States
in Pennoyer v. Neff (supra);
It is true that, in a strict sense, a proceeding in rem is one taken directly against property, and has for its object the
disposition of the property, without reference to the title of individual claimants; but , in a large and more general
sense, the terms are applied to actions between parties, where the direct object is to reach and dispose of property
owned by them, or of some interest therein.
The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction over the person of the non-
resident. In order to satisfy the constitutional requirement of due process, summons has been served upon her by
publication. There is no question as to the adequacy of publication made nor as to the mailing of the order of
publication to the petitioner's last known place of residence in the United States. But, of course, the action being quasi
in rem and notice having be made by publication, the relief that may be granted by the Philippine court must be
confined to the res, it having no jurisdiction to render a personal judgment against the non-resident. In the amended
complaint filed by Eugene Arthur Perkins, no money judgment or other relief in personam is prayed for against the
petitioner. The only relief sought therein is that she be declared to be without any interest in the shares in
controversy and that she be excluded from any claim thereto.
Petitioner contends that the proceeding instituted against her is one of interpleading and is therefore an action in
personam. Section 120 of our Code of Civil Procedure provides that whenever conflicting claims are or may be made
upon a person for or relating to personal property, or the performance of an obligation or any portion thereof, so that
he may be made subject to several actions by different persons, such person may bring an action against the
conflicting claimants, disclaiming personal interest in the controversy, and the court may order them to interplead
with one another and litigate their several claims among themselves, there upon proceed to determine their several
claims. Here, The Benguet Consolidated Mining Company, in its answer to the complaint filed by Eugene Arthur
Perkins, averred that in connection with the shares of stock in question, conflicting claims were being made upon it by
said plaintiff, Eugene Arthur Perkins, his wife Idonah Slade Perkins, and one named George H. Engelhard, and prayed
that these last two be made parties to the action and served with summons by publication, so that the three claimants
may litigate their conflicting claims and settle their rights among themselves. The court has not issued an order
compelling the conflicting claimants to interplead with one another and litigate their several claims among
themselves, but instead ordered the plaintiff to amend his complaint including the other two claimants as parties
defendant. The plaintiff did so, praying that the new defendants thus joined be excluded fro any interest in the shares
in question, and it is upon this amended complaint that the court ordered the service of the summons by publication.
It is therefore, clear that the publication of the summons was ordered not in virtue of an interpleading, but upon the
filing of the amended complaint wherein an action quasi in rem is alleged.
Had not the complaint been amended, including the herein petitioner as an additional defendant, and had the court,
upon the filing of the answer of the Benguet Consolidated Mining Company, issued an order under section 120 of the
Code of Civil Procedure, calling the conflicting claimants into court and compelling them to interplead with one
another, such order could not perhaps have validly been served by publication or otherwise, upon the non-resident
Idonah Slade Perkins, for then the proceeding would be purely one of interpleading. Such proceeding is a personal
action, for it merely seeks to call conflicting claimants into court so that they may interplead and litigate their several
claims among themselves, and no specific relief is prayed for against them, as the interpleader have appeared in court,
one of them pleads ownership of the personal property located in the Philippines and seeks to exclude a non-resident
claimant from any interest therein, is a question which we do not decide not. Suffice it to say that here the service of
the summons by publication was ordered by the lower court by virtue of an action quasi in rem against the non-
resident defendant.
Respondents contend that, as the petitioner in the lower court has pleaded over the subject-matter, she has submitted
herself to its jurisdiction. We have noticed, however, that these pleas have been made not as independent grounds for
relief, but merely as additional arguments in support of her contention that the lower court had no jurisdiction over
the person. In other words, she claimed that the lower court had no jurisdiction over her person not only because she
is a non-resident, but also because the court had no jurisdiction over the subject-matter of the action and that the
issues therein involved have already been decided by the New York court and are being relitigated in the California
court. Although this argument is obviously erroneous, as neither jurisdiction over the subject-matter nor res
adjudicata nor lis pendens has anything to do with the question of jurisdiction over her person, we believe and so hold
that the petitioner has not, by such erroneous argument, submitted herself to the jurisdiction of the court. Voluntary
appearance cannot be implied from either a mistaken or superflous reasoning but from the nature of the relief prayed
for.
For all the foregoing, petition is hereby denied, with costs against petitioner.
G.R. No. 47517 June 27, 1941
IDONAH SLADE PERKINS, petitioner,
vs.
MAMERTO ROXAS, ET AL., respondents.
Alva J. Hill for petitioner.
DeWitt, Perkins & Ponce Enrile for respondent Judge and respondent Perkins.
Ross, Lawrence, Selph & Carrascoso, Jr., for respondent Benguet Consolidated Mining Co.
LAUREL, J.:
On July 5, 1938, the respondent Eugene Arthur Perkins, filed a complaint in the Court of First Instance of Manila
against the Benguet Consolidated Mining Company for the recovery of the sum of P71,379.90, consisting of dividends
which have been declared and made payable on 52,874 shares of stock registered in his name, payment of which was
being withheld by the company, and for the recognition of his right to the control and disposal of said shares, to the
exclusion of all others. To the complaint, the company filed its answer, alleging, by way of defense, that the
withholding of plaintiff's right to the disposal and control of the shares was due to certain demands made with respect
to said shares by the petitioner herein. Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that
the adverse claimants be made parties to the action and served with notice thereof by publication, and that thereafter
all such parties be required to interplead and settle the rights among themselves.
On September 5, 1938, the trial court ordered the respondent, Eugene Arthur Perkins, to include in his complaint as
parties defendants petitioner, Idonah Slade Perkins, and George H. Engelhard. The complaint was accordingly
amended and in addition to the relief prayed for in the original complaint, respondent Perkins prayed that petitioner
Idonah Slade Perkins and George H. Engelhard be adjudged without interest in the shares of stock in question and
excluded from any claim they assert thereon. Thereafter, summons by publication were served upon the non-resident
defendants, Idonah Slade Perkins and George H. Engelhard, pursuant to the order of the trial court. On December 9,
1938, Engelhard filed his answer to the amended complaint, and on January 8, 1940, petitioner's objection to the
court's jurisdiction over her person having been overruled by the trial court and by this court in G. R. No. 46831,
petitioner filed her answer with a cross-complaint in which she sets up a judgment allegedly obtained by her against
respondent, Eugene Arthur Perkins, from the Supreme Court of the State of New York, wherein it is declared that she
is the sole legal owner and entitled to the possession and control of the shares of stock in question together with all
the cash dividends declared thereon by the Benguet Consolidated Mining Company, and prays for various affirmative
reliefs against the respondent. To the answer and cross-complaint thus filed, the respondent, Eugene Arthur Perkins,
filed a reply and an answer in which he sets up several defenses to the enforcement in this jurisdiction of the
judgment of the Supreme Court of the State of New York above alluded to. Instead of demurring to the reply on either
of the two grounds specified in section 100 of the Code of Civil Procedure, petitioner, Idonah Slade Perkins, on June 5,
1940, filed a demurrer thereto on the ground that "the court has no jurisdiction of the subject of the action," because
the alleged judgment of the Supreme Court of the State of New York is res judicata.
Petitioner's demurrer having been overruled, she now filed in this court a petition entitled "Certiorari, Prohibition
and Mandamus," alleging that "the respondent judge is about to and will render judgment in the above-mentioned
case disregarding the constitutional rights of this petitioner; contrary to and annulling the final, subsisting, valid
judgment rendered and entered in this petitioner's favor by the courts of the State of New York, ... which decision
is res judicata on all the questions constituting the subject matter of civil case No. 53317, of the Court of First Instance
of Manila; and which New York judgment the Court of First Instance of Manila is without jurisdiction to annul, amend,
reverse, or modify in any respect whatsoever"; and praying that the order of the respondent judge overruling the
demurrer be annulled, and that he and his successors be permanently prohibited from taking any action on the case,
except to dismiss the same.
The only question here to be determined, therefore, is whether or not, in view of the alleged judgment entered in
favor of the petitioner by the Supreme Court of New York, and which is claimed by her to be res judicata on all
questions raised by the respondent, Eugene Arthur Perkins, in civil case No. 53317 of the Court of First Instace of
Manila, the local court has jurisdiction over the subject matter of the action in the said case. By jurisdiction over the
subject matter is meant the nature of the cause of action and of the relief sought, and this is conferred by the sovereign
authority which organizes the court, and is to be sought for in general nature of its powers, or in authority specially
conferred. In the present case, the amended complaint filed by the respondent, Eugene Arthur Perkins, in the court
below alleged the ownership in himself of the conjugal partnership between him and his wife, Idonah Slade Perkins;
that the petitioner, Idonah Slade Perkins, and George H. Engelhard assert claims to and interests in the said stock
adverse to Eugene Arthur Perkins; that such claims are invalid, unfounded, and made only for the purpose of vexing,
hindering and delaying Eugene Arthur Perkins in the exercise of the lawful control over and use of said shares and
dividends accorded to him and by law and by previous orders and decrees of this court; and the said amended
complaint prays, inter alia, "that defendant Benguet Consolidated Mining Company be required and ordered to
recognize the right of the plaintiff to the control and disposal of said shares so standing in his name to the exclusion of
all others; that the additional defendants, Idonah Slade Perkins and George H. Engelhard, be each held to have no
interest or claim in the subject matter of the controversy between plaintiff and defendant Benguet Consolidated
Mining Company, or in or under the judgment to be rendered herein and that by said judgment they, and each of them
be excluded therefrom; and that the plaintiff be awarded the costs of this suit and general relief." The respondent's
action, therefore, calls for the adjudication of title to certain shares of stock of the Benguet Consolidated Mining
Company, and the granting of affirmative reliefs, which fall within the general jurisdiction of the Court of First
Instance of Manila. (Vide: sec. 146, et seq., Adm. Code, as amended by Commonwealth Act No. 145; sec. 56, Act No. 136,
as amended by Act No. 400.)
Similarly, the Court of First Instance of Manila is empowered to adjudicate the several demands contained in
petitioner's cross-complaint. The cross-complaint sets up a judgment allegedly recovered by Idonah Slade Perkins
against Eugene Arthur Perkins in the Supreme Court of New York and by way of relief prays:
(1) Judgment against the plaintiff Eugene Arthur Perkins in the sum of one hundred eighty-five thousand and four
hundred dollars ($185,400), representing cash dividends paid to him by defendant Benguet Consolidated Mining Co.
from February, 1930, up to and including the dividend of March 30, 1937.
(2) That plaintiff Eugene Arthur Perkins be required to deliver to this defendant the certificates representing the
48,000 shares of capital stock of Benguet Consolidated Mining Co. issued as a stock dividend on the 24,000 shares
owned by this defendant as described in the judgment Exhibit 1-A.
(3) That this defendant recover under that judgment Exhibit 1-A interest upon the amount of each cash dividend
referred to in that judgment received by plaintiff Eugene Arthur Perkins from February, 1930, to and including the
dividend of March 30, 1937, from the date of payment of each of such dividends at the rate of 7 per cent per annum
until paid.
(4) That this defendant recover of plaintiff her costs and disbursements in that New York action amounting to the sum
of one thousand five hundred eighty-four and 20/00 dollars ($1,584.20), and the further sum of two thousand dollars
($2,000) granted her in that judgment Exhibit 1-A as an extra allowance, together with interest.
(5) For an order directing an execution to be issued in favor of this defendant and against the plaintiff for amounts
sufficient to satisfy the New York judgment Exhibit 1-A in its entirety, and against the plaintiff and the defendant
Benguet Consolidated Mining Co. for such other amounts prayed for herein as this court may find to be due and
payable by each of them; and ordering them to comply with all other orders which this court may issue in favor of the
defendant in this case.
(6) For the costs of this action, and

(7) For such other relief as may be appropriate and proper in the premises.

In other words, Idonah Slade Perkins in her cross-complaint brought suit against Eugene Arthur Perkins and the
Benguet Consolidated Mining Company upon the alleged judgment of the Supreme Court of the State of New York and
asked the court below to render judgment enforcing that New York judgment, and to issue execution thereon. This is a
form of action recognized by section 309 of the Code of Civil Procedure (now section 47, Rule 39, Rules of Court) and
which falls within the general jurisdiction of the Court of First Instance of Manila, to adjudicate, settled and determine.

The petitioner expresses the fear that the respondent judge may render judgment "annulling the final, subsisting,
valid judgment rendered and entered in this petitioner's favor by the courts of the State of New York, ... which decision
is res judicata on all the questions constituting the subject matter of civil case No. 53317," and argues on the
assumption that the respondent judge is without jurisdiction to take cognizance of the cause. Whether or not the
respondent judge in the course of the proceedings will give validity and efficacy to the New York judgment set up by
the petitioner in her cross-complaint is a question that goes to the merits of the controversy and relates to the rights
of the parties as between each other, and not to the jurisdiction or power of the court. The test of jurisdiction is
whether or not the tribunal has power to enter upon the inquiry, not whether its conclusion in the course of it is right
or wrong. If its decision is erroneous, its judgment case be reversed on appeal; but its determination of the question,
which the petitioner here anticipates and seeks to prevent, is the exercise by that court — and the rightful exercise —
of its jurisdiction.

The petition is, therefore, hereby denied, with costs against the petitioner. So ordered.
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.
TORRES, JR., J.:p
Business Corporations, according to Lord Coke, "have no souls." They do business peddling goods, wares or even
services across national boundaries in "souless 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".1 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. 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.2 The said agreement was initially for a term of twenty-four months. After the lapse of the agreed period,
the agreement was renewed for another twenty-four months.
Through a "License Agreement"3 entered into by the same parties on 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"4 which defined the project details for the supply of ITEC's 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 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.
On January 31, 1991, the complaint6 in Civil Case No. 91-294, was filed 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, plaintiff's trademark,
internationally known as ITEC; and the recovery from defendants in solidum, damages of at least P500,000.00,
attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss7 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".
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,9 defendants took note of the 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: 10 (1) denying the motion to 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 Prohibition11 under Rule 65 of 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 court's) ruling. We therefore
are unable to find in respondent Judge's 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 13 on June 7, 1991, which was 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 Certiorari15 under 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.,16 as to reduce petitioner ASPAC to a 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 business like 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 ITEC's
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 bear
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
respondent's 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.19 and again in TOP-WELD. (supra)" It thus appears that as
the respondent Court of Appeals and the trial court's 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 petitioner's 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 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 per centum of the FOB value of all ITEC equipment sold to customers
within the territory as a direct result of REPRESENTATIVE's sales efforts. 21
More importantly, private respondent charges 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 respondent echoes the respondent court's 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.25 Before a foreign corporation can transact business in this 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 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 licensed 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.28 The implication of 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 totalling one hundred eighty (180) days or more; participating in the management,
supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts
that imply a continuity 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 Philippines31 and a foreign corporation which had been collecting premiums on
outstanding policies 32 were regarded as doing business here.
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, 33 and a foreign corporation engaged in the business 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,35 it was held that the 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,36 for in such case, the foreign 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 corporation's
intention to do other business in the Philippines, said single act or transaction constitutes "doing" or "engaging in" or
"transacting" business in the Philippines.3 7
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 corporation's 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. 38 the
FUTURES CONTRACT entered into by the petitioner foreign corporation weighed heavily in the court's 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 ITEC's 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 Agreement39 with TESSI, private respondent 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
ITEC's 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 ITEC's 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.41 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.42 One who 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 court's 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.46 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.
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).

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.4 7 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.48

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.

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.
G.R. No. 115849 January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO
RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE
JANOLO,respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a
meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa,
Laguna? Does the doctrine of "apparent authority" apply in this case? If so, may the Central Bank-appointed
conservator of Producers Bank (now First Philippine International Bank) repudiate such "apparent authority" after
said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a
"derivative suit" by the majority shareholders and directors of the distressed bank to prevent the enforcement or
implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review
on certiorariunder Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the
respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14, 1994 denying the
motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under
paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00,
to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to
legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's 2 decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants
as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose,
Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title
Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the
defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs
the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6)
parcels of land, and to immediately deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937,
inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of
P200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of
attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of
P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was given
due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply
memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After
carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponentefor the
writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for
brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner
Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head-
Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-
appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this
petition.
The Facts
The facts of this case are summarized in the respondent Court's Decision3 as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land
with a total area of 101 hectares located at Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title
Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation
which had them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio Demetria and Jose
O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose
Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant
bank. The meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the
meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a
letter dated August 30, 1987 (Exh. "B"), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera September 17, 1987
Manager, Property Management Dept.
Producers Bank
Gentleman:
Paseo de Roxas
Makati, Metro Manila
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at
Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.
Attention: Mr. Mercurio Rivera

TCT NO. AREA Gentlemen:

T-106932 113,580 sq. m. In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa, Laguna, I would
like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH..
T-106933 70,899 sq. m.
Hoping that this proposal meets your satisfaction.

T-106934 52,246 sq. m. (5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place was a meeting on
September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as
T-106935 96,768 sq. m. Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the
bank, through Rivera, the following letter (Exh. "E"):

T-106936 187,114 sq. m. The Producers Bank of the Philippines

Paseo de Roxas, Makati
T-106937 481,481 sq. m. Metro Manila

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash. Attention: Mr. Mercurio Rivera

Kindly contact me at Telephone Number 921-1344. Re: 101 Hectares of Land

in Sta. Rosa, Laguna
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder
quoted (Exh. "C"): Gentlemen:

September 1, 1987 Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for
us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE
JP M-P GUTIERREZ ENTERPRISES MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
142 Charisma St., Doña Andres II
Thank you.
Rosario, Pasig, Metro Manila
(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central
Attention: JOSE O. JANOLO
Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On
Dear Sir: November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"):

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Attention: Atty. Demetrio Demetria
Byme Industrial Corp.). Please be informed however that the bank's counter-offer is at P5.5 million for more than 101
Dear Sir:
hectares on lot basis.
Your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta. Rosa, Laguna is
We shall be very glad to hear your position on the on the matter.
under study yet as of this time by the newly created committee for submission to the newly designated Acting
Best regards. Conservator of the bank.

(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply, wrote (Exh. "D"): For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of
plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank. the said lots. Please inform us of the date of documentation of the sale immediately.
As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera
(Exhibit "G") tendered payment of the amount of P5.5 million "pursuant to (our) perfected sale agreement." Kindly acknowledge receipt of our payment.
Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction
were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the execution (9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through
by the bank of the documents on what was considered as a "perfected agreement." Thus: counsel, made a final demand for compliance by the bank with its obligations under the considered perfected contract
of sale (Exhibit "N"). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988
Mr. Mercurio Rivera (Annex "4" of defendant's answer to amended complaint), the defendants through Acting Conservator Encarnacion
Manager, Producers Bank repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-
Paseo de Roxas, Makati offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of
Metro Manila payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract
of sale.
Dear Mr. Rivera:
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rivers and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted
Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937. in a perfected contract of sale, The defendants took the position that there was no such perfected sale because the
defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the
amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan,
October 5, 1987. filed a motion to intervene in the trial court, alleging that as owner of 80% of the Bank's outstanding shares of stock,
he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the
In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for
despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you reconsideration filed thereafter. From the trial court's decision, the Bank, petitioner Rivera and conservator
have advertised for sale the same lot to others. Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment.
Henry Co did not appeal the denial of his motion for intervention.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the
necessary actions/documentation within three (3) days from your receipt hereof. We are ready to remit the agreed In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and
amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to protect Janolo, in view of the assignment of the latters' rights in the matter in litigation to said private respondent.
the interest of our client.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other
We trust that you will be guided accordingly. stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the
"Second Case") — purportedly a "derivative suit" — with the Regional Trial Court of Makati, Branch 134, docketed as
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as
communication of December 2, 1987 (Exh. "I"), that said letter has been "referred . . . to the office of our Conservator unenforceable and to stop Ejercito from enforcing or implementing the sale" 4 In his answer, Janolo argued that the
for proper disposition" However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-
made a second tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice.
Encarnacion. Plaintiffs' letter reads: "Private respondent opposed this motion on the ground, among others, that plaintiff's act of forum shopping justifies
the dismissal of both cases, with prejudice."5 Private respondent, in his memorandum, averred that this motion is still
PRODUCERS BANK OF
pending in the Makati RTC.
THE PHILIPPINES
Paseo de Roxas, In their Petition6 and Memorandum7 , petitioners summarized their position as follows:
Makati, Metro Manila
I.
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of
Demetria and Janolo) and the bank.
We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of
P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, II.
106935, 106936 and 106937 and registered under Producers Bank.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of
previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground 8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no
longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by;
respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency
and the contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke
the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular
No. 28-91 requiring that a party "must certify under oath . . . [that] (a) he has not (t)heretofore commenced any other
action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or
agency; (b) to the best of his knowledge, no such action or proceeding is pending" in said courts or agencies. A
violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or
complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the
record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving
a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the
subject of a pending Motion to Dismiss Without Prejudice. 9
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum
shopping because the instant petition pending before this Court involves "identical parties or interests represented,
rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in
the Second Case. In fact, the issues in the two cases are so interwined that a judgement or resolution in either case will
constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping because:
1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded as a defendant, whereas in
the "Second Case" (assuming the Bank is the real party in interest in a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition
identifies the action as a "derivative suit," it "does not mean that it is one" and "(t)hat is a legal question for the courts
to decide";
4) Petitioners did not hide the Second Case at they mentioned it in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law.12 , where non-resident litigants
are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including
to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a
more friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was
developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the
most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to have his action tried
in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict." Hence,
according to Words and Phrases14 , "a litigant is open to the charge of "forum shopping" whenever he chooses a forum
with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to
settle their differences without imposing undue expenses and vexatious situations on the courts".
In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of venues, as it was
originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules
of Court, for example, allow a plaintiff to commence personal actions "where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4,
Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently
of the criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a vehicular
accident may sue on culpa contractual, culpa aquiliana or culpa criminal — each remedy being available
independently of the others — although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action,
This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and
consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to
some of the parties to the action.
Thus, "forum shopping" had acquired a different concept — which is unethical professional legal practice. And this
necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the
practice. 15
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving
problems has been abused and mis-used to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned,
promulgated Circular 28-91. And even before that, the Court had prescribed it in the Interim Rules and Guidelines
issued on January 11, 1983 and had struck down in several cases 16 the inveterate use of this insidious malpractice.
Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice Andres R.
Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible
manipulation of court processes and proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion
(other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts
but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in
this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a
favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has
no jurisdiction.18
The test for determining whether a party violated the rule against forum shopping has been laid dawn in the 1986
case of Buan vs. Lopez 19 , also by Chief Justice Narvasa, and that is, forum shopping exists where the elements of litis
pendentia are present or where a final judgment in one case will amount to res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such
parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and the identity on the two preceding particulars is such that any judgment
rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the action under
consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties, or
interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise to
the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into operation the
sanction of twin dismissals just mentioned. The application of this sanction will prevent any further delay in the
settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the
Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the
petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom
another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still
pending, the defense of litis pendencia in one case is bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by
the other party as a ground to ask for summary dismissal of the two 20 (or more) complaints or petitions, and for
imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action
against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there
exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the
buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce
the alleged perfected sale of real estate. On the other hand, the complaint 21 in the Second Case seeks to declare such
purported sale involving the same real property "as unenforceable as against the Bank", which is the petitioner herein.
In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to
accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief
being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the
obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22 , this Court ruled
that the filing by a party of two apparently different actions, but with the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein —
PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10,
1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and
petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a
rebidding and from selling to other parties the vessel "T/T Andres Bonifacio", and for an extension of time for it to
comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief
prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is,
approval of the sale of vessel in favor of petitioner and to overturn the letter-directive of the COA of October 10, 1988
disapproving the sale. (emphasis supplied).
In an earlier case 23 but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court
despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions
unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners' claim of
absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not involve
certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before this Court,
the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously
rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of their loans,
obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention
of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took
place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not
become functus oficio. It remained an effective vehicle for obtention of relief; and petitioners' remedy in the premises
was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as
defendant and seek nullification of the acts sought to be enjoined but nonetheless done. The remedy was certainly not
the institution of another action in another forum based on essentially the same facts, The adoption of this latter
recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as well as in the
Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the
plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same
interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in
controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed
contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a "derivative
suit". In the caption itself, petitioners claim to have brought suit "for and in behalf of the Producers Bank of the
Philippines" 24 . Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he
holdsstock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or
are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a
nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
emphasis supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely,
sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority
shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but
also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the
Bank. So, whether they sued "derivatively" or directly, there is undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is separate and distinct
from its shareholders. But the rulings of this Court are consistent: "When the fiction is urged as a means of
perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to
allow for its consideration merely as an aggregation of individuals." 25
In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the instant case, and
declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition
against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a
derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation
itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying
remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as
fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is
identity of parties, causes of action and reliefs sought, "because it (the Bank) was the defendant in the (first) case
while it was the plaintiff in the other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial
Court, Branch 63, Makati, etc. et al., 27 where Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against
the plaintiff — instead of filing a responsive pleading in the other case — setting forth therein, as causes of action,
specific denials, special and affirmative defenses or even counterclaims, Thus, Velhagen's and King's motion to dismiss
Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place.
(emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in
said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present
suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file any responsive
pleading in the first case. In other words, they did not make any denial or raise any defense or counter-claim therein
In the case before us however, petitioners filed a responsive pleading to the complaint — as a result of which, the
issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter–claims in their responsive pleadings, the petitioners
became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the
Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation
caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on
the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly
the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly
conflict with a possible decision in the Second Case barring the parties front enforcing or implementing the said sale.
Indeed, a final decision in one would constitute res judicata in the other 28 .
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is
the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners' present
counsel entered their appearance only during the proceedings in this Court, and the Petition's
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good
faith in observing Circular 28-91. The Lawyers who filed the Second Case are not before us; thus the rudiments of due
process prevent us from motu propio imposing disciplinary measures against them in this Decision. However,
petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules
against forum-shopping and not to trifle with court proceedings and processes They are warned that a repetition of
the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping
but also because of the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established,
a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court
stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets
consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-
106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Bank's Deputy
Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted to
purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the
Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired
assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of
Rivera himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of
July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-
office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise
acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon having been
offered, I present it to the Committee. I provide the Committee with necessary information about the property such as
original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time
the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy
which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also
the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of
sale and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with
and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with
the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before which
the said official is authorized to discuss information relative to price determination. Necessarily, too, it being inherent
in his authority, Rivera is the officer from whom official information regarding the price, as determined by the
Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the
plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his
authority to sell any property?
A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it would take because he was
saying that the matter of pricing will be passed upon by the committee. And when I asked him how long it will take for
the committee to decide and he said the committee meets every week. If I am not mistaken Wednesday and in about
two week's (sic) time, in effect what he was saying he was not the one who was to decide. But he would refer it to the
committee and he would relay the decision of the committee to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he said he would refer the matter to the committee and he would
relay the decision to me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose
Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and
the bank's internal procedure in the matter of the sale of bank's assets. As advised by Rivera, the plaintiffs made a
formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The
letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an
aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed
buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price
on the other, and considering further the discussion of price at the meeting of August resulting in a formal offer of
P3.5 Million in cash, there can be no other logical conclusion than that when, on September 1, 1987, Rivera informed
plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis," such
counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera
had duly presented plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower, bid
price during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts, the price
of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at which the bank
was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed
by the Committee and that price. As correctly characterized by the trial court, this is not credible. The testimonies of
Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character
of these declarations, the bank's submission on this point does not inspire belief. Both Co ad Entereso, as members of
the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the
same vein, both Co and Entereso openly admit that they seldom attend the meetings of the Committee. It is important
to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as
purchase price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will
be submitted for approval by the bank and that the bank's decision will be relayed to plaintiffs. From the facts, the
official bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy and
negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn around and later say, as
it now does, that what Rivera states as the bank's action on the matter is not in fact so. It is a familiar doctrine, the
doctrine of ostensible authority, that if a corporation knowingly permits one of its officers, or any other agent, to do
acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those
acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, he
estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357,
369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: "(1) Consent of
the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which
is established."
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in
Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer Certificates of
Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or
Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for Ejercito (in
substitution of Demetria and Janolo) to accept." 30 They disputed the factual basis of the respondent Court's findings
that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We have
perused the evidence but cannot find fault with the said Court's findings of fact. Verily, in a petition under Rule 45
such as this, errors of fact — if there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and
the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners
is not by itself a reversible error. In fact, such findings merit serious consideration by this Court, particularly where, as
in this case, said courts carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of
Rivera's authority to act and petitioner's allegations that the P5.5 million counter-offer was extinguished by the P4.25
million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual findings of the
respondent Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of "apparent
authority", with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals31 , where it was held
that:
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the
agent. The agent's apparent representation yields to the principal's true representation and the contract is considered
as entered into between the principal and the third person (citing National Food Authority vs. Intermediate Appellate
Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts outside the scape of their authority (9 C.J.S., p. 417). A bank
holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus
be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility
for such frauds even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a
banking corporation is liable to innocent third persons where the representation is made in the course of its business
by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own
ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with the public and
their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where
banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their
depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority
to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case, Manager of the
Property Management Department of the Bank". By his own admission, Rivera was already the person in charge of the
Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting
between the buyers and Rivera, the latter suggested that the buyers' offer should be no less than P3.3 million (TSN,
April 26, 1990, pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to buy the property for P4.25
million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN, January
16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994, during which the Bank's
offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major
shareholder and officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's counter-offer of P5.5
million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the
Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer
mentioned in the Bank's advertisements offering for sale the property in question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32 , the Court, through Justice Jose A. R.
Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P.I.
in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and testimony which
seek to establish Rivera's actual authority. These pieces of evidence, however, are inherently weak as they consist of
Rivera's self-serving testimony and various inter-office memoranda that purport to show his limited actual authority,
of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent authority,
the existence of which is borne out by the respondent Court's findings, the evidence of actual authority is immaterial
insofar as the liability of a corporation is concerned 33 .
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law firm" had once acted
for the Bank in three criminal cases, they should be charged with actual knowledge of Rivera's limited authority. But
the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of Rivera's
actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to any
acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a loose
aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker) acted in said
criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated September 17,
1987 extinguished the Bank's offer of P5.5 million 34 .They disputed the respondent Court's finding that "there was a
meeting of minds when on 30 September 1987 Demetria and Janolo through Annex "L" (letter dated September 30,
1987) "accepted" Rivera's counter offer of P5.5 million under Annex "J" (letter dated September 17, 1987)", citingthe
late Justice Paras35 , Art. 1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs.
Prieto 37 .
However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the
respondent Court which reviewed the testimonies on this point, what was "accepted" by Janolo in his letter dated
September 30, 1987 was the Bank's offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose
Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30, 1987
begins with"(p)ursuant to our discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September
28, 1987 meeting "was meant to have the offerors improve on their position of P5.5. million." 38 However, both the trial
court and the Court of Appeals found petitioners' testimonial evidence "not credible", and we find no basis for
changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA) common finding that private
respondents' evidence is more in keeping with truth and logic — that during the meeting on September 28, 1987, Luis
Co and Rivera "confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be
lowered (TSN of April 27, 1990, pp. 34-35)"39 . Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5 million price during the September 28,
1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there
was a meeting of the minds, as the acceptance in said letter was absolute and unqualified.
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and action, particularly
the latter's counter-offer of P5.5 million, as being "unauthorized and illegal" came only on May 12, 1988 or more than
seven (7) months after Janolo' acceptance. Such delay, and the absence of any circumstance which might have
justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-
minute attempt on the Bank's part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of the
petitioners that the written offer made on September 1, 1987 was carried through during the meeting of September
28, 1987. This is the conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for the first time on As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of
appeal and should thus be disregarded. P5.5 million is a plenty — and the silence of petitioners all throughout the presentation makes the evidence binding
on them thus;
This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and
arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, A Yes, sir, I think it was September 28, 1987 and I was again present because Atty. Demetria told me to accompany
considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243, him we were able to meet Luis Co at the Bank.
November 14, 1986, 145 SCRA 592).40
xxx xxx xxx
. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in
the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty
& Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
August 30, 1990).41
Q What price?
Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an
A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price and that is
opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due
the price they intends (sic) to have, sir.
process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and
we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the
Q What do you mean?.
inevitable conclusion is simply that there was a perfected contract of sale.
A That is the amount they want, sir.
The Third Issue: Is the Contract Enforceable?
Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant Rivera's counter-offer of
The petition alleged42 :
5.5 million was the defendant's bank (sic) final offer?
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28
A He said in a day or two, he will make final acceptance, sir.
September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September
1987, the contract produced thereby would be unenforceable by action — there being no note, memorandum or Q What is the response of Mr. Luis Co?.
writing subscribed by the Bank to evidence such contract. (Please see article 1403[2], Civil Code.)
A He said he will wait for the position of Atty. Demetria, sir.
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs' acceptance of the price on
September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
that a contract of sale was perfected between the parties, such contract being binding in whatever form it may have
been entered into (case citations omitted). Stated simply, the banks' letter of September 1, 1987, taken together with A We went straight to the point because he being a busy person, I told him if the amount of P5.5 million could still be
plaintiffs' letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of sale. reduced and he said that was already passed upon by the committee. What the bank expects which was contrary to
what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million and we should indicate our
The respondent Court could have added that the written communications commenced not only from September 1, position as soon as possible.
1987 but from Janolo's August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient
memoranda — since they include the names of the parties, the terms and conditions of the contract, the price and a Q What was your response to the answer of Mr. Luis Co?
description of the property as the object of the contract.
A I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I and Mr.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a Mercurio [Rivera] was with us at the time at his office.
"new" offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason
of the failure of petitioners to object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence, Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers Bank
petitioners — by such utter failure to object — are deemed to have waived any defects of the contract under the Building during this meeting?
statute of frauds, pursuant to Article 1405 of the Civil Code:
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure to
object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them. Q By Mr. Co you are referring to?
A Mr. Luis Co. May 12, 1988

Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the bank?
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we accepted, the offer of the
Suite 323 Rufino Building
bank which is P5.5 million.
Ayala Avenue, Makati, Metro-Manila
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Dear Atty. Zarate:
Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is not within
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels of
his power to reduce this amount. What can you say to that statement that the amount of P5.5 million was reached by
land located at Sta. Rosa, Laguna.
the Committee?
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a "contract to
A It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetrio
sell and buy" with any of them for the following reasons.
Demetria and Atty. Pajardo (sic) in that September 28, 1987 meeting, sir.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by former Acting Conservator Mr.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of Property Management
The Fourth Issue: May the Conservator Revoke Department (PMD) staff and officers (Annex A.), you will immediately read that Manager Mr. Mercurio Rivera or any
the Perfected and Enforceable Contract. of his subordinates has no authority, power or right to make any alleged counter-offer. In short, your lawyer-clients
did not deal with the authorized officers of the bank.
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines
during the time that the negotiation and perfection of the contract of sale took place. Petitioners energetically Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates Pambansa Blg. 68.) and Sec. 28-A of
contended that the conservator has the power to revoke or overrule actions of the management or the board of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize the sale
directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows: of any property of the corportion/bank..

Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators (starting
Board finds that a bank or a non-bank financial intermediary performing quasi-banking functions is in a state of January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were just preliminary
continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of discussions/consultations between him and your clients, which everyone knows cannot bind the Bank's Board or
depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and Conservator.
the management of that institution, collect all monies and debts due said institution and exercise all powers necessary
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of
to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the
corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said alleged
power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank
tender.
financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and
such other powers as the Monetary Board shall deem necessary.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance with
law. We also have no personal interest in any of the properties of the Bank.
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the perfected contract of sale
was raised for the first time in this Petition — as this was not litigated in the trial court or Court of Appeals. As already
Please be advised accordingly.
stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be raised
for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process." 43 Very truly yours,

In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected, (Sgd.) Leonida T. Encarnacion
actually repudiated or overruled said contract of sale. The Bank's acting conservator at the time, Rodolfo Romey, LEONIDA T. EDCARNACION
never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter Acting Conservator
of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 (Annex V,
petition) which unilaterally repudiated — not the contract — but the authority of Rivera to make a binding offer — In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a
and which unarguably came months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced bank, it must be pointed out that such powers must be related to the "(preservation of) the assets of the bank, (the
hereunder: reorganization of) the management thereof and (the restoration of) its viability." Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution 44 . If the legislature itself cannot revoke an existing
valid contract, how can it delegate such non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing
law, deemed to be defective — i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes
the place of a bank's board of directors. What the said board cannot do — such as repudiating a contract validly
entered into under the doctrine of implied authority — the conservator cannot do either. Ineluctably, his power is not
unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court
actions to assail such contracts — as he has already done so in the instant case. A contrary understanding of the law
would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a
failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke
all previous dealings which had one way or another or come to be considered unfavorable to the Bank, yielding
nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of
Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, 45 , we
held:
. . . The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the
Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the
Revised Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is
limited to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive " [Chan vs.
Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has
emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court"
(Tiongco v. De la Merced, G. R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482,
April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596).
"Barring, therefore, a showing that the findings complained of are totally devoid of support in the record, or that they
are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and documentary evidence submitted by the parties" [Santa Ana,
Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of
evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme Court
to analyze or weigh such evidence all over again. The Supreme Court's jurisdiction is limited to reviewing errors of
law that may have been committed by the lower court. The Supreme Court is not a trier of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development
Corp. 47 :
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises
or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the
findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-
evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company
Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is not the function of this Court
to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly
where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (emphasis
supplied)
Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and conclusions which were
not only contrary to the evidence on record but have no bases at all," specifically the findings that (1) the "Bank's
counter-offer price of P5.5 million had been determined by the past due committee and approved by conservator
Romey, after Rivera presented the same for discussion" and (2) "the meeting with Co was not to scale down the price
and start negotiations anew, but a meeting on the already determined price of P5.5 million" Hence, citingPhilippine
National Bank vs. Court of Appeals 49 , petitioners are asking us to review and reverse such factual findings.
The first point was clearly passed upon by the Court of Appeals 50 , thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter
that "the bank's counter-offer is at P5.5 Million for more than 101 hectares on lot basis, "such counter-offer price had
been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs' offer for discussion by the Committee . . . Tersely put, under the established fact, the price of P5.5 Million
was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive price at which the bank was selling the
property. (p. 11, CA Decision)
xxx xxx xxx
. . . The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28, 1987
between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the possible
lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been passed upon by
the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as "not credible"
and "at best equivocal and considering the gratuitous and self-serving character of these declarations, the bank's
submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on
their behalf, as he would have been in the best position to establish their thesis. Under the rules on evidence 51 , such
suppression gives rise to the presumption that his testimony would have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed insufficient by
both the trial court and the respondent Court, and instead, it was respondent's submissions that were believed and
became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid
and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are
espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of SO ORDERED.
Appeals 52 . We have studied both the records and the CA Decision and we find no such exceptions in this case. On the
contrary, the findings of the said Court are supported by a preponderance of competent and credible evidence. The
inferences and conclusions are seasonably based on evidence duly identified in the Decision. Indeed, the appellate
court patiently traversed and dissected the issues presented before it, lending credibility and dependability to its
findings. The best that can be said in favor of petitioners on this point is that the factual findings of respondent Court
did not correspond to petitioners' claims, but were closer to the evidence as presented in the trial court by private
respondent. But this alone is no reason to reverse or ignore such factual findings, particularly where, as in this case,
the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact of a trial judge
— as affirmed by the Court of Appeals — are conclusive upon this Court, absent any serious abuse or evident lack of
basis or capriciousness of any kind, because the trial court is in a better position to observe the demeanor of the
witnesses and their courtroom manner as well as to examine the real evidence presented.

Epilogue.

In summary, there are two procedural issues involved forum-shopping and the raising of issues for the first time on
appeal [viz., the extinguishment of the Bank's offer of P5.5 million and the conservator's powers to repudiate contracts
entered into by the Bank's officers] — which per se could justify the dismissal of the present case. We did not limit
ourselves thereto, but delved as well into the substantive issues — the perfection of the contract of sale and its
enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of facts
and as a rule we are not required to look into the factual bases of respondent Court's decisions and resolutions, we did
so just the same, if only to find out whether there is reason to disturb any of its factual findings, for we are only too
aware of the depth, magnitude and vigor by which the parties through their respective eloquent counsel, argued their
positions before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-
appointed conservator and "there is need to rehabilitate the Bank in order to get it back on its feet . . . as many people
depend on (it) for investments, deposits and well as employment. As of June 1987, the Bank's overdraft with the
Central Bank had already reached P1.023 billion . . . and there were (other) offers to buy the subject properties for a
substantial amount of money." 53

While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its
eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts, non-
impairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of law and
blind justice.

This Court cannot just gloss over private respondent's submission that, while the subject properties may currently
command a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed upon of
P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for no more
than P3.5 million 54 . That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by
it to promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the increase in
land values. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price
during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts.
Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.

WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the
petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-
shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against
petitioners.
G.R. No. 120077 October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G.
SANTOS, respondents.
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 respondent's 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 attorney's 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, People's 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), MHICL10 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 family's piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's 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. Shmidt's 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 attorney's 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 attorney's 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 unexpired 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) attorney's fees of 10% of complainant's total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Vera's
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 petitioner's 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 People's Republic of
China.
No power to determine the facts. — Neither can the NLRC determine the facts surrounding the alleged illegal dismissal
as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a position to determine
whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify
respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision could be reached by
the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a
corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its
person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign
employers. Neither are we saying that we do not have power over an employment contract executed in a foreign
country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not the NLRC, would
protect him.39 He is not an "overseas contract worker" a fact which he admits with conviction. 40
Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for
Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough
to pierce the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a corporation is a
mere alter ego or business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities."
The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or
complete domination of the other corporation's finances, policy and business practices with regard to the transaction
attacked. There must be proof that the other corporation had no separate mind, will or existence with respect the act
complained of. Second, control must be used by the defendant to commit fraud or wrong. Third, the aforesaid control
or breach of duty must be the proximate cause of the injury or loss complained of. The absence of any of the elements
prevents the piercing of the corporate veil.43
It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of
any other legal entity to which it may be related.44 Clear and convincing evidence is needed to pierce the veil of
corporate fiction.45 In this case, we find no evidence to show that MHICL and MHC are one and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment contract with the
Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the
employment contract as a mere witness. He merely signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or approval, as a party would. 46 In Sichangco v.
Board of Commissioners of Immigration,47 the Court recognized that the term "noted" means that the person so noting
has merely taken cognizance of the existence of an act or declaration, without exercising a judicious deliberation or
rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is that
which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are no
recitals, after the parties (emphasis ours)."48 As opposed to a party to a contract, a witness is simply one who, "being
present, personally sees or perceives a 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; "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
"(3) the power to dismiss; and irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein." 55

"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an
employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage
respondent Santos to work. The terms of employment were negotiated and finalized through correspondence
between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and
not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally,
it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos' services.
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).

Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that MHICL No costs.
"supplied" respondent Santos or even referred him for employment to the Palace Hotel.
SO ORDERED.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the
Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and
the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering further that no employer-employee
relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.

Labor Arbiters have exclusive and original jurisdiction only over the following: 53

"1. Unfair labor practice cases;

"2. Termination disputes;

"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
G.R. No. 166920 February 19, 2007 You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines, Inc. in Manila,
hereinafter referred as Pacicon. Pacicon will provide you with a separate contract, which will define that part of the
PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER HENRICHSEN, Petitioners, present terms and conditions for which Pacicon is responsible. In case of any discrepancies or contradictions between
vs. the present Letter of Employment and the contract with Pacicon Philippines, Inc. or in the case that Pacicon should
KLAUS K. SCHONFELD, Respondent. not live up to its obligations, this Letter of Employment will prevail.

DECISION 1. Project Country: The Philippines with possible short-term assignments in other countries.

CALLEJO, SR., J.: 2. Duty Station: Manila, the Philippines.

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the Resolution of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn, affirmed the Decision of the Labor
Arbiter in NLRC NCR Case No. 30-12-04787-00 dismissing the complaint of respondent Klaus K. Schonfeld.
The antecedent facts are as follows:
Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia, Canada. He had been a
consultant in the field of environmental engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) is
a corporation duly established and incorporated in accordance with the laws of the Philippines. The primary purpose
of PPI was to engage in the business of providing specialty and technical services both in and out of the Philippines. 2 It
is a subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen, who
was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa,
as well as in other countries where PCIJ had business.
3. Family Status: Married.
4. Position: Sector Manager, Water and Sanitation.
5. Commencement: 1st October 1997.
6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary (US$2,100.00 per month)
by Pacicon and partly as an offshore salary (US$4,900.00) by PCI to bank accounts to be nominated by you.
A performance related component corresponding to 17.6% of the total annual remuneration, subject to satisfactory
performance against agreed tasks and targets, paid offshore.
7. Accommodation: The company will provide partly furnished accommodation to a rent including association fees,
taxes and VAT not exceeding the Pesos equivalent of US$2,900.00 per month.

In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines. In October 1997, 8. Transportation: Included for in the remuneration.
respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and Sanitation
9. Leave Travels: You are entitled to two leave travels per year.
Department. However, PCIJ assigned him as PPI sector manager in the Philippines. His salary was to be paid partly by
PPI and PCIJ.
10. Shipment of Personal
On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada, requesting him to accept
Effects: The maximum allowance is US$4,000.00.
the same and affix his conformity thereto. Respondent made some revisions in the letter of employment and signed
the contract.3 He then sent a copy to Henrichsen. The letter of employment reads: 11. Mobilization

Mr. Klaus K. Schonfeld Travel: Mobilization travel will be from New Westminster, B.C., Canada.
II-365 Ginger Drive
New Westminster, B.C. This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.
Canada V3L 5L5
Tokyo 7 Yours sincerely,

January 1998 Pacific Consultants International

Jens Peter Henrichsen
Dear Mr. Schonfeld,
Above terms and conditions accepted
Letter of Employment
Date: 2 March 1998
This Letter of Employment with the attached General Conditions of Employment constitutes the agreement under
which you will be engaged by our Company on the terms and conditions defined hereunder. In case of any (Sgd.)
discrepancies or contradictions between this Letter of Employment and the General Conditions of Employment, this Klaus Schonfeld
Letter of Employment will prevail.
as annotated and initialed4
Section 21 of the General Conditions of Employment appended to the letter of employment reads: On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment had been
terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been successful in the water and
21 Arbitration sanitation sector in the Philippines.8 However, on July 24, 1999, Henrichsen, by electronic mail, 9 requested
respondent to stay put in his job after August 5, 1999, until such time that he would be able to report on certain
Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question projects and discuss all the opportunities he had developed. 10 Respondent continued his work with PPI until the end
arising between the Employee and the Company which is in consequence of or connected with his employment with of business hours on October 1, 1999.
the Company and which can not be settled amicably, is to be finally settled, binding to both parties through written
submissions, by the Court of Arbitration in London. 5 Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from Manila to Canada,
and cost of shipment of goods to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to pay the
Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was accorded the status of rest.
a resident alien.
On December 5, 2000, respondent filed a Complaint 11 for Illegal Dismissal against petitioners PPI and Henrichsen with
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor Code, PPI applied for the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.
an Alien Employment Permit (Permit) for respondent before the Department of Labor and Employment (DOLE). It
appended respondent’s contract of employment to the application.1awphi1.net In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE of its decision to
close one of its departments, which resulted in his dismissal; and they failed to notify him that his employment was
On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It reads: terminated after August 4, 1999. Respondent also claimed for separation pay and other unpaid benefits. He alleged
that the company acted in bad faith and disregarded his rights. He prayed for the following reliefs:
Republic of the Philippines
Department of Labor & Employment 1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to his former position
National Capital Region without loss of seniority and other privileges and benefits, and to pay his full backwages from the time compensation
was with held (sic) from him up to the time of his actual reinstatement. In the alternative, if reinstatement is no longer
ALIEN EMPLOYMENT PERMIT
feasible, respondents must pay the complainant full backwages, and separation pay equivalent to one month pay for
every year of service, or in the amount of US$16,400.00 as separation pay;
ISSUED TO: SCHONFELD, KLAUS KURT
2. Judgment be rendered ordering the respondents to pay the outstanding monetary obligation to complainant in the
DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian
amount of US$10,131.76 representing the balance of unpaid salaries, leave pay, cost of his air travel and shipment of
POSITION: VP – WATER & SANITATION goods from Manila to Canada; and

EMPLOYER: PACICON PHILIPPINES, INC. 3. Judgment be rendered ordering the respondent company to pay the complainant damages in the amount of no less
than US $10,000.00 and to pay 10% of the total monetary award as attorney’s fees, and costs.
ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City
Other reliefs just and equitable under the premises are, likewise, prayed for. 12 1awphi1.net
PERMIT
Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter had no jurisdiction
ISSUED ON: February 26, 1999 SIGNATURE OF BEARER: over the subject matter; and (2) venue was improperly laid. It averred that respondent was a Canadian citizen, a
transient expatriate who had left the Philippines. He was employed and dismissed by PCIJ, a foreign corporation with
VALID UNTIL: January 7, 2000 (Sgd.) principal office in Tokyo, Japan. Since respondent’s cause of action was based on his letter of employment executed in
Tokyo, Japan dated January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in
APPROVED: BIENVENIDO S. LAGUESMA Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his complaint against PPI
before the NLRC in the Philippines. Moreover, under Section 12 of the General Conditions of Employment appended to
By: MAXIMO B. ANITO the letter of employment dated January 7, 1998, complainant and PCIJ had agreed that any employment-related
REGIONAL DIRECTOR dispute should be brought before the London Court of Arbitration. Since even the Supreme Court had already ruled
that such an agreement on venue is valid, Philippine courts have no jurisdiction. 13
(Emphasis supplied)6
Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines under contract
Respondent received his compensation from PPI for the following periods: February to June 1998, November to separate from his January 7, 1998 contract of employment with PCIJ. He insisted that his employer was PPI, a
December 1998, and January to August 1999. He was also reimbursed by PPI for the expenses he incurred in Philippine-registered corporation; it is inconsequential that PPI is a wholly-owned subsidiary of PCIJ because the two
connection with his work as sector manager. He reported for work in Manila except for occasional assignments corporations have separate and distinct personalities; and he received orders and instructions from Henrichsen who
abroad, and received instructions from Henrichsen. 7
was the president of PPI. He further insisted that the principles of forum non conveniens and lex loci contractus do not According to respondent, the material allegations of the complaint, not petitioners’ defenses, determine which quasi-
apply, and that although he is a Canadian citizen, Philippine Labor Laws apply in this case. judicial body has jurisdiction. Section 21 of the Arbitration Clause in the General Conditions of Employment does not
provide for an exclusive venue where the complaint against PPI for violation of the Philippine Labor Laws may be
Respondent adduced in evidence the following contract of employment dated January 9, 1998 which he had entered filed. Respondent pointed out that PPI had adopted two inconsistent positions: it was first alleged that he should have
into with Henrichsen: filed his complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court
of Arbitration.15
Mr. Klaus K. Schonfeld
In their reply, petitioners claimed that respondent’s employer was PCIJ, which had exercised supervision and control
II-365 Ginger Drive over him, and not PPI. Respondent was dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in
New Westminster, B.C. Japan.16 The letter of employment dated January 9, 1998 which respondent relies upon did not bear his (respondent’s)
Canada V3L 5L5 signature nor that of Henrichsen.

Manila 9 January, 1998 On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners’ Motion to Dismiss. The dispositive
portion reads:
Dear Mr. Schonfeld,
WHEREFORE, finding merit in respondents’ Motion to Dismiss, the same is hereby granted. The instant complaint filed
Letter of Employment
by the complainant is dismissed for lack of merit.

This Letter of Employment with the attached General Conditions of Employment constitutes the agreement, under
which you will be engaged by Pacicon Philippines, Inc. on the terms and conditions defined hereunder.
1. Project Country: The Philippines with possible assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
SO ORDERED.17
The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between respondent and
PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld was required to work under the
General Conditions of Employment. PCIJ remained respondent’s employer despite his having been sent to the
Philippines. Since the parties had agreed that any differences regarding employer-employee relationship should be
submitted to the jurisdiction of the court of arbitration in London, this agreement is controlling.

4. Position: Sector Manager – Water and Sanitation Sector. On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter’s decision in toto. 18

5. Commencement: 1 January, 1998. Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the following arguments:

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by you. I

7. Accommodation: The company will provide partly furnished accommodation to a rent including association fees,
taxes and VAT not exceeding the Pesos equivalent of US$2300.00 per month.
8. Transportation: Included for in the remuneration.
9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with initial shipment of
personal effects from Canada.
10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE LABOR ARBITER’S
DECISION CONSIDERING THAT:
A. PETITIONER’S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF JAPAN BUT RESPONDENT
COMPANY, AND THEREFORE, THE LABOR ARBITER HAS JURISDICTION OVER THE INSTANT CASE; AND
B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF THE NLRC AND NOT THE
COURT OF ARBITRATION IN LONDON.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us. II

Yours sincerely, WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF THE
Pacicon Philippines, Inc. COMPLAINT CONSIDERING THAT PETITIONER’S TERMINATION FROM EMPLOYMENT IS ILLEGAL:
Jens Peter Henrichsen
President14 A. THE CLOSURE OF RESPONDENT COMPANY’S WATER AND SANITATION SECTOR WAS NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY’S WATER AND SANITATION SECTOR
WAS JUSTIFIABLE, PETITIONER’S DISMISSAL WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) AND PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED CLOSURE. 19
Respondent averred that the absence or existence of a written contract of employment is not decisive of whether he is
an employee of PPI. He maintained that PPI, through its president Henrichsen, directed his work/duties as Sector
Manager of PPI; proof of this was his letter-proposal to the Development Bank of the Philippines for PPI to provide
consultancy services for the Construction Supervision of the Water Supply and Sanitation component of the World
Bank-Assisted LGU Urban Water and Sanitation Project. 20 He emphasized that as gleaned from Alien Employment
Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he is an employee of PPI. It was PPI
president Henrichsen who terminated his employment; PPI also paid his salary and reimbursed his expenses related
to transactions abroad. That PPI is a wholly-owned subsidiary of PCIJ is of no moment because the two corporations
have separate and distinct personalities.
The CA found the petition meritorious. Applying the four-fold test21 of determining an employer-employee
relationship, the CA declared that respondent was an employee of PPI. On the issue of venue, the appellate court
declared that, even under the January 7, 1998 contract of employment, the parties were not precluded from bringing a
case related thereto in other venues. While there was, indeed, an agreement that issues between the parties were to
be resolved in the London Court of Arbitration, the venue is not exclusive, since there is no stipulation that the
complaint cannot be filed in any other forum other than in the Philippines.
On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of which reads:
WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby REVERSED and SET
ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for disposition of the case on the merits.
SO ORDERED.22
A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the appellate court
denied for lack of merit.23
In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT RELATIONSHIP EXISTED BETWEEN
PETITIONERS AND RESPONDENT DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL,
WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND WAS
MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA.
II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO HAS JURISDICTION OVER
RESPONDENT’S CLAIM DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED
ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED
THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN
LONDON."24
Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver that the findings
of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They maintain that it is not within the
province of the appellate court in a petition for certiorari to review the facts and evidence on record since there was
no conflict in the factual findings and conclusions of the lower tribunals. Petitioners assert that such findings and
conclusions, having been made by agencies with expertise on the subject matter, should be deemed binding and
conclusive. They contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to
petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner PPI, being a
wholly-owned subsidiary of PCIJ, was never the employer of respondent.
Petitioners assert that the January 9, 1998 letter of employment which respondent presented to prove his
employment with petitioner PPI is of doubtful authenticity since it was unsigned by the purported parties. They insist
that PCIJ paid respondent’s salaries and only coursed the same through petitioner PPI. PPI, being its subsidiary, had
supervision and control over respondent’s work, and had the responsibilities of monitoring the "daily administration"
of respondent. Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to
prove that he was an employee of petitioner PPI because these documents are of doubtful authenticity.
Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of PPI, it was he who
signed the termination letter of respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ’s
letterhead was used to inform him that his employment was terminated. Petitioners further assert that all work
instructions came from PCIJ and that petitioner PPI only served as a "conduit." Respondent’s Alien Employment
Permit stating that petitioner PPI was his employer is but a necessary consequence of his being "seconded" thereto. It
is not sufficient proof that petitioner PPI is respondent’s employer. The entry was only made to comply with the DOLE
requirements.
There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no jurisdiction over
respondent’s complaint.
Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that the principlesof
forum non conveniens and lex loci contractus are applicable. They also point out that the principal office, officers and
staff of PCIJ are stationed in Tokyo, Japan; and the contract of employment of respondent was executed in Tokyo,
Japan.
Moreover, under Section 21 of the General Conditions for Employment incorporated in respondent’s January 7, 1998
letter of employment, the dispute between respondent and PCIJ should be settled by the court of arbitration of
London. Petitioners claim that the words used therein are sufficient to show the exclusive and restrictive nature of the
stipulation on venue.
Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers, while the Labor
Code of the Philippines applies only to Filipino employers and Philippine-based employers and their employees, not to
PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not extend to foreign workers who executed
employment agreements with foreign employers abroad, although "seconded" to the Philippines. 25
In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which are proscribed
under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had been an employee of petitioner PPI
and not of PCIJ is buttressed by his documentary evidence which both the Labor Arbiter and the NLRC ignored; they
erroneously opted to dismiss his complaint on the basis of the letter of employment and Section 21 of the General
Conditions of Employment. In contrast, the CA took into account the evidence on record and applied case law
correctly.
The petition is denied for lack of merit.
It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing the evidence on
record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to pass upon
the evidence, if and when necessary, to resolve factual issues. 27 If it appears that the Labor Arbiter and the NLRC
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated, the factual findings of such tribunals cannot be given great respect and finality. 28
Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent appended to his
pleadings showing that he was an employee of petitioner PPI; they merely focused on the January 7, 1998 letter of
employment and Section 21 of the General Conditions of Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said application, PPI averred that
respondent is its employee. To show that this was the case, PPI appended a copy of respondent’s employment
contract. The DOLE then granted the application of PPI and issued the permit.
It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the requirements for the
issuance of an employment permit is the employment contract. Section 5, Rule XIV (Employment of Aliens) of the
Omnibus Rules provides:
SECTION 1. Coverage. – This rule shall apply to all aliens employed or seeking employment in the Philippines and the
present or prospective employers.
SECTION 2. Submission of list. – All employers employing foreign nationals, whether resident or non-resident, shall
submit a list of nationals to the Bureau indicating their names, citizenship, foreign and local address, nature of
employment and status of stay in the Philippines.
SECTION 3. Registration of resident aliens. – All employed resident aliens shall register with the Bureau under such
guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. – No alien seeking employment, whether as a resident or non-
resident, may enter the Philippines without first securing an employment permit from the Ministry. If an alien enters
the country under a non-working visa and wishes to be employed thereafter, he may only be allowed to be employed
upon presentation of a duly approved employment permit.
SECTION 5. Requirements for employment permit applicants. – The application for an employment permit shall be
accompanied by the following:
(a) Curriculum vitae duly signed by the applicant indicating his educational background, his work experience and
other data showing that he possesses technical skills in his trade or profession.
(b) Contract of employment between the employer and the principal which shall embody the following, among others:
1. That the non-resident alien worker shall comply with all applicable laws and rules and regulations of the
Philippines;
2. That the non-resident alien worker and the employer shall bind themselves to train at least two (2) Filipino
understudies for a period to be determined by the Minister; and
3. That he shall not engage in any gainful employment other than that for which he was issued a permit.
(c) A designation by the employer of at least two (2) understudies for every alien worker. Such understudies must be
the most ranking regular employees in the section or department for which the expatriates are being hired to insure
the actual transfer of technology.
Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the following:
(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;
(b) Report of the Bureau Director as to the availability or non-availability of any person in the Philippines who is
competent and willing to do the job for which the services of the applicant are desired;
(c) His assessment as to whether or not the employment of the applicant will redound to the national interest;
(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;
(e) The recommendation of the Board of Investments or other appropriate government agencies if the applicant will
be employed in preferred areas of investments or in accordance with the imperative of economic development.
Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise, petitioner PPI would
not have filed an application for a Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ, not
petitioner PPI, had been the employer of respondent all along.
We agree with the conclusion of the CA that there was an employer-employee relationship between petitioner PPI and
respondent using the four-fold test. Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the
employee’s conduct. It is the so-called "control test" which constitutes the most important index of the existence of the
employer-employee relationship–that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by which the same is
to be accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end to be achieved but also the means to be used in
reaching such end.29 We quote with approval the following ruling of the CA:
[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent company is the
true employer of petitioner. In the case at bar, the power to control and supervise petitioner’s work performance
devolved upon the respondent company. Likewise, the power to terminate the employment relationship was
exercised by the President of the respondent company. It is not the letterhead used by the company in the termination
letter which controls, but the person who exercised the power to terminate the employee. It is also inconsequential if
the second letter of employment executed in the Philippines was not signed by the petitioner. An employer-employee
relationship may indeed exist even in the absence of a written contract, so long as the four elements mentioned in the
Mafinco case are all present.30
The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking
Corporation v. Tensuan,31 is that while they are considered valid and enforceable, venue stipulations in a contract do
not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying
or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to
the specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue,
there must be accompanying language clearly and categorically expressing their purpose and design that actions
between them be litigated only at the place named by them. 32
In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other court save —,"
"particularly," "nowhere else but/except —," or words of equal import were stated in the contract. 33 It cannot be said
that the court of arbitration in London is an exclusive venue to bring forth any complaint arising out of the
employment contract.
Petitioners contend that respondent should have filed his Complaint in his place of permanent residence, or where the
PCIJ holds its principal office, at the place where the contract of employment was signed, in London as stated in their
contract. By enumerating possible venues where respondent could have filed his complaint, however, petitioners
themselves admitted that the provision on venue in the employment contract is indeed merely permissive.

Petitioners’ insistence on the application of the principle of forum non conveniens must be rejected. The bare fact that
respondent is a Canadian citizen and was a repatriate does not warrant the application of the principle for the
following reasons:

First. The Labor Code of the Philippines does not include forum non conveniens as a ground for the dismissal of the
complaint.34

Second. The propriety of dismissing a case based on this principle requires a factual determination; hence, it is
properly considered as defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals, 36 this Court held that:

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

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 76563 is AFFIRMED. This
case is REMANDED to the Labor Arbiter for disposition of the case on the merits. Cost against petitioners.

SO ORDERED.
G.R. No. L-32636 March 17, 1930 1929, while the proceedings in West Virginia appear to have been initiated on June 8, 1929. These facts are strongly
indicative of an intention to make the Philippines the principal administration and West Virginia the ancillary
In the matter Estate of Edward Randolph Hix, deceased. administration. However this may be, no attempt has been made to comply with Civil Procedure, for no hearing on the
A.W. FLUEMER, petitioner-appellant, question of the allowance of a will said to have been proved and allowed in West Virginia has been requested. There is
vs. no showing that the deceased left any property at any place other than the Philippine Islands and no contention that
ANNIE COUSHING HIX, oppositor-appellee. he left any in West Virginia.

C.A. Sobral for appellant. Reference has been made by the parties to a divorce purported to have been awarded Edward Randolph Hix from
Harvey & O' Brien and Gibbs & McDonough for appellee. Annie Cousins Hix on October 8, 1925, in the State of West specific pronouncements on the validity or validity of this
alleged divorce.
MALCOLM, J.:
For all of the foregoing, the judgment appealed from will be affirmed, with the costs of this instance against the
The special administrator of the estate of Edward Randolph Hix appeals from a decision of Judge of First Instance appellant.
Tuason denying the probate of the document alleged to by the last will and testament of the deceased. Appellee is not
authorized to carry on this appeal. We think, however, that the appellant, who appears to have been the moving party Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
in these proceedings, was a "person interested in the allowance or disallowance of a will by a Court of First Instance,"
and so should be permitted to appeal to the Supreme Court from the disallowance of the will (Code of Civil Procedure,
sec. 781, as amended; Villanueva vs. De Leon [1925], 42 Phil., 780).

It is theory of the petitioner that the alleged will was executed in Elkins, West Virginia, on November 3, 1925, by Hix
who had his residence in that jurisdiction, and that the laws of West Verginia Code, Annotated, by Hogg, Charles E., vol.
2, 1914, p. 1690, and as certified to by the Director of the National Library. But this was far from a compliance with the
law. The laws of a foreign jurisdiction do not prove themselves in our courts. the courts of the Philippine Islands are
not authorized to take American Union. Such laws must be proved as facts. (In re Estate of Johnson [1918], 39 Phil.,
156.) Here the requirements of the law were not met. There was no was printed or published under the authority of
the State of West Virginia, as provided in section 300 of the Code of Civil Procedure. Nor was the extract from the law
attested by the certificate of the officer having charge of the original, under the sale of the State of West Virginia, as
provided in section 301 of the Code of Civil Procedure. No evidence was introduced to show that the extract from the
laws of West Virginia was in force at the time the alleged will was executed.

In addition, the due execution of the will was not established. The only evidence on this point is to be found in the
testimony of the petitioner. Aside from this, there was nothing to indicate that the will was acknowledged by the
testator in the presence of two competent witnesses, of that these witnesses subscribed the will in the presence of the
testator and of each other as the law of West Virginia seems to require. On the supposition that the witnesses to the
will reside without the Philippine Islands, it would then the duty of the petitioner to prove execution by some other
means (Code of Civil Procedure, sec. 633.)

It was also necessary for the petitioner to prove that the testator had his domicile in West Virginia and not establish
this fact consisted of the recitals in the CATHY will and the testimony of the petitioner. Also in beginning
administration proceedings orginally in the Philippine Islands, the petitioner violated his own theory by attempting to
have the principal administration in the Philippine Islands.

While the appeal pending submission in this court, the attorney for the appellant presented an unverified petition
asking the court to accept as part of the evidence the documents attached to the petition. One of these documents
discloses that a paper writing purporting to be the was presented for probate on June 8, 1929, to the clerk of
Randolph Country, State of West Virginia, in vacation, and was duly proven by the oaths of Dana Wamsley and Joseph
L. MAdden, the subscribing witnesses thereto , and ordered to be recorded and filed. It was shown by another
document that, in vacation, on June 8, 1929, the clerk of court of Randolph Country, West Virginia, appointed Claude
W. Maxwell as administrator, cum testamento annexo, of the estate of Edward Randolph Hix, deceased. In this
connection, it is to be noted that the application for the probate of the will in the Philippines was filed on February 20,
G.R. No. L-12105 January 30, 1960
TESTATE ESTATE OF C. O. BOHANAN, deceased. PHILIPPINE TRUST CO., executor-appellee,
vs.
MAGDALENA C. BOHANAN, EDWARD C. BOHANAN, and MARY LYDIA BOHANAN, oppositors-appellants.
Jose D. Cortes for appellants.
Ohnick, Velilla and Balonkita for appellee.
LABRADOR, J.:
Appeal against an order of the Court of First Instance of Manila, Hon. Ramon San Jose, presiding, dismissing the
objections filed by Magdalena C. Bohanan, Mary Bohanan and Edward Bohanan to the project of partition submitted
by the executor and approving the said project.
On April 24, 195 0, the Court of First Instance of Manila, Hon. Rafael Amparo, presiding, admitted to probate a last will
and testament of C. O. Bohanan, executed by him on April 23, 1944 in Manila. In the said order, the court made the
following findings:
According to the evidence of the opponents the testator was born in Nebraska and therefore a citizen of that state, or
at least a citizen of California where some of his properties are located. This contention in untenable. Notwithstanding
the long residence of the decedent in the Philippines, his stay here was merely temporary, and he continued and
remained to be a citizen of the United States and of the state of his pertinent residence to spend the rest of his days in
that state. His permanent residence or domicile in the United States depended upon his personal intent or desire, and
he selected Nevada as his homicide and therefore at the time of his death, he was a citizen of that state. Nobody can
choose his domicile or permanent residence for him. That is his exclusive personal right.
Wherefore, the court finds that the testator C. O. Bohanan was at the time of his death a citizen of the United States
and of the State of Nevada and declares that his will and testament, Exhibit A, is fully in accordance with the laws of
the state of Nevada and admits the same to probate. Accordingly, the Philippine Trust Company, named as the
executor of the will, is hereby appointed to such executor and upon the filing of a bond in the sum of P10,000.00, let
letters testamentary be issued and after taking the prescribed oath, it may enter upon the execution and performance
of its trust. (pp. 26-27, R.O.A.).
It does not appear that the order granting probate was ever questions on appeal. The executor filed a project of
partition dated January 24, 1956, making, in accordance with the provisions of the will, the following adjudications:
(1) one-half of the residuary estate, to the Farmers and Merchants National Bank of Los Angeles, California, U.S.A. in
trust only for the benefit of testator's grandson Edward George Bohanan, which consists of several mining companies;
(2) the other half of the residuary estate to the testator's brother, F.L. Bohanan, and his sister, Mrs. M. B. Galbraith,
share and share alike. This consist in the same amount of cash and of shares of mining stock similar to those given to
testator's grandson; (3) legacies of P6,000 each to his (testator) son, Edward Gilbert Bohana, and his daughter, Mary
Lydia Bohanan, to be paid in three yearly installments; (4) legacies to Clara Daen, in the amount of P10,000.00;
Katherine Woodward, P2,000; Beulah Fox, P4,000; and Elizabeth Hastings, P2,000;
It will be seen from the above that out of the total estate (after deducting administration expenses) of P211,639.33 in
cash, the testator gave his grandson P90,819.67 and one-half of all shares of stock of several mining companies and to
his brother and sister the same amount. To his children he gave a legacy of only P6,000 each, or a total of P12,000.
The wife Magadalena C. Bohanan and her two children question the validity of the testamentary provisions disposing
of the estate in the manner above indicated, claiming that they have been deprived of the legitimate that the laws of
the form concede to them.
The first question refers to the share that the wife of the testator, Magdalena C. Bohanan, should be entitled to
received. The will has not given her any share in the estate left by the testator. It is argued that it was error for the
trial court to have recognized the Reno divorce secured by the testator from his Filipino wife Magdalena C. Bohanan,
and that said divorce should be declared a nullity in this jurisdiction, citing the case of Querubin vs.Querubin, 87 Phil.,
124, 47 Off. Gaz., (Sup, 12) 315, Cousins Hiz vs. Fluemer, 55 Phil., 852, Ramirez vs. Gmur, 42 Phil., 855 and
Gorayeb vs. Hashim, 50 Phil., 22. The court below refused to recognize the claim of the widow on the ground that the
laws of Nevada, of which the deceased was a citizen, allow him to dispose of all of his properties without requiring
him to leave any portion of his estate to his wife. Section 9905 of Nevada Compiled Laws of 1925 provides:
Every person over the age of eighteen years, of sound mind, may, by last will, dispose of all his or her estate, real and
personal, the same being chargeable with the payment of the testator's debts.
Besides, the right of the former wife of the testator, Magdalena C. Bohanan, to a share in the testator's estafa had
already been passed upon adversely against her in an order dated June 19, 1955, (pp. 155-159, Vol II Records, Court of
First Instance), which had become final, as Magdalena C. Bohanan does not appear to have appealed therefrom to
question its validity. On December 16, 1953, the said former wife filed a motion to withdraw the sum of P20,000 from
the funds of the estate, chargeable against her share in the conjugal property, (See pp. 294-297, Vol. I, Record, Court of
First Instance), and the court in its said error found that there exists no community property owned by the decedent
and his former wife at the time the decree of divorce was issued. As already and Magdalena C. Bohanan may no longer
question the fact contained therein, i.e. that there was no community property acquired by the testator and Magdalena
C. Bohanan during their converture.
Moreover, the court below had found that the testator and Magdalena C. Bohanan were married on January 30, 1909,
and that divorce was granted to him on May 20, 1922; that sometime in 1925, Magdalena C. Bohanan married Carl
Aaron and this marriage was subsisting at the time of the death of the testator. Since no right to share in the
inheritance in favor of a divorced wife exists in the State of Nevada and since the court below had already found that
there was no conjugal property between the testator and Magdalena C. Bohanan, the latter can now have no longer
claim to pay portion of the estate left by the testator.
The most important issue is the claim of the testator's children, Edward and Mary Lydia, who had received legacies in
the amount of P6,000 each only, and, therefore, have not been given their shares in the estate which, in accordance
with the laws of the forum, should be two-thirds of the estate left by the testator. Is the failure old the testator to give
his children two-thirds of the estate left by him at the time of his death, in accordance with the laws of the forum
valid?
The old Civil Code, which is applicable to this case because the testator died in 1944, expressly provides that
successional rights to personal property are to be earned by the national law of the person whose succession is in
question. Says the law on this point:
Nevertheless, legal and testamentary successions, in respect to the order of succession as well as to the extent of the
successional rights and the intrinsic validity of their provisions, shall be regulated by the national law of the person
whose succession is in question, whatever may be the nature of the property and the country in which it is found.
(par. 2, Art. 10, old Civil Code, which is the same as par. 2 Art. 16, new Civil Code.)
In the proceedings for the probate of the will, it was found out and it was decided that the testator was a citizen of the
State of Nevada because he had selected this as his domicile and his permanent residence. (See Decision dated April
24, 1950, supra). So the question at issue is whether the estementary dispositions, especially hose for the children
which are short of the legitime given them by the Civil Code of the Philippines, are valid. It is not disputed that the
laws of Nevada allow a testator to dispose of all his properties by will (Sec. 9905, Complied Nevada Laws of
1925, supra). It does not appear that at time of the hearing of the project of partition, the above-quoted provision was
introduced in evidence, as it was the executor's duly to do. The law of Nevada, being a foreign law can only be proved
in our courts in the form and manner provided for by our Rules, which are as follows:

SEC. 41. Proof of public or official record. — An official record or an entry therein, when admissible for any purpose,
may be evidenced by an official publication thereof or by a copy tested by the officer having the legal custody of he
record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such
officer has the custody. . . . (Rule 123).

We have, however, consulted the records of the case in the court below and we have found that during the hearing on
October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal of P20,000 as her share, the foreign law,
especially Section 9905, Compiled Nevada Laws. was introduced in evidence by appellant's (herein) counsel as
Exhibits "2" (See pp. 77-79, VOL. II, and t.s.n. pp. 24-44, Records, Court of First Instance). Again said laws presented by
the counsel for the executor and admitted by the Court as Exhibit "B" during the hearing of the case on January 23,
1950 before Judge Rafael Amparo (se Records, Court of First Instance, Vol. 1).

In addition, the other appellants, children of the testator, do not dispute the above-quoted provision of the laws of the
State of Nevada. Under all the above circumstances, we are constrained to hold that the pertinent law of Nevada,
especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial notice of by us, without proof of
such law having been offered at the hearing of the project of partition.

As in accordance with Article 10 of the old Civil Code, the validity of testamentary dispositions are to be governed by
the national law of the testator, and as it has been decided and it is not disputed that the national law of the testator is
that of the State of Nevada, already indicated above, which allows a testator to dispose of all his property according to
his will, as in the case at bar, the order of the court approving the project of partition made in accordance with the
testamentary provisions, must be, as it is hereby affirmed, with costs against appellants.

Paras, Bengzon, C.J., Padilla, Bautista Angelo and Endencia, JJ., concur.
Barrera, J., concurs in the result.
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:
I
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.
V
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 Padilla, Bautista Angelo, Concepcion, Reyes, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
are recognized as controlling by the Conflict of Laws rules at the situs property, and the reason for the recognition as Bengzon, C.J., took no part.
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.
G.R. Nos. 90306-07 July 30, 1990
K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE VESSEL M/V
"ESTELLA", respondents.
Hernandez, Velicaria Vibar & Santiago for petitioners.
Cesar C. Cruz & Partners for private respondents
CORTES, J:
Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being considered final and
conclusive. However, when its factual conclusions are manifestly mistaken, the Court will step in to correct the
misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September
29, 1983, 124 SCRA 808.] This case is one such instance calling for the Court's review of the facts.
On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a corporation formed and
existing under the laws of Japan, filed a complaint for the collection of a sum of money with preliminary attachment
against Atlantic Venus Co., S.A. (hereinafter referred to as "Atlantic"), a corporation registered in Panama, the vessel
MV Estella and Crestamonte Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine
corporation. Atlantic is the owner of the MV Estella. The complaint, docketed as Civil Case No. 8738930 of the
Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat charterer and operator of the MV
Estella, appointed N.S. Shipping Corporation (hereinafter referred to as "NSS"), a Japanese corporation, as its general
agent in Japan. The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai as its local
agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and services but despite repeated demands
Crestamonte failed to pay the amounts due.
NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-intervention.
On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing"), a corporation organized in Hong
Kong and not doing business in the Philippines, filed a motion for leave to intervene with an attached complaint-in-
intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for
the total sum of One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56)
but such has remained unpaid despite demand and that the claim constitutes a maritime lien. The issuance of a writ of
attachment was also prayed for.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as K.K. Shell"), a corporation
organized in Japan and not doing business in the Philippines, likewise filed a motion to intervene with an attached
complaint-in-intervention, alleging that upon request of NSS, Crestamonte's general agent in Japan, K.K. Shell
provided and supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo and Mutsure in Japan and that
despite previous demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six
Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shell's claim
constitutes a maritime lien on the MV Estella. The complaint-in-intervention sought the issuance of a writ of
preliminary attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and August 11, 1987, respectively.
Writs of preliminary attachment were issued on August 25, 1987 upon posting of the appropriate bonds. Upon the
posting of counterbonds, the writs of attachment were discharged on September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in- intervention filed by Fu Hing and K.K. Shell.
In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against the trial court judge,
Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment of the orders of the trial
court dated April 30, 1987 and August 11, 1987. Among others, the omnibus order dated August 11, 1987 denied the
motion to reconsider the order allowing Fu Hing's intervention and granted K.K. Shell's motion to intervene. Again Fu
Hing and K.K. Shell intervened, CA-G.R. SP No. 12999 was consolidated with another case (CA-G.R. SP No. 12341). Fu
Hing and K.K. Shell intervened in CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed it to cease
and desist from proceeding with the case.
According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence they were
bound by the Agency Agreement between Crestamonte and NSS, particularly, the choice of forum clause, which
provides:
12.0-That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising
between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the
District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene.
A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the Court of Appeals. Hence
this petition;
In this case, we shall review the decision of the Court of Appeals only insofar as it relate to the intervention of K.K.
Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on March 7, 1990, alleging that an amicable
settlement had been reached with private respondents. The Court granted the motion on March 19, 1990.
After considering the pleadings filed by the parties and the arguments raised therein, the Court finds reversible error
on the part of the Court of Appeals in so far; as it disallowed petitioners' intervention in the case before the trial court
and ordered the latter to cease and desist from proceeding with the case.
1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of NSS and is,
therefore, bound by the agreement.
The body of the Agency Agreement entered into by and between Crestamonte (referred to in the agreement as
"Owner") and NSS ("Agent") provides:
WITNESSETH
That the OWNER has appointed and by these presents hereby appoints the AGENT as its General Agents for all Japan
in connection with the Owner's vessels and/or providing suitable vessels for Japan Ports under the following terms
and conditions:
1.0 - In general, the Agent will abide by the Owner's decisions regarding the mode of operations of the vessels in Japan
and that all cargo bookings, vessel's fixtures/charters, etc. by the Agent, shall always be subject to the prior approval
and consent of the Owners.
2.0 - That the Agent shall provide for the necessary services required for the husbanding of the Owner's vessels in all
Japan Ports and issue Bill(s) of Lading to Shippers in the form prescribed by the Owners.
3.0 - That the Agent shall be responsible for fixing south-bound cargoes with revenues sufficient to cover ordinary
liner operation expenses such as bunkers, additives, lubricating oil, water, running repairs, drydocking expenses,
usual port disbursement accounts, cargo handling charges including stevedorage, provisions and ship's stores and
cash advance to crew (excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan shall be essentially the Agent's responsibility, and
should the revenue for south-bound cargoes as above-mentioned be insufficient to cover the aforesaid expenses, the
Agent shall provide credit to the extent of the vessels' requirements, provided however that said obligation shall be
secured by the Owner committing at least forty-eight (48) mailings of Japan/Philippines liner service per year.
The Agent shall settle, in behalf of the Owner, all outstanding payments for the operation costs on Owner's liner
service carried forward from the present Owner's agent, subject to approval of Owner's Representative in Japan in
regard to amount and nature thereof.
4.0- That the agent shall furnish office space of approximately thirty (30) square meters for the exclusive use of the
Owner and its representatives, within the premises of the Agent's office, free of charge.
5.0 — That the responsibilities of the Agent in regard to the cargo shall begin, in the case of imports into the territory
of Japan, from the time such cargo has left the ship's tackles, and shall cease, in case of export, upon completion of
loading.
6.0 — That the remuneration of the Agent from the Owner shall be as follows:
xxx xxx xxx
7.0 — That the Agent shall exert best efforts to recommend to Owners stevedoring and other expenses incurred in
connection with work on board the Owner's vessels, as well as customs house charges, pilotage, harbour dues, cables,
etc. which are for Owner's account, on the cheapest possible terms. Owners shall decide and may appoint through the
Agent the services described herein.
8.0 — That the Agent shall be responsible for the due collection of and due payment to the Owner of all outward
freight prepaid for cargo without delay upon the sailing of each vessel from the port. The Agent shall be also
responsible for the due collection of all inward freight payable at the port against delivery unless otherwise instructed
by the Owner to the contrary.
9.0 — The account statements supported by vouchers in two copies itemized for each service and/or supply for each
vessel, shall be forwarded by the Agent to the Owner promptly after the departure of each vessel but in no case later
than 60 days thereafter.
10.0 — That the freightage to be collected by the Agent in Japan shall be paid to the Owner after deducting the total
amount of disbursements incurred in Japan.
11.0 — That this Agreement takes effect as of April 15, 1983 and shall remain in force unless terminated by either
party upon 60 days notice.
12.0 — That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising
between the parties hereto concerned regarding this reement shall be subject exclusively to the jurisdiction of the
District Courts of Japan. [Annex "G" of the Petition, Rollo, pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability of the terms of the agreement, particularly
the choice-of-forum clause, to sub-agents is made in the text of the agreement. What the contract clearly states are
NSS' principal duties, i.e., that it shall provide for the necessary services required for the husbanding of Crestamonte's
vessels in Japanese ports (section 2.0) and shall be responsible for fixing southbound cargoes with revenues sufficient
to cover ordinary expenses (section 3.0).i•t•c-aüsl
Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and supplied the MV Estella
with marine diesel oil/fuel, upon request of NSS who was acting for and as duly appointed agent of Crestamonte
[Rollo, pp. 116117.] There is thus no basis for the Court of Appeal's finding, as regards K.K Shell in relation to its
intervention in Civil Case No. 87-38930, that "the sub-agents admitted in their pleadings that they were appointed as
local agent/sub-agent or representatives by NSS by virtue of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.]
What the Court of Appeals could have been referring to was K.K. Shell's Urgent Motion for Leave to Intervene dated
February 24, 1987 in another case (Civil Case No. 86-38704) in another court and involving other vessels (NW Ofelia
and MV Christina C), where it was alleged that K.K. Shell is "one of the representatives of NS Shipping Corporation for
the supply of bunker oil, fuel oil, provisions and other necessaries to vessels of which NS Shipping Corporation was
the general agent." [Comment, p. 17; Rollo, p. 274.] However, this allegation does not conclusively establish a sub-
agency between NSS and K.K. Shell. It is therefore surprising how the Court of Appeals could have come to the
conclusion, just on the basis of the Agency Agreement and the pleadings filed in the trial court, that "Crestamonte is
the principal, NSS is the agent and ... Fu Hing and K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court, additional evidence,
if there be any, would still have to be presented to establish the allegation that K.K. Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been conclusively shown to
be binding upon K.K. Shell, additional evidence would also still have to be presented to establish this defense, K.K.
Shell cannot therefore, as of yet, be barred from instituting an action in the Philippines.
2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is expressly bound
by the Agency Agreement, and thus they fall back on the argument that even if this were so, the doctrine of forum non
conveniens would be a valid ground to cause the dismissal of K.K. Shell's complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree No. 1521,
the Ship Mortgage Decree of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any person furnishing repairs, supplies, to wage, use
of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the
owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be
enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot rely on the
maritime lien because the fuel was provided not exclusively for the benefit of the MV Estella, but for the benefit of
Crestamonte in general. Under the law it must be established that the credit was extended to the vessel itself. Now,
this is a defense that calls precisely for a factual determination by the trial court of who benefitted from the delivery of
the fuel. Hence, again, the necessity for the reception of evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the private respondents have yet to file their
answer in the proceedings below and trial on the merits is still to be conducted, whether or not petitioners are indeed
maritime lienholders and as such may enforce the lien against the MV Estella are matters that still have to be
established.

Neither are we ready to rule on the private respondents' invocation of the doctrine of forum non conveniens, as the
exact nature of the relationship of the parties is still to be established. We leave this matter to the sound discretion of
the trial court judge who is in the best position, after some vital facts are established, to determine whether special
circumstances require that his court desist from assuming jurisdiction over the suit.

It was clearly reversible error on the. part of the Court of Appeals to annul the trial court's orders, insofar as K.K. Shell
is concerned, and order the trial court to cease and desist from proceeding with Civil Case No. 87-38930. There are
still numerous material facts to be established in order to arrive at a conclusion as to the true nature of the
relationship between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse would have been
to allow the trial court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised by
private respondents after they have filed their answer and evidence to support their conflicting claims has been
presented. The Court of Appeals, however, substituted its judgment for that of the trial court and decided the merits of
the case, even in the absence of evidence, on the pretext of reviewing an interlocutory order.

WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is REVERSED in CA-G.R. SP No. 12999,
insofar as it annulled the order of the August 11, 1987 and directed the trial court to cease and desist from proceeding
with Civil Case No. 87-38930.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

.R. No. L-23678 June 6, 1967 divided the residuary estate into seven equal portions for the benefit of the testator's seven legitimate children by his
first and second marriages.
TESTATE ESTATE OF AMOS G. BELLIS, deceased.
PEOPLE'S BANK and TRUST COMPANY, executor. On January 17, 1964, Maria Cristina Bellis and Miriam Palma Bellis filed their respective oppositions to the project of
MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants, partition on the ground that they were deprived of their legitimes as illegitimate children and, therefore, compulsory
vs. heirs of the deceased.
EDWARD A. BELLIS, ET AL., heirs-appellees.
Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service of which is evidenced by the registry
Vicente R. Macasaet and Jose D. Villena for oppositors appellants. receipt submitted on April 27, 1964 by the executor. 1
Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al.
Quijano and Arroyo for heirs-appellees W. S. Bellis, et al. After the parties filed their respective memoranda and other pertinent pleadings, the lower court, on April 30, 1964,
J. R. Balonkita for appellee People's Bank & Trust Company. issued an order overruling the oppositions and approving the executor's final account, report and administration and
Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman. project of partition. Relying upon Art. 16 of the Civil Code, it applied the national law of the decedent, which in this
case is Texas law, which did not provide for legitimes.
BENGZON, J.P., J.:
Their respective motions for reconsideration having been denied by the lower court on June 11, 1964, oppositors-
This is a direct appeal to Us, upon a question purely of law, from an order of the Court of First Instance of Manila dated appellants appealed to this Court to raise the issue of which law must apply — Texas law or Philippine law.
April 30, 1964, approving the project of partition filed by the executor in Civil Case No. 37089 therein.1äwphï1.ñët
In this regard, the parties do not submit the case on, nor even discuss, the doctrine of renvoi, applied by this Court
The facts of the case are as follows: in Aznar v. Christensen Garcia, L-16749, January 31, 1963. Said doctrine is usually pertinent where the decedent is a
national of one country, and a domicile of another. In the present case, it is not disputed that the decedent was both a
Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the United States." By his first wife, Mary E. national of Texas and a domicile thereof at the time of his death. 2 So that even assuming Texas has a conflict of law
Mallen, whom he divorced, he had five legitimate children: Edward A. Bellis, George Bellis (who pre-deceased him in rule providing that the domiciliary system (law of the domicile) should govern, the same would not result in a
infancy), Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman; by his second wife, Violet Kennedy, who survived reference back (renvoi) to Philippine law, but would still refer to Texas law. Nonetheless, if Texas has a conflicts rule
him, he had three legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he had three adopting the situs theory (lex rei sitae) calling for the application of the law of the place where the properties are
illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis. situated, renvoi would arise, since the properties here involved are found in the Philippines. In the absence, however,
of proof as to the conflict of law rule of Texas, it should not be presumed different from ours. 3 Appellants' position is
On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed that after all taxes, therefore not rested on the doctrine of renvoi. As stated, they never invoked nor even mentioned it in their arguments.
obligations, and expenses of administration are paid for, his distributable estate should be divided, in trust, in the Rather, they argue that their case falls under the circumstances mentioned in the third paragraph of Article 17 in
following order and manner: (a) $240,000.00 to his first wife, Mary E. Mallen; (b) P120,000.00 to his three illegitimate relation to Article 16 of the Civil Code.
children, Amos Bellis, Jr., Maria Cristina Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two
items have been satisfied, the remainder shall go to his seven surviving children by his first and second wives, namely: Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the national law of the decedent, in intestate or
Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman, Edwin G. Bellis, Walter S. Bellis, and testamentary successions, with regard to four items: (a) the order of succession; (b) the amount of successional rights;
Dorothy E. Bellis, in equal shares.1äwphï1.ñët (e) the intrinsic validity of the provisions of the will; and (d) the capacity to succeed. They provide that —

Subsequently, or on July 8, 1958, Amos G. Bellis died a resident of San Antonio, Texas, U.S.A. His will was admitted to
probate in the Court of First Instance of Manila on September 15, 1958.
The People's Bank and Trust Company, as executor of the will, paid all the bequests therein including the amount of
$240,000.00 in the form of shares of stock to Mary E. Mallen and to the three (3) illegitimate children, Amos Bellis, Jr.,
Maria Cristina Bellis and Miriam Palma Bellis, various amounts totalling P40,000.00 each in satisfaction of their
respective legacies, or a total of P120,000.00, which it released from time to time according as the lower court
approved and allowed the various motions or petitions filed by the latter three requesting partial advances on account
of their respective legacies.
On January 8, 1964, preparatory to closing its administration, the executor submitted and filed its "Executor's Final
Account, Report of Administration and Project of Partition" wherein it reported, inter alia, the satisfaction of the
legacy of Mary E. Mallen by the delivery to her of shares of stock amounting to $240,000.00, and the legacies of Amos
Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis in the amount of P40,000.00 each or a total of P120,000.00. In
the project of partition, the executor — pursuant to the "Twelfth" clause of the testator's Last Will and Testament —
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 he the nature of the property and regardless of
the country wherein said property may be found.
ART. 1039. Capacity to succeed is governed by the law of the nation of the decedent.
Appellants would however counter that Art. 17, paragraph three, of the Civil Code, stating that —
Prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or
conventions agreed upon in a foreign country.
prevails as the exception to Art. 16, par. 2 of the Civil Code afore-quoted. This is not correct. Precisely,
Congress deleted the phrase, "notwithstanding the provisions of this and the next preceding article" when they
incorporated Art. 11 of the old Civil Code as Art. 17 of the new Civil Code, while reproducing without substantial
change the second paragraph of Art. 10 of the old Civil Code as Art. 16 in the new. It must have been their purpose to
make the second paragraph of Art. 16 a specific provision in itself which must be applied in testate and intestate
succession. As further indication of this legislative intent, Congress added a new provision, under Art. 1039, which
decrees that capacity to succeed is to be governed by the national law of the decedent.

It is therefore evident that whatever public policy or good customs may be involved in our System of legitimes,
Congress has not intended to extend the same to the succession of foreign nationals. For it has specifically chosen to
leave, inter alia, the amount of successional rights, to the decedent's national law. Specific provisions must prevail
over general ones.

Appellants would also point out that the decedent executed two wills — one to govern his Texas estate and the other
his Philippine estate — arguing from this that he intended Philippine law to govern his Philippine estate. Assuming
that such was the decedent's intention in executing a separate Philippine will, it would not alter the law, for as this
Court ruled in Miciano v. Brimo, 50 Phil. 867, 870, a provision in a foreigner's will to the effect that his properties shall
be distributed in accordance with Philippine law and not with his national law, is illegal and void, for his national law
cannot be ignored in regard to those matters that Article 10 — now Article 16 — of the Civil Code states said national
law should govern.

The parties admit that the decedent, Amos G. Bellis, was a citizen of the State of Texas, U.S.A., and that under the laws
of Texas, there are no forced heirs or legitimes. Accordingly, since the intrinsic validity of the provision of the will and
the amount of successional rights are to be determined under Texas law, the Philippine law on legitimes cannot be
applied to the testacy of Amos G. Bellis.

Wherefore, the order of the probate court is hereby affirmed in toto, with costs against appellants. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.
.R. No. L-23145 November 29, 1968
TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.
Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.
FERNANDO, J.:
Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County Trust Company of New
York, United States of America, of the estate of the deceased Idonah Slade Perkins, who died in New York City on
March 27, 1960, to surrender to the ancillary administrator in the Philippines the stock certificates owned by her in a
Philippine corporation, Benguet Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court,
then presided by the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order of this tenor: "After
considering the motion of the ancillary administrator, dated February 11, 1964, as well as the opposition filed by the
Benguet Consolidated, Inc., the Court hereby (1) considers as lost for all purposes in connection with the
administration and liquidation of the Philippine estate of Idonah Slade Perkins the stock certificates covering the
33,002 shares of stock standing in her name in the books of the Benguet Consolidated, Inc., (2) orders said certificates
cancelled, and (3) directs said corporation to issue new certificates in lieu thereof, the same to be delivered by said
corporation to either the incumbent ancillary administrator or to the Probate Division of this Court." 1
From such an order, an appeal was taken to this Court not by the domiciliary administrator, the County Trust
Company of New York, but by the Philippine corporation, the Benguet Consolidated, Inc. The appeal cannot possibly
prosper. The challenged order represents a response and expresses a policy, to paraphrase Frankfurter, arising out of
a specific problem, addressed to the attainment of specific ends by the use of specific remedies, with full and ample
support from legal doctrines of weight and significance.
The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc., Idonah Slade Perkins, who
died on March 27, 1960 in New York City, left among others, two stock certificates covering 33,002 shares of
appellant, the certificates being in the possession of the County Trust Company of New York, which as noted, is the
domiciliary administrator of the estate of the deceased. 2 Then came this portion of the appellant's brief: "On August
12, 1960, Prospero Sanidad instituted ancillary administration proceedings in the Court of First Instance of Manila;
Lazaro A. Marquez was appointed ancillary administrator, and on January 22, 1963, he was substituted by the
appellee Renato D. Tayag. A dispute arose between the domiciary administrator in New York and the ancillary
administrator in the Philippines as to which of them was entitled to the possession of the stock certificates in
question. On January 27, 1964, the Court of First Instance of Manila ordered the domiciliary administrator, County
Trust Company, to "produce and deposit" them with the ancillary administrator or with the Clerk of Court. The
domiciliary administrator did not comply with the order, and on February 11, 1964, the ancillary administrator
petitioned the court to "issue an order declaring the certificate or certificates of stocks covering the 33,002 shares
issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or] considered as lost." 3
It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far as it is concerned
as to "who is entitled to the possession of the stock certificates in question; appellant opposed the petition of the
ancillary administrator because the said stock certificates are in existence, they are today in the possession of the
domiciliary administrator, the County Trust Company, in New York, U.S.A...." 4
It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or considered as lost.
Moreover, it would allege that there was a failure to observe certain requirements of its by-laws before new stock
certificates could be issued. Hence, its appeal.
As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order constitutes an emphatic
affirmation of judicial authority sought to be emasculated by the wilful conduct of the domiciliary administrator in
refusing to accord obedience to a court decree. How, then, can this order be stigmatized as illegal?
As is true of many problems confronting the judiciary, such a response was called for by the realities of the situation.
What cannot be ignored is that conduct bordering on wilful defiance, if it had not actually reached it, cannot without
undue loss of judicial prestige, be condoned or tolerated. For the law is not so lacking in flexibility and resourcefulness
as to preclude such a solution, the more so as deeper reflection would make clear its being buttressed by indisputable
principles and supported by the strongest policy considerations.
It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary no less than that of
the country. Through this challenged order, there is thus dispelled the atmosphere of contingent frustration brought
about by the persistence of the domiciliary administrator to hold on to the stock certificates after it had, as admitted,
voluntarily submitted itself to the jurisdiction of the lower court by entering its appearance through counsel on June
27, 1963, and filing a petition for relief from a previous order of March 15, 1963.
Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to what was decreed. For
without it, what it had been decided would be set at naught and nullified. Unless such a blatant disregard by the
domiciliary administrator, with residence abroad, of what was previously ordained by a court order could be thus
remedied, it would have entailed, insofar as this matter was concerned, not a partial but a well-nigh complete
paralysis of judicial authority.
1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary administrator to gain
control and possession of all assets of the decedent within the jurisdiction of the Philippines. Nor could it. Such a
power is inherent in his duty to settle her estate and satisfy the claims of local creditors. 5 As Justice Tuason speaking
for this Court made clear, it is a "general rule universally recognized" that administration, whether principal or
ancillary, certainly "extends to the assets of a decedent found within the state or country where it was granted," the
corollary being "that an administrator appointed in one state or country has no power over property in another state
or country."6
It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case, set forth by Justice
Malcolm. Thus: "It is often necessary to have more than one administration of an estate. When a person dies intestate
owning property in the country of his domicile as well as in a foreign country, administration is had in both countries.
That which is granted in the jurisdiction of decedent's last domicile is termed the principal administration, while any
other administration is termed the ancillary administration. The reason for the latter is because a grant of
administration does not ex proprio vigore have any effect beyond the limits of the country in which it is granted.
Hence, an administrator appointed in a foreign state has no authority in the [Philippines]. The ancillary administration
is proper, whenever a person dies, leaving in a country other than that of his last domicile, property to be
administered in the nature of assets of the deceased liable for his individual debts or to be distributed among his
heirs."7
It would follow then that the authority of the probate court to require that ancillary administrator's right to "the stock
certificates covering the 33,002 shares ... standing in her name in the books of [appellant] Benguet Consolidated,
Inc...." be respected is equally beyond question. For appellant is a Philippine corporation owing full allegiance and
subject to the unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be considered in any wise
as immune from lawful court orders.
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue 8 finds application. "In the instant case, the
actual situs of the shares of stock is in the Philippines, the corporation being domiciled [here]." To the force of the
above undeniable proposition, not even appellant is insensible. It does not dispute it. Nor could it successfully do so
even if it were so minded.
2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the legality of the
challenged order, how does appellant, Benguet Consolidated, Inc. propose to carry the extremely heavy burden of
persuasion of precisely demonstrating the contrary? It would assign as the basic error allegedly committed by the
lower court its "considering as lost the stock certificates covering 33,002 shares of Benguet belonging to the deceased
Idonah Slade Perkins, ..."9 More specifically, appellant would stress that the "lower court could not "consider as lost"
the stock certificates in question when, as a matter of fact, his Honor the trial Judge knew, and does know, and it is
admitted by the appellee, that the said stock certificates are in existence and are today in the possession of the
domiciliary administrator in New York."10
There may be an element of fiction in the above view of the lower court. That certainly does not suffice to call for the
reversal of the appealed order. Since there is a refusal, persistently adhered to by the domiciliary administrator in
New York, to deliver the shares of stocks of appellant corporation owned by the decedent to the ancillary
administrator in the Philippines, there was nothing unreasonable or arbitrary in considering them as lost and
requiring the appellant to issue new certificates in lieu thereof. Thereby, the task incumbent under the law on the
ancillary administrator could be discharged and his responsibility fulfilled.
Any other view would result in the compliance to a valid judicial order being made to depend on the uncontrolled
discretion of the party or entity, in this case domiciled abroad, which thus far has shown the utmost persistence in
refusing to yield obedience. Certainly, appellant would not be heard to contend in all seriousness that a judicial decree
could be treated as a mere scrap of paper, the court issuing it being powerless to remedy its flagrant disregard.
It may be admitted of course that such alleged loss as found by the lower court did not correspond exactly with the
facts. To be more blunt, the quality of truth may be lacking in such a conclusion arrived at. It is to be remembered
however, again to borrow from Frankfurter, "that fictions which the law may rely upon in the pursuit of legitimate
ends have played an important part in its development." 11
Speaking of the common law in its earlier period, Cardozo could state fictions "were devices to advance the ends of
justice, [even if] clumsy and at times offensive."12 Some of them have persisted even to the present, that eminent
jurist, noting "the quasi contract, the adopted child, the constructive trust, all of flourishing vitality, to attest the
empire of "as if" today."13 He likewise noted "a class of fictions of another order, the fiction which is a working tool of
thought, but which at times hides itself from view till reflection and analysis have brought it to the light."14
What cannot be disputed, therefore, is the at times indispensable role that fictions as such played in the law. There
should be then on the part of the appellant a further refinement in the catholicity of its condemnation of such judicial
technique. If ever an occasion did call for the employment of a legal fiction to put an end to the anomalous situation of
a valid judicial order being disregarded with apparent impunity, this is it. What is thus most obvious is that this
particular alleged error does not carry persuasion.
3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking one of the
provisions of its by-laws which would set forth the procedure to be followed in case of a lost, stolen or destroyed stock
certificate; it would stress that in the event of a contest or the pendency of an action regarding ownership of such
certificate or certificates of stock allegedly lost, stolen or destroyed, the issuance of a new certificate or certificates
would await the "final decision by [a] court regarding the ownership [thereof]." 15
Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law. It is admitted that the
foreign domiciliary administrator did not appeal from the order now in question. Moreover, there is likewise the
express admission of appellant that as far as it is concerned, "it is immaterial ... who is entitled to the possession of the
stock certificates ..." Even if such were not the case, it would be a legal absurdity to impart to such a provision
conclusiveness and finality. Assuming that a contrariety exists between the above by-law and the command of a court
decree, the latter is to be followed.
It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which, however, the judiciary
must yield deference, when appropriately invoked and deemed applicable. It would be most highly unorthodox,
however, if a corporate by-law would be accorded such a high estate in the jural order that a court must not only take
note of it but yield to its alleged controlling force.
The fear of appellant of a contingent liability with which it could be saddled unless the appealed order be set aside for
its inconsistency with one of its by-laws does not impress us. Its obedience to a lawful court order certainly
constitutes a valid defense, assuming that such apprehension of a possible court action against it could possibly
materialize. Thus far, nothing in the circumstances as they have developed gives substance to such a fear. Gossamer
possibilities of a future prejudice to appellant do not suffice to nullify the lawful exercise of judicial authority.
4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with implications at war with the
basic postulates of corporate theory.
We start with the undeniable premise that, "a corporation is an artificial being created by operation of law...." 16 It owes
its life to the state, its birth being purely dependent on its will. As Berle so aptly stated: "Classically, a corporation was
conceived as an artificial person, owing its existence through creation by a sovereign power." 17 As a matter of fact, the
statutory language employed owes much to Chief Justice Marshall, who in the Dartmouth College decision defined a
corporation precisely as "an artificial being, invisible, intangible, and existing only in contemplation of law." 18
The well-known authority Fletcher could summarize the matter thus: "A corporation is not in fact and in reality a
person, but the law treats it as though it were a person by process of fiction, or by regarding it as an artificial person
distinct and separate from its individual stockholders.... It owes its existence to law. It is an artificial person created by
law for certain specific purposes, the extent of whose existence, powers and liberties is fixed by its charter." 19Dean
Pound's terse summary, a juristic person, resulting from an association of human beings granted legal personality by
the state, puts the matter neatly.20
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote from Friedmann, "is the
reality of the group as a social and legal entity, independent of state recognition and concession." 21 A corporation as
known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of the state
according to law. It is logically inconceivable therefore that it will have rights and privileges of a higher priority than
that of its creator. More than that, it cannot legitimately refuse to yield obedience to acts of its state organs, certainly
not excluding the judiciary, whenever called upon to do so.
As a matter of fact, a corporation once it comes into being, following American law still of persuasive authority in our
jurisdiction, comes more often within the ken of the judiciary than the other two coordinate branches. It institutes the
appropriate court action to enforce its right. Correlatively, it is not immune from judicial control in those instances,
where a duty under the law as ascertained in an appropriate legal proceeding is cast upon it.
To assert that it can choose which court order to follow and which to disregard is to confer upon it not autonomy
which may be conceded but license which cannot be tolerated. It is to argue that it may, when so minded, overrule the
state, the source of its very existence; it is to contend that what any of its governmental organs may lawfully require
could be ignored at will. So extravagant a claim cannot possibly merit approval.
5. One last point. In Viloria v. Administrator of Veterans Affairs, 22 it was shown that in a guardianship proceedings
then pending in a lower court, the United States Veterans Administration filed a motion for the refund of a certain sum
of money paid to the minor under guardianship, alleging that the lower court had previously granted its petition to
consider the deceased father as not entitled to guerilla benefits according to a determination arrived at by its main
office in the United States. The motion was denied. In seeking a reconsideration of such order, the Administrator
relied on an American federal statute making his decisions "final and conclusive on all questions of law or fact"
precluding any other American official to examine the matter anew, "except a judge or judges of the United States
court."23 Reconsideration was denied, and the Administrator appealed.

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the opinion that the appeal should
be rejected. The provisions of the U.S. Code, invoked by the appellant, make the decisions of the U.S. Veterans'
Administrator final and conclusive when made on claims property submitted to him for resolution; but they are not
applicable to the present case, where the Administrator is not acting as a judge but as a litigant. There is a great
difference between actions against the Administrator (which must be filed strictly in accordance with the conditions
that are imposed by the Veterans' Act, including the exclusive review by United States courts), and those actions
where the Veterans' Administrator seeks a remedy from our courts and submits to their jurisdiction by filing actions
therein. Our attention has not been called to any law or treaty that would make the findings of the Veterans'
Administrator, in actions where he is a party, conclusive on our courts. That, in effect, would deprive our tribunals of
judicial discretion and render them mere subordinate instrumentalities of the Veterans' Administrator."

It is bad enough as the Viloria decision made patent for our judiciary to accept as final and conclusive, determinations
made by foreign governmental agencies. It is infinitely worse if through the absence of any coercive power by our
courts over juridical persons within our jurisdiction, the force and effectivity of their orders could be made to depend
on the whim or caprice of alien entities. It is difficult to imagine of a situation more offensive to the dignity of the
bench or the honor of the country.

Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet Consolidated seems to
be firmly committed as shown by its failure to accept the validity of the order complained of; it seeks its reversal.
Certainly we must at all pains see to it that it does not succeed. The deplorable consequences attendant on appellant
prevailing attest to the necessity of negative response from us. That is what appellant will get.

That is all then that this case presents. It is obvious why the appeal cannot succeed. It is always easy to conjure
extreme and even oppressive possibilities. That is not decisive. It does not settle the issue. What carries weight and
conviction is the result arrived at, the just solution obtained, grounded in the soundest of legal doctrines and
distinguished by its correspondence with what a sense of realism requires. For through the appealed order, the
imperative requirement of justice according to law is satisfied and national dignity and honor maintained.

WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First Instance, dated May
18, 1964, is affirmed. With costs against oppositor-appelant Benguet Consolidated, Inc.

Makalintal, Zaldivar and Capistrano, JJ., concur.

Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro, JJ., concur in the result.
G.R. No. 61594 September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his capacity as
Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to
do business in the Philippines, executed in Manila two (2) separate contracts of employment, one with private
respondent Ethelynne B. Farrales and the other with private respondent Ma. M.C. Mamasig. 1The contracts, which
became effective on 9 January 1979, provided in pertinent portion as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any
time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu
thereof, by paying the EMPLOYEE wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi,
Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their training period, they began discharging their job
functions as flight attendants, with base station in Manila and flying assignments to different parts of the Middle East
and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of employment,
PIA through Mr. Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters both dated 1
August 1980 to private respondents Farrales and Mamasig advising both that their services as flight stewardesses
would be terminated "effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they
had) executed with [PIA]."2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint, docketed as NCR-STF-
95151-80, for illegal dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry
of Labor and Employment ("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty.
Jose M. Pascual ordered the parties to submit their position papers and evidence supporting their respective
positions. The PIA submitted its position paper, 3 but no evidence, and there claimed that both private respondents
were habitual absentees; that both were in the habit of bringing in from abroad sizeable quantities of "personal
effects"; and that PIA personnel at the Manila International Airport had been discreetly warned by customs officials to
advise private respondents to discontinue that practice. PIA further claimed that the services of both private
respondents were terminated pursuant to the provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private
respondents with full backwages or, in the alternative, the payment to them of the amounts equivalent to their
salaries for the remainder of the fixed three-year period of their employment contracts; the payment to private
respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a
bonus to each of the private respondents equivalent to their one-month salary. 4 The Order stated that private
respondents had attained the status of regular employees after they had rendered more than a year of continued
service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as
violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual
employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was
illegal and entitled private respondents to reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings
of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA
the option, in lieu of reinstatement, "to pay each of the complainants [private respondents] their salaries
corresponding to the unexpired portion of the contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the
Deputy Minister as having been rendered without jurisdiction; for having been rendered without support in the
evidence of record since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for
having been issued in disregard and in violation of petitioner's rights under the employment contracts with private
respondents.
1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the
complaint initiated by private respondents for illegal dismissal, jurisdiction over the same being lodged in the
Arbitration Branch of the National Labor Relations Commission ("NLRC") It appears to us beyond dispute, however,
that both at the time the complaint was initiated in September 1980 and at the time the Orders assailed were
rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente
Leogardo, Jr.), the Regional Director had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one
(1) year of service without prior clearance from the Department of Labor and Employment:
Art. 278. Miscellaneous Provisions — . . .
(b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the
employment of employees with at least one year of service during the last two (2) years, whether such service is
continuous or broken, without prior written authority issued in accordance with such rules and regulations as the
Secretary may promulgate . . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case of a
termination without the necessary clearance, the Regional Director was authorized to order the reinstatement of the
employee concerned and the payment of backwages; necessarily, therefore, the Regional Director must have been
given jurisdiction over such termination cases:
Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal without prior clearance shall be
conclusively presumed to be termination of employment without a just cause. The Regional Director shall, in such
case order the immediate reinstatement of the employee and the payment of his wages from the time of the shutdown
or dismissal until the time of reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly very explicit about the
jurisdiction of the Regional Director over termination of employment cases:
Under PD 850, termination cases — with or without CBA — are now placed under the original jurisdiction of the
Regional Director. Preventive suspension cases, now made cognizable for the first time, are also placed under the
Regional Director. Before PD 850, termination cases where there was a CBA were under the jurisdiction of the
grievance machinery and voluntary arbitration, while termination cases where there was no CBA were under the
jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its implementing rules and regulations with respect
to termination and preventive suspension cases are:
1. The Regional Director is now required to rule on every application for clearance, whether there is opposition or not,
within ten days from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still his order was null
and void because it had been issued in violation of petitioner's right to procedural due process .6 This claim, however,
cannot be given serious consideration. Petitioner was ordered by the Regional Director to submit not only its position
paper but also such evidence in its favor as it might have. Petitioner opted to rely solely upon its position paper; we
must assume it had no evidence to sustain its assertions. Thus, even if no formal or oral hearing was conducted,
petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was able to appeal his case to the
Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due process must be rejected. At the time the complaint
was filed by private respondents on 21 September 1980 and at the time the Regional Director issued his questioned
order on 22 January 1981, applicable regulation, as noted above, specified that a "dismissal without prior clearance
shall be conclusively presumed to be termination of employment without a cause", and the Regional Director was
required in such case to" order the immediate reinstatement of the employee and the payment of his wages from the
time of the shutdown or dismiss until . . . reinstatement." In other words, under the then applicable rule, the Regional
Director did not even have to require submission of position papers by the parties in view of the conclusive (juris et de
jure) character of the presumption created by such applicable law and regulation. In Cebu Institute of Technology v.
Minister of Labor and Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules
and Regulations, the termination of [an employee] which was without previous clearance from the Ministry of Labor
is conclusively presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary
proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private
respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its
contract rather than by the general provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the
parties; while paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to
terminate the employment agreement at any time by giving one-month's notice to the employee or, in lieu of such
notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the
parties. 10 The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306,
of our Civil Code is that the contracting parties may establish such stipulations as they may deem
convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus,
counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of
applicable law, especially provisions relating to matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions
of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating
to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary
to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable
Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that
employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the
contract of employment was entered into, and hence refused to give effect to said paragraph 5. These Articles read as
follows:
Art. 280. Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his
compensation was withheld from him up to the time his reinstatement.
Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered
as regular employee with respect to the activity in which he is employed and his employment shall continue while
such actually exists. (Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in detail the question of
whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. After
an extensive examination of the history and development of Articles 280 and 281, the Court reached the conclusion
that a contract providing for employment with a fixed period was not necessarily unlawful:
There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods
have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated
otherwise, where the reason for the law does not exist e.g. where it is indeed the employee himself who insists upon a
period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite
date of termination is a sine qua non would an agreement fixing a period be essentially evil or illicit, therefore
anathema Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent
the circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and
literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period
would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to
freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation
should be eschewed or avoided. The law must be given reasonable interpretation, to preclude absurdity in its
application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of
contract to remedy the evil of employers" using it as a means to prevent their employees from obtaining security of
tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article
280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's
right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral
agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of
tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the
employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes
other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to
lead to absurd and unintended consequences. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication
that the period specified in an employment agreement was designed to circumvent the security of tenure of regular
employees which is provided for in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon
some aspect of the agreement other than the mere specification of a fixed term of the ernployment agreement, or
upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private
respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3)
years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of
that agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly granted
by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner
PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month
period, or even less by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of
the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically
employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent
any security of tenure from accruing in favor of private respondents even during the limited period of three (3)
years,13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of
Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out
of or in connection with the agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot
be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of this case, i.e.,
the employer-employee relationship between petitioner PIA and private respondents. We have already pointed out
that the relationship is much affected with public interest and that the otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship.
Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the sole venue for
the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant circumstances of
this case will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one
hand, and the relationship between the parties, upon the other: the contract was not only executed in the Philippines,
it was also performed here, at least partially; private respondents are Philippine citizens and respondents, while
petitioner, although a foreign corporation, is licensed to do business (and actually doing business) and hence resident
in the Philippines; lastly, private respondents were based in the Philippines in between their assigned flights to the
Middle East and Europe. All the above contacts point to the Philippine courts and administrative agencies as a proper
forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10 of the
employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested
upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the
contents of Pakistan law on the matter; it must therefore be presumed that the applicable provisions of the law of
Pakistan are the same as the applicable provisions of Philippine law.14
We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent
Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess of
jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3) years
backwages without qualification or deduction. Should their reinstatement to their former or other substantially
equivalent positions not be feasible in view of the length of time which has gone by since their services were
unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting to one
(1) month's salary for every year of service rendered by them, including the three (3) years service putatively
rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August 1982
of public respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years
backwages, without deduction or qualification; and (2) should reinstatement of private respondents to their former
positions or to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private
respondents separation pay amounting to one (1)-month's salary for every year of service actually rendered by them
and for the three (3) years putative service by private respondents. The Temporary Restraining Order issued on 13
September 1982 is hereby LIFTED. Costs against petitioner.
SO ORDERED.
G.R. No. 104235 November 18, 1993
SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,
vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.
Sycip, Salazar, Hernandez, Gatmaitan for petitioners.
Quisumbing, Torres & Evangelista for private-respondent.
NOCON, J.:
Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007 departing from New
York to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed an action for damages
before the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating petitioner's position, the trial court
categorically ruled that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners and
that said breach was "characterized by bad faith." On appeal, however, the appellate court found that while there was
a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under the Code of
Federal Regulations by the Civil Aeronautics Board of the United States of America it is allowed to overbook flights.
The factual backdrop of the case is as follows:
Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three (3)
airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los Angeles on
June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of their daughter was
a full fare ticket. All three tickets represented confirmed reservations.
While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for said
flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled flight
at 11:00 a.m. but were placed on the wait-list because the number of passengers who had checked in before them had
already taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two
other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names
were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The two others, on the
other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were
given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter,
was allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied
boarding. According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare
ticket.
Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it was
also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American
Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars.
Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage
before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the lower court ruled in favor of
petitioners in its decision 1 dated January 9, 1989 the dispositive portion of which states as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the following amounts:
(1) US $918.00, or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira
and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;
(2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira Zalamea's ticket for
TWA Flight 007;
(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50, Philippine Currency, representing
the price of Liana Zalamea's ticket for TWA Flight 007,
(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral damages for all the plaintiffs'
(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees; and
(6) The costs of suit.
SO ORDERED. 2
On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a matter of record that
overbooking of flights is a common and accepted practice of airlines in the United States and is specifically allowed
under the Code of Federal Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on
respondent TransWorld Airlines.
Moreover, while respondent TWA was remiss in not informing petitioners that the flight was overbooked and that
even a person with a confirmed reservation may be denied accommodation on an overbooked flight, nevertheless it
ruled that such omission or negligence cannot under the circumstances be considered to be so gross as to amount to
bad faith.
Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-eight (48) other
passengers where full-fare first class tickets were given priority over discounted tickets.
The dispositive portion of the decision of respondent Court of Appeals 3 dated October 25, 1991 states as follows:
WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in that the award of moral
and exemplary damages to the plaintiffs is eliminated, and the defendant-appellant is hereby ordered to pay the
plaintiff the following amounts:
(1) US$159.49, or its peso equivalent at the time of the payment, representing the price of Suthira Zalamea's ticket for
TWA Flight 007;
(2) US$159.49, or its peso equivalent at the time of the payment, representing the price of Cesar Zalamea's ticket for
TWA Flight 007;
(3) P50,000.00 as and for attorney's fees.
(4) The costs of suit.
SO ORDERED.4
Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and alleged the
following errors committed by the respondent Court of Appeals, to wit:
I. In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith.
In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be passenger had the necessary
. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT TWA BECAUSE IT HAS ticket, baggage claim and clearance from immigration all clearly and unmistakably showing that she was, in fact,
A RIGHT TO OVERBOOK FLIGHTS. included in the passenger manifest of said flight, and yet was denied accommodation in said flight, this Court did not
hesitate to affirm the lower court's finding awarding her damages.
II.
A contract to transport passengers is quite different in kind and degree from any other contractual relation. So ruled
. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES. this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract of carriage generates a relation
attended with public duty — a duty to provide public service and convenience to its passengers which must be
III.
paramount to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed 1011 to a
smaller Boeing 707 because there were only 138 confirmed economy class passengers who could very well be
. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR THE AMERICAN
accommodated in the smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of
AIRLINES
economy, amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are entitled to
TICKETS.5
its utmost consideration entitles the passenger to an award of moral damages. 13
That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their
Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing its
flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or regulation allegedly authorizing
passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there was
overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take judicial notice of
overbooking. Respondent TWA should have incorporated stipulations on overbooking on the tickets issued or to
them. Like any other fact, they must be alleged and proved. 6 Written law may be evidenced by an official publication
properly inform its passengers about these policies so that the latter would be prepared for such eventuality or would
thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied
have the choice to ride with another airline.
with a certificate that such officer has custody. The certificate may be made by a secretary of an embassy or legation,
consul general, consul, vice-consul, or consular agent or by any officer in the foreign service of the Philippines
Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name of the
stationed in the foreign country in which the record is kept, and authenticated by the seal of his office.7
passenger and the points of origin and destination, contained such a notice. An examination of Exhibit I does not bear
this out. At any rate, said exhibit was not offered for the purpose of showing the existence of a notice of overbooking
Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her
but to show that Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los Angeles.
deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows
overbooking. Aside from said statement, no official publication of said code was presented as evidence. Thus,
Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less priority
respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has no basis
to discounted tickets. While the petitioners had checked in at the same time, and held confirmed tickets, yet, only one
in fact.
of them was allowed to board the plane ten minutes before departure time because the full-fare ticket he was holding
was given priority over discounted tickets. The other two petitioners were left behind.
Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in
accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was
It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are
issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is
reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not the
issued in such State by the defendant airline.8 Since the tickets were sold and issued in the Philippines, the applicable
reasonableness of said policies but whether or not said policies were incorporated or deemed written on petitioners'
law in this case would be Philippine law.
contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither did it present
any argument of substance to show that petitioners were duly apprised of the overbooked condition of the flight or
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to
that there is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners had the right to rely
an award of moral damages. In Alitalia Airways v. Court of Appeals,9 where passengers with confirmed bookings were
upon the assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets represented
refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a
confirmed seats without any qualification. The failure of respondent TWA to so inform them when it could easily have
particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he
done so thereby enabling respondent to hold on to them as passengers up to the last minute amounts to bad faith.
would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of
Evidently, respondent TWA placed its self-interest over the rights of petitioners under their contracts of carriage.
carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their
Such conscious disregard of petitioners' rights makes respondent TWA liable for moral damages. To deter breach of
seats in case all of them would show up for the check in. For the indignity and inconvenience of being refused a
contracts by respondent TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary
confirmed seat on the last minute, said passenger is entitled to an award of moral damages.
damages, as well.
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed to board the
Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket because the
plane because her seat had already been given to another passenger even before the allowable period for passengers
ticket was used by her father. On this score, we uphold the respondent court. Petitioners had not shown with certainty
to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this Court held that
that the act of respondent TWA in allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or
petitioner airline acted in bad faith in violating private respondent's rights under their contract of carriage and is
deliberate act. Petitioners had also failed to establish that they did not accede to said agreement. The logical
therefore liable for the injuries she has sustained as a result.
conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit impliedly, to the course of action
taken.

The respondent court erred, however, in not ordering the refund of the American Airlines tickets purchased and used
by petitioners Suthira and Liana. The evidence shows that petitioners Suthira and Liana were constrained to take the
American Airlines flight to Los Angeles not because they "opted not to use their TWA tickets on another TWA flight"
but because respondent TWA could not accommodate them either on the next TWA flight which was also fully
booked. 14 The purchase of the American Airlines tickets by petitioners Suthira and Liana was the consequence of
respondent TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article 2201,
New Civil Code, respondent TWA should, therefore, be responsible for all damages which may be reasonably
attributed to the non-performance of its obligation. In the previously cited case of Alitalia Airways v. Court of
Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost of the tickets he had to
buy for a flight to another airline. Thus, instead of simply being refunded for the cost of the unused TWA tickets,
petitioners should be awarded the actual cost of their flight from New York to Los Angeles. On this score, we differ
from the trial court's ruling which ordered not only the reimbursement of the American Airlines tickets but also the
refund of the unused TWA tickets. To require both prestations would have enabled petitioners to fly from New York to
Los Angeles without any fare being paid.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which allows
recovery when the defendant's act or omission has compelled plaintiff to litigate or to incur expenses to protect his
interest. However, the award for moral damages and exemplary damages by the trial court is excessive in the light of
the fact that only Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral damages and
another P50,000.00 exemplary damages would suffice under the circumstances obtaining in the instant case.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is hereby
MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay damages to petitioners in the following
amounts, to wit:

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira
and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;

(2) P50,000.00 as moral damages;

(3) P50,000.00 as exemplary damages;

(4) P50,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

G.R. No. 124110 April 20, 2001 The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely uttered, "it’s not my fault.
It’s the fault of the company. Just sit down and wait."9 When Mr. Fontanilla reminded Linda of the inconvenience being
UNITED AIRLINES, INC., Petitioner caused to them, she bluntly retorted, "Who do you think you are? You lousy Flips are good for nothing beggars. You
vs. always ask for American aid." After which she remarked "Don’t worry about your baggage. Anyway there is nothing in
COURT OF APPEALS, ANICETO FONTANILLA, in his personal capacity and in behalf of his minor son MYCHAL there. What are you doing here anyway? I will report you to immigration. You Filipinos should go home." 10 Such rude
ANDREW FONTANILLA, Respondents. statements were made in front of other people in the airport causing the Fontanillas to suffer shame, humiliation and
embarrassment. The chastening situation even caused the younger Fontanilla to break into tears.11
KAPUNAN, J.:
After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She simply said "Take it or leave
On March 1, 1989, private respondent Aniceto Fontanilla purchased from petitioner United Airlines, through the it." This, the Fontanillas declined.12
Philippine Travel Bureau in Manila three (3) "Visit the U.S.A." tickets for himself, his wife and his minor son Mychal for
the following routes: The Fontanillas then proceeded to the United Airlines customer service counter to plead their case. The male
employee at the counter reacted by shouting that he was ready for it and left without saying anything. 13
a. San Francisco to Washinton (15 April 1989);
The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It was only at
b. Washington to Chicago (25 April 1989); 12:00 noon that they were able to leave Los Angeles on United Airlines Flight No. 803.

c. Chicago to Los Angeles (29 April 1989); Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May 5, 1989.

d. Los Angeles to San Francisco (01 may 1989 for petitioner’s wife and 05 May 1989 for petitioner and his son). 1 According to United Airlines, the Fontanillas did not initially go to the check-in counter to get their seat assignments
for UA Flight 1108. They instead proceeded to join the queue boarding the aircraft without first securing their seat
All flights had been confirmed previously by United Airlines. 2
assignments as required in their ticket and boarding passes. Having no seat assignments, the stewardess at the door of
the plane instructed them to go to the check-in counter. When the Fontanillas proceeded to the check-in counter,
The Fontanillas proceeded to the United States as planned, where they used the first coupon from San Francisco to
Linda Allen, the United Airlines Customer Representative at the counter informed them that the flight was
Washington. On April 24, 1989, Aniceto Fontanilla bought two (2) additional coupons each for himself, his wife and
overbooked. She booked them on the next available flight and offered them denied boarding compensation. Allen
his son from petitioner at its office in Washington Dulles Airport. After paying the penalty for rewriting their tickets,
vehemently denies uttering the derogatory and racist words attributed to her by the Fontanillas. 14
the Fontanillas were issued tickets with corresponding boarding passes with the words "CHECK-IN REQUIRED," for
United Airlines Flight No. 1108, set to leave from Los Angeles to San Francisco at 10:30 a.m. on May 5, 1989. 3
The incident prompted the Fontanillas to file Civil Case No. 89-4268 for damages before the Regional Trial Court of
Makati. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads as follows:
The cause of the non-boarding of the Fontanillas on United Airlines Flight No. 1108 makes up the bone of contention
of this controversy.1âwphi1.nêt
WHEREFORE, judgment is rendered dismissing the complaint. The counterclaim is likewise dismissed as it appears
that plaintiffs were not actuated by legal malice when they filed the instant complaint. 15
Private respondents’ version is as follows:
On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that there was an
Aniceto Fontanilla and his son Mychal claim that on May 5, 1989, upon their arrival at the los Angeles Airport for their
admission on the part of United Airlines that the Fontanillas did in fact observe the check-in requirement. It ruled
flight, they proceeded to united Airlines counter where they were attended by an employee wearing a nameplate
further that even assuming there was a failure to observe the check-in requirement, United Airlines failed to comply
bearing the name "LINDA." Linda examined their tickets, punched something into her computer and then told them
with the procedure laid down in cases where a passenger is denied boarding. The appellate court likewise gave
that boarding would be in fifteen minutes.4
credence to the claim of Aniceto Fontanilla that the employees of United Airlines were discourteous and arbitrary and,
When the flight was called, the Fontanillas proceeded to the plane. To their surprise, the stewardess at the gate did worse, discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages. The dispositive
not allow them to board the plane, as they had no assigned seat numbers. They were then directed to go back to the portion of the decision of the respondent Court of Appeals dated 29 September 1995, states as follows:
"check-in" counter where Linda subsequently informed them that the flight had been overbooked and asked them to
WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby REVERSED and SET ASIDE, and a new
wait.5
judgment is entered ordering defendant-appellee to pay plaintiff-appellant the following:
The Fontanillas tried to explain to Linda the special circumstances of their visit. However, Linda told them in arrogant
manner, "So what, I can not do anything about it."6
a. P200,000.00 as moral damages;
Subsequently, three other passengers with Caucasian features were graciously allowed to baord, after the Fontanillas
were told that the flight had been overbooked.7
b. P200,000.00 as exemplary damages;

The plane then took off with the Fontanillas’ baggage in tow, leaving them behind. 8
c. P50,000.00 as attorney’s fees;
No pronouncement as to costs.
SO ORDERED.16
Petitioner United Airlines now comes to this Court raising the following assignments of errors;
I The rule authorizing an answer that the defendant has no knowledge or information sufficient to form a belief as to
RESPONDENT COURT OF APPEALS GRVAELY ERRED IN RULING THAT THE TRIAL COURT WAS WRONG IN FAILING
TO CONSIDER THE ALLEGED ADMISSION THAT PRIVATE RESPONDENT OBSERVED THE CHECK-IN REQUIREMENT.
II
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT’S FAILURE TO
CHECK-IN WILL NOT DEFEAT HIS CLAIMS BECAUSE THE DENIED BOARDING RULES WERE NOT COMPLIED WITH.
III
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
MORAL DAMAGES OF P200,000.
IV
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
EXEMPLARY DAMAGES OF P200,000.
V The determination of the other issues raised is dependent on whether or not there was a breach of contract in bad
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
ATTORNEY’S FEES OF P50,000.17
On the first issue raised by the petitioner, the respondent Court of Appeals ruled that when Rule 9, Section 1 of the
Rules of Court,18 there was an implied admission in petitioner’s answer in the allegations in the complaint that private
respondent and his son observed the "check-in requirement at the Los Angeles Airport." Thus:
A perusal of the above pleadings filed before the trial court disclosed that there exist a blatant admission on the part
of the defendant-appellee that the plaintiffs-appellants indeed observed the "check-in" requirement at the Los Angeles
Airport on May 5, 1989. In view of defendant-appellee’s admission of plaintiffs-appellants’ material averment in the
complaint. We find no reason why the trial court should rule against such admission. 19
We disagree with the above conclusion reached by respondent Court of Appeals. Paragraph 7 of private respondents’
complaint states:
7. On May 5, 1989 at 9:45 a.m., plaintiff and his son checked in at defendant’s designated counter at the airport in Los
Angeles for their scheduled flight to San Francisco on defendant’s Flight No. 1108. 20
Responding to the above allegations, petitioner averred in paragraph 4 of its answer, thus:
4. Admits the allegation set forth in paragraph 7 of the complaint except to deny that plaintiff and his son checked in at
9:45 a.m., for lack of knowledge or information at this point in time as to the truth thereof. 21
the truth of an averment giving such answer is asserted is so plainly and necessarily within the defendant’s
knowledge that his averment of ignorance must be palpably untrue. 22 Whether or not private respondents checked in
at petitioner’s designated counter at the airport at 9:45 a.m. on May 5, 1989 must necessarily be within petitioner’s
knowledge.
While there was no specific denial as to the fact of compliance with the "check-in" requirement by private
respondents, petitioner presented evidence to support its contention that there indeed was no compliance.
Private respondents then are said to have waived the rule on admission. It not only presented evidence to support its
contention that there was compliance with the check-in requirement, it even allowed petitioner to present rebutal
evidence. In the case of Yu Chuck vs. "Kong Li Po," we ruled that:
The object of the rule is to relieve a party of the trouble and expense in proving in the first instance an alleged fact, the
existence or non-existence of which is necessarily within the knowledge of the adverse party, and of the necessity (to
his opponent’s case) of establishing which such adverse party is notified by his opponent’s pleadings.
The plaintiff may, of course, waive the rule and that is what must be considered to have done (sic) by introducing
evidence as to the execution of the document and failing to object to the defendant’s evidence in refutation; all this
evidence is now competent and the case must be decided thereupon. 23
faith on the part of the petitioner in not allowing the Fontanillas to board United Airlines Flight 1108.
It must be remembered that the general rule in civil cases is that the party having the burden of proof of an essential
fact must produce a preponderance of evidence thereon. 24 Although the evidence adduced by the plaintiff is stronger
than that presented by the defendant, a judgment cannot be entered in favor of the former, if his evidence is not
sufficient to sustain his cause of action. The plaintiff must rely on the strength of his own evidence and not upon the
weakness of the defendant’s.25 Proceeding from this, and considering the contradictory findings of facts by the
Regional Trial Court and the Court of Appeals, the question before this Court is whether or not private respondents
were able to prove with adequate evidence his allegations of breach of contract in bad faith.
We rule in the negative.
Time and again, the Court has pronounced that appellate courts should not, unless for strong and cogent reasons,
reverse the findings of facts of trial courts. This is so because trial judges are in better position to examine real
evidence and at a vantage point to observe the actuation and the demeanor of the witnesses. 26 While not the sole
indicator of the credibility of a witness, it is of such weight that it has been said to be the touchstone of credibility.27
Aniceto Fontanilla’s assertion that upon arrival at the airport at 9:45 a.m., he immediately proceeded to the check-in
counter, and that Linda Allen punched in something into the computer is specious and not supported by the evidence
on record. In support of their allegations, private respondents submitted a copy of the boarding pass. Explicitly
printed on the boarding pass are the words "Check-In Required." Curiously, the said pass did not indicate any seat
number. If indeed the Fontanillas checked in at the designated time as they claimed, why then were they not assigned
seat numbers? Absent any showing that Linda was so motivated, we do not buy into private respondents’ claim that
Linda intentionally deceived him, and made him the laughing stock among the passengers. 28Hence, as correctly
observed by the trial court:
Plaintiffs fail to realize that their failure to check in, as expressly required in their boarding passes, is they very reason
why they were not given their respective seat numbers, which resulted in their being denied boarding. 29
enable the Court to reach the conclusion that plaintiffs have, by a preponderance of evidence, proven that they are
entitled to P1,650,000.00 damages from defendant. 31
As to the award of moral and exemplary damages, we find error in the award of such by the Court of Appeals. For the
plaintiff to be entitled to an award of moral damages arising from a breach of contract of carriage, the carrier must
have acted with fraud or bad faith. The appellate court predicated its award on our pronouncement in the case
of Zalanea vs. Court of Appeals, supra, where we stated:

Neither do we agree with the conclusion reached by the appellate court that private respondents’ failure to comply
with the check-in requirement will not defeat his claim as the denied boarding rules were not complied with. Notably,
the appellate court relied on the Code of Federal Regulation Part on Oversales which states:
250.6 Exceptions to eligibility for denied boarding compensation.
A passenger denied board involuntarily from an oversold flight shall not be eligible for denied board compensation if:
a. The passenger does not comply with the carrier’s contract of carriage or tariff provisions
regarding ticketing, reconfirmation, check-in, and acceptability for transformation.
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling passengers concerned to an
award of moral damages. In Alitalia Airways vs. Court of Appeals, where passengers with confirmed booking were
refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to except that he
would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of
carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their
seats in case all of them would show up for check in. For the indignity and inconvenience of being refused a confirmed
seat on the last minute, said passenger is entitled to moral damages. (Emphasis supplied).
However, the Court’s ruling in said case should be read in consonance with existing laws, particularly, Economic
Regulations No. 7, as amended, of the Civil Aeronautics Board:

Sec. 3. Scope. – This regulation shall apply to every Philippine and foreign air carrier with respect to its operation of
The appellate court, however, erred in applying the laws of the United States as, in the case at bar, Philippine law is
flights or portions of flights originating from or terminating at, or serving a point within the territory of the Republic
the applicable law. Although, the contract of carriage was to be performed in the United States, the tickets were
of the Philippines insofar as it denies boarding to a passenger on a flight, or portion of a flight inside or outside the
purchased through petitioner’s agent in Manila. It is true that the tickets were "rewritten" in Washington, D.C.
Philippines, for which he holds confirmed reserved space. Furthermore, this Regulation is designed to cover only
however, such fact did not change the nature of the original contract of carriage entered into by the parties in Manila.
honest mistakes on the part of the carriers and excludes deliberate and willful acts of non-accommodation. Provided,
however, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a
In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of lex loci contractus. According to the
deliberate and willful act of non-accommodation.
doctrine, as a general rule, the law of the place where a contract is made or entered into governs with respect to its
nature and validity, obligation and interpretation. This has been said to be the rule even though the place where the
What this Court considers as bad faith is the willful and deliberate overbooking on the part of the airline carrier. The
contract was made is different from the place where it is to be performed, and particularly so, if the place of the
above-mentioned law clearly states that when the overbooking does not exceed ten percent (10%), it is not
making and the place of performance are the same. Hence, the court should apply the law of the place where the
considered as deliberate and therefore does not amount to bad faith. While there may have been overbooking in this
airline ticket was issued, when the passengers are residents and nationals of the forum and the ticket is issued in such
case, private respondents were not able to prove that the overbooking on United Airlines Flight 1108 exceeded ten
State by the defendant airline.
percent.
The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding Priority and
As earlier stated, the Court is of the opinion that the private respondents were not able to prove that they were
Denied Board Compensation of the Civil Aeronautics Board which provides that the check-in requirement be complied
subjected to coarse and harsh treatment by the ground crew of united Airlines. Neither were they able to show that
with before a passenger may claim against a carrier for being denied boarding:
there was bad faith on part of the carrier airline. Hence, the award of moral and exemplary damages by the Court of
Appeals is improper. Corollarily, the award of attorney’s fees is, likewise, denied for lack of any legal and factual basis.
Sec. 5. Amount of Denied Boarding Compensation Subject to the exceptions provided hereinafter under Section 6,
carriers shall pay to passengers holding confirmed reserved space and who have presented themselves at the proper
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 37044 is
place and time and fully complied with the carrier’s check-in and reconfirmation procedures and who are acceptable
hereby REVERSED and SET ASIDE. The decision of the Regional Trial Court of Makati City in Civil Case No. 89-4268
for carriage under the Carrier’s tariff but who have been denied boarding for lack of space, a compensation at the rate
dated April 8, 1991 is hereby REINSTATED.
of: xxx
SO ORDERED.
Private respondents’ narration that they were subjected to harsh and derogatory remarks seems incredulous.
However, this Court will not attempt to surmise what really happened, suffice to say, private respondent was not able
to prove his cause of action, for as the trial court correctly observed:

xxx plaintiffs claim to have been discriminated against and insulted in the presence of several people. Unfortunately,
plaintiffs limited their evidence to the testimony of Aniceto Fontanilla, without any corroboration by the people who
saw or heard the discriminatory remarks and insults; while such limited testimony could possibly be true, it does not
G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767 NAMED-
COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, NATIONAL LABOR RELATIONS
COMMISSION, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS
CORPORATION, respondents.
G.R. Nos. 104911-14 December 5, 1994
BIENVENIDO M. CADALIN, ET AL., petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC. and/or ASIA
INTERNATIONAL BUILDERS CORPORATION, respondents.
G.R. Nos. 105029-32 December 5, 1994
ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT INTERNATIONAL, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B.
EVANGELISTA, ROMEO PATAG, RIZALINO REYES, IGNACIO DE VERA, SOLOMON B. REYES, JOSE M. ABAN,
EMIGDIO N. ABARQUEZ, ANTONIO ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO,
MARTIN AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE ARLITA,
HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO BANAAG, RAMON BARBOSA, FELIX
BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C.
BICOL, PETRONILLO BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S. BRACAMANTE, PABLITO
BUSTILLO, GUILLERMO CABEZAS, BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO, IRENEO
CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS, ROMEO CECILIO,
TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ, FRANCISCO DE GUZMAN,
ONOFRE DE RAMA, IGNACIO DE VERA, MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ,
GILBERT EBRADA, RICARDO EBRADA, ANTONIO EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN
ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU, RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN
ESTRADA, VALERIO EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA,
PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO, ANTONIO JOCSON,
GERARDO LACSAMANA, EFREN U. LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO, JOSE
MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL MARTINEZ, DANTE MATREO, LUCIANO
MELENDEZ, RENATO MELO, FRANCIS MEDIODIA, JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO
MIRANDA, ILDEFONSO C. MOLINA, ARMANDO B. MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO,
FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE PANCHO, JOSE PANCHO, GORGONIO
P. PARALA, MODESTO PINPIN, JUANITO PAREA, ROMEO I. PATAG, FRANCISCO PINPIN, LEONARDO POBLETE,
JAIME POLLOS, DOMINGO PONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR.,
TOMAS B. RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G. RICAZA, RODELIO
RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA, QUIRINO
RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO, PEDRO SALGATAR, EDGARDO SALONGA,
NUMERIANO SAN MATEO, FELIZARDO DE LOS SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO
SOLANTE, CONRADO A. SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC, MENANDRO
TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES, MAXIMIANO TORRES, FRANCISCO G. TRIAS,
SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA, GILBERT VICTORIA,
HERNANE VICTORIANO, FRANCISCO VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO VILLALOBOS,
ANTONIO VILLAUZ, DANILO VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA, JUANITO VILLARINO,
FRANCISCO ZARA, ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES, EDUARDO
ABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO,
RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C.
ACUEZA, EDUARDO ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R.
AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO AGUIRRE, GONZALO
ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA, MARIANITO J. ALCANTARA, BENCIO
ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO,
ALBERTO ALMENAR, ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN
R. AMBROCIO, CARLOS AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI, ELINO P.
ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO, ANTONIO APILADO, ARTURO P. APILADO,
FRANCISCO APOLINARIO, BARTOLOME M. AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO,
ROBERTO ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO, ALEXANDER
ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO AREVALO, RAMON AREVALO, RODOLFO AREVALO,
EULALIO ARGUELLES, WILFREDO P. ARICA, JOSE M. ADESILLO, ANTONIO ASUNCION, ARTEMIO M. ASUNCION,
EDGARDO ASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P. AVERILLA, JR.,
VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL, JOSE L. BACANI, ROMULO R.
BALBIERAN, VICENTE BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O. BARBA, BERNARDO
BARRO, JUAN A. BASILAN, CEFERINO BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO
BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO B. BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO
BAUTISTA, JESUS R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERIC B. BELTRAN,
EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEO BERGONIO, ISABELO BERMUDEZ,
ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL,
CELESTINO BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL, ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N.
BITO, FERNANDO BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA, WILFREDO
BRACEROS, ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO BUDILLO, ARCHIMEDES
BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMO BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO
BUTIONG, JR., HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY,
HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V. CALDEJON,
OSCAR C. CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO, SANTOS T. CAMACHO,
ROBERTO CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO A.
CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON, MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO,
CORNELIO L. CASTILLO, JOSEPH B. CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO,
ROMEO P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO, RAMO CASTRO, JR.,
ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO B. CELIS, HERMINIGILDO CEREZO,
VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL, RODRIGO CLARETE,
AUGUSTO COLOMA, TURIANO CONCEPCION, TERESITO CONSTANTINO, ARMANDO CORALES, RENATO C.
CORCUERA, APOLINAR CORONADO, ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO CORPUZ, JESUS M.
CORRALES, CESAR CORTEMPRATO, FRANCISCO O. CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO,
ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA CRUZ, JR., PANCHITO CRUZ,
REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA,
FELIMON CUIZON, FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO DANTINGUINOO,
JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID, EDGARDO N.
DAYACAP, JOSELITO T. DELOSO, CELERINO DE GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE
DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO,
ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F. DIATA, EDUARDO A. DIAZ,
FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDO
DIONISIO, PHILIPP G. DISMAYA, BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA,
BENJAMIN DUPA, DANILO C. DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E. EISMA,
ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO, REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS
EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR, ROMEO T. ESCUYOS,
ANGELITO ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN ESPREGANTE,
IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR,
CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO, EMILIO E. FERNANDEZ,
ARTEMIO FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES, BENJAMIN FLORES, EDGARDO C. FLORES,
BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO, ROLANDO FRANCISCO, VALERIANO FRANCISCO,
RODOLFO GABAWAN, ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA,
BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M. GARCIA, EUGENIO GARCIA,
MARCELO L. GARCIA, PATRICIO L. GARCIA, JR., PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P.
GARCIA, ROBERTO S. GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINO
GAYETA, RAYMUNDO GERON, PLACIDO GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V.
GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J. GUTIERREZ, IGNACIO B.
GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA, RAUL G. HERNANDEZ, REYNALDO HERNANDEZ,
JOVENIANO D. HILADO, JUSTO HILAPO, ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL
L. IGNACIO, MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO G. ISLA, ARNEL L. JACOB,
OSCAR J. JAPITENGA, CIRILO HICBAN, MAXIMIANO HONRADES, GENEROSO IGNACIO, FELIPE ILAGAN,
EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE
JESUS, CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON,
PEDRO N. JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN
JOSE, GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C. LABELLA,
EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J. LADINES, RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M.
LAMADRID, GUADENCIO LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO
LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO DE LEMOS, JR., PEDRO G. DE
LEON, MANOLITO C. LILOC, GERARDO LIMUACO, ERNESTO S. LISING, RENATO LISING, WILFREDO S. LISING,
CRISPULO LONTOC, PEDRO M. LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO LOPEZ,
GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G. LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA,
DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ C. LUALHATI, SEBASTIAN
LUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI
MACALADLAD, ALFREDO MACALINO, RICARDO MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG,
RODOLFO V. MACARAIG, BENJAMIN MACATANGAY, HERMOGENES MACATANGAY, RODEL MACATANGAY,
ROMULO MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO G. MAGAT, EFREN C.
MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO MAGNAYE, ALFONSO MAGPANTAY,
RICARDO C. MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S. MAGSINO, ANTONIO
MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFO
MANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO, LEOPOLDO
MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIEL MANONSON, ERNESTO F. MANUEL,
EDUARDO MANZANO, RICARDO N. MAPA, RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN,
WENCESLAO MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE, SANTOS E. MARINO,
NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO MATABERDE, RENATO MATILLA,
VICTORIANO MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE,
REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA, JR., CLARO MENDOZA, TIMOTEO MENDOZA,
GREGORIO MERCADO, ERNANI DELA MERCED, RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE,
GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO A. MODESTO, JR., OSCAR MONDEDO,
GENEROSO MONTON, RENATO MORADA, RICARDO MORADA, RODOLFO MORADA, ROLANDO M. MORALES,
FEDERICO M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO
MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A. NARCIZO, REYNALDO NATALIA, FERNANDO C.
NAVARETTE, PACIFICO D. NAVARRO, FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO
NEPUMUCENO, HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON, AVELINO NUQUI, NEMESIO D. OBA,
DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO, REYNALDO P. OCSON,
BENJAMIN ODESA, ANGEL OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S.
ORIGINES, DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N. PACHECO,
ALFONSO L. PADILLA, DANILO PAGSANJAN, NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO
PAKINGAN, LEANDRO PALABRICA, QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN,
BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR., JOSE V. PASION,
ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO M. PERALTA, ANTONIO PEREZ,
ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ,
FERNANDO G. PERINO, FLORENTINO DEL PILAR, DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN,
WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO
PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO PUNIO, FEDERICO
QUIMAN, ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO C. DE RAMA, RICARDO L. DE
RAMA, ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V.
RAMIREZ, ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO, REYNALDO
RAQUEDAN, MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO, ALBERTO REDAZA,
ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO, GERARDO RENTOZA,
REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES, BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A.
REYES, JOSE C. REYES, ROMULO M. REYES, SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL
RIETA, RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO ROBLEZA, EDUARDO
ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS
RONQUILLO, ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO RONQUILLO,
ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL ROSARIO, TEODORICO DEL
ROSARIO, VIRGILIO L. ROSARIO, CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V.
SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ, APOLONIO P. SANTIAGO, JOSELITO
S. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D. SANTOS, MIGUEL
SAPUYOT, ALEX S. SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG,
RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON,
DOMINGO SOLANO, JOSELITO C. SOLANTE, CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO
SOLIS, ISAGANI M. SOLIS, EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON SUPANG,
PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN TARUC, JR., LEVY S. TEMPLO,
RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA,
JOVITO V. TORRES, LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI,
SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO,
EDGARDO C. VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA, BIENVENIDO VERGARA,
ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO, ALFREDO VICTORIANO, TEOFILO P.
VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO
VILLAGERA, ALEX VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M. VILLANUEVA,
MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL, FELICISIMO VILLARINO, RAFAEL
VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO YABUT, VICENTE YNGENTE, AND ORO C.
ZUNIGA, respondents.
Gerardo A. Del Mundo and Associates for petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.
Florante M. De Castro for private respondents in 105029-32.
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine Overseas Employment
Administration's Administrator, et. al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the National Labor Relations Commission (NLRC) in POEA
Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new decision: (i) declaring private
respondents as in default; (ii) declaring the said labor cases as a class suit; (iii) ordering Asia International Builders
Corporation (AIBC) and Brown and Root International Inc. (BRII) to pay the claims of the 1,767 claimants in said labor
cases; (iv) declaring Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing POEA Case No. L-86-05-
460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution
dated September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. National Labor Relations
Commission, et. al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-
10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code of the Philippines
instead of the ten-year prescriptive period under the Civil Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution
dated September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v. National Labor
Relations Commission, et. al." was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-
10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions for reconsideration of
AIBC and BRII (Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in four labor cases: (1)
awarded monetary benefits only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to conduct hearings
and to receive evidence on the claims dismissed by the POEA for lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos. 104911-14 were raffled
to the Second Division. In the Resolution dated July 26, 1993, the Second Division referred G.R. Nos. 104911-14 to the
Third Division (G.R. Nos. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos. 104911-14 for
the consolidation of said cases with G.R. Nos. 104776 and 105029-32, which were assigned to the First Division (G.R.
Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated
October 27, 1993, the First Division granted the motion to consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R.
Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own behalf and on
behalf of 728 other overseas contract workers (OCWs) instituted a class suit by filing an "Amended Complaint" with
the Philippine Overseas Employment Administration (POEA) for money claims arising from their recruitment by AIBC
and employment by BRII (POEA Case No. L-84-06-555). The claimants were represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a
domestic corporation licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas
employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired portion of the employment contracts, which
was terminated prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved
Fund, interest on all the unpaid benefits; area wage and salary differential pay; fringe benefits; refund of SSS and
premium not remitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for committing
prohibited practices; as well as the suspension of the license of AIBC and the accreditation of BRII (G.R. No.
104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given, together with BRII, up to
July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a bill of particulars
within ten days from receipt of the order and the movants to file their answers within ten days from receipt of the bill
of particulars. The POEA Administrator also scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984, AIBC filed a
"Motion to Strike Out of the Records", the "Complaint" and the "Compliance and Manifestation." On July 25, 1984, the
claimants filed their "Rejoinder and Comments," averring, among other matters, the failure of AIBC and BRII to file
their answers and to attend the pre-trial conference on July 25, 1984. The claimants alleged that AIBC and BRII had
waived their right to present evidence and had defaulted by failing to file their answers and to attend the pre-trial
conference.
On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed by AIBC but
required the claimants to correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply with the Order of October 2, 1984 and filed an
"Urgent Manifestation," praying that the POEA Administrator direct the parties to submit simultaneously their
position papers, after which the case should be deemed submitted for decision. On the same day, Atty. Florante de
Castro filed another complaint for the same money claims and benefits in behalf of several claimants, some of whom
were also claimants in POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and an "Urgent
Manifestation," praying that the POEA direct the parties to submit simultaneously their position papers after which
the case would be deemed submitted for decision. On the same day, AIBC asked for time to file its comment on the
"Compliance" and "Urgent Manifestation" of claimants. On November 6, 1984, it filed a second motion for extension of
time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and
BRII be declared in default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that claimants should be
ordered to amend their complaint.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within
ten days from receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of the POEA
Administrator. Claimants opposed the appeal, claiming that it was dilatory and praying that AIBC and BRII be declared
in default.
On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated March 24, 1985,
adding new demands: namely, the payment of overtime pay, extra night work pay, annual leave differential pay, leave
indemnity pay, retirement and savings benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On
April 15, 1985, the POEA Administrator directed AIBC to file its answer to the amended complaint (G.R. No.
104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same day, the POEA issued an
order directing AIBC and BRII to file their answers to the "Amended Complaint," otherwise, they would be deemed to
have waived their right to present evidence and the case would be resolved on the basis of complainant's evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for Bill of Particulars
Re: Amended Complaint dated March 24, 1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their answers in POEA
Case No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the issuance of a writ of
injunction. On September 19, 1985, NLRC enjoined the POEA Administrator from hearing the labor cases and
suspended the period for the filing of the answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in the case and to
investigate alleged wrongdoings of BRII, AIBC and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-10-777) against AIBC
and BRII with the POEA, demanding monetary claims similar to those subject of POEA Case No. L-84-06-555. In the
same month, Solomon Reyes also filed his own complaint (POEA Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution of the original
counsel of record and the cancellation of the special powers of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in behalf of 11
claimants including Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 and September 18, 1985 by
AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to mention that two
cases were filed in the Supreme Court by the claimants, namely — G.R. No. 72132 on September 26, 1985 and
Administrative Case No. 2858 on March 18, 1986. On May 13, 1987, the Supreme Court issued a resolution in
Administrative Case No. 2858 directing the POEA Administrator to resolve the issues raised in the motions and
oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases with deliberate
dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated September 4, 1985 of
the POEA Administrator. Said order required BRII and AIBC to answer the amended complaint in POEA Case No. L-84-
06-555. In a resolution dated November 9, 1987, we dismissed the petition by informing AIBC that all its technical
objections may properly be resolved in the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by claimant Hermie
Arguelles and 18 co-claimants against the POEA Administrator and several NLRC Commissioners. The Ombudsman
merely referred the complaint to the Secretary of Labor and Employment with a request for the early disposition of
POEA Case No. L-84-06-555. The second was filed on April 28, 1989 by claimants Emigdio P. Bautista and Rolando R.
Lobeta charging AIBC and BRII for violation of labor and social legislations. The third was filed by Jose R. Santos,
Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of the period for filing
an answer or motion for extension of time to file the same until the resolution of its motion for reconsideration of the
order of the NLRC dismissing the two appeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing, the parties were
given a period of 15 days from said date within which to submit their respective position papers. On June 24, 1987
claimants filed their "Urgent Motion to Strike Out Answer," alleging that the answer was filed out of time. On June 29,
1987, claimants filed their "Supplement to Urgent Manifestational Motion" to comply with the POEA Order of June 19,
1987. On February 24, 1988, AIBC and BRII submitted their position paper. On March 4, 1988, claimants filed their
"Ex-Parte Motion to Expunge from the Records" the position paper of AIBC and BRII, claiming that it was filed out of
time.
On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in POEA Case No. L-86-
05-460. On September 6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On September 12, 1988,
BRII filed its "Reply to Complainant's Memorandum." On October 26, 1988, claimants submitted their "Ex-
Parte Manifestational Motion and Counter-Supplemental Motion," together with 446 individual contracts of
employments and service records. On October 27, 1988, AIBC and BRII filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-555 and the other
consolidated cases, which awarded the amount of $824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the decision of the
POEA. On the same day, AIBC also filed its motion for reconsideration and/or appeal in addition to the "Notice of
Appeal" filed earlier on February 6, 1989 by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the appeal of AIBC and
BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum," together with their
"newly discovered evidence" consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other matters that there were Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The first, by the
only 728 named claimants. On April 20, 1989, the claimants filed their "Counter-Manifestation," alleging that there claimants represented by Atty. Del Mundo; the second, by the claimants represented by Atty. De Castro; and the third,
were 1,767 of them. by AIBC and BRII.

On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated January 30, 1989 on the
grounds that BRII had failed to appeal on time and AIBC had not posted the supersedeas bond in the amount of
$824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767 claimants be awarded
their monetary claims for failure of private respondents to file their answers within the reglamentary period required
by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:
WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases is modified to the extent and
in accordance with the following dispositions:
1. The claims of the 94 complainants identified and listed in Annex "A" hereof are dismissed for having prescribed;
In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the claimants
represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted, from time to time,
compromise agreements for our approval and jointly moved for the dismissal of their respective petitions insofar as
the claimants-parties to the compromise agreements were concerned (See Annex A for list of claimants who signed
quitclaims).
Thus the following manifestations that the parties had arrived at a compromise agreement and the corresponding
motions for the approval of the agreements were filed by the parties and approved by the Court:

2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay the 149 complainants, 1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 co-claimants dated September 2, 1992
identified and listed in Annex "B" hereof, the peso equivalent, at the time of payment, of the total amount in US dollars (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp.
indicated opposite their respective names; 470-615);

3. The awards given by the POEA to the 19 complainants classified and listed in Annex "C" hereof, who appear to have 2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 co-petitioners dated September 3,
worked elsewhere than in Bahrain are hereby set aside. 1992 (G.R. No. 104776, Rollo, pp. 364-507);

4. All claims other than those indicated in Annex "B", including those for overtime work and favorably granted by the 3) Joint Manifestation and Motion involving claimant Jose
POEA, are hereby dismissed for lack of substantial evidence in support thereof or are beyond the competence of this M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No.
Commission to pass upon. 104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);

In addition, this Commission, in the exercise of its powers and authority under Article 218(c) of the Labor Code, as
amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this Commission to summon parties, conduct
hearings and receive evidence, as expeditiously as possible, and thereafter submit a written report to this Commission
(First Division) of the proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached and made an integral part of this Resolution, whose
claims were dismissed by the POEA for lack of proof of employment in Bahrain (these complainants numbering 683,
are listed in pages 13 to 23 of the decision of POEA, subject of the appeals) and,
(b) complainants identified and listed in Annex "E" attached and made an integral part of this Resolution, whose
awards decreed by the POEA, to Our mind, are not supported by substantial evidence" (G.R. No. 104776; Rollo, pp.
113-115; G.R. Nos. 104911-14, pp. 85-87; G.R. Nos. 105029-31, pp. 120-122).
4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-claimants dated October 14, 1992
(G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-claimants dated January 15, 1993
(G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-652);
6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 co-claimants dated March 10, 1993
(G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-1829);
7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 co-claimants dated March 17, 1993
(G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp. 655-675);

On November 27, 1991, claimant Amado S. Tolentino and 12 8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 other co-claimants dated May 4,
co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with the Supreme Court (G.R. 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp.
Nos. 120741-44). The petition was dismissed in a resolution dated January 27, 1992. 1773-1814);

9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants dated May 10, 1993 (G.R. No.
104776, Rollo, pp. 1815-1829);
10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-claimants dated June 14, 1993 Months and/or
(G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066- Job Completion
1183);
xxx xxx xxx
11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-claimants dated July 22, 1993 (G.R.
No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896- 3. HOURS OF WORK AND COMPENSATION
959);
a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this Document.
12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimants dated September 7, 1993
(G.R. Nos. b) The hours of work shall be those set forth by the Employer, and Employer may, at his sole option, change or adjust
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984); such hours as maybe deemed necessary from time to time.

13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-claimants dated September 8, 1993 4. TERMINATION
(G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp.
a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at his sole discretion,
1280-1397);
terminate employee's service with cause, under this agreement at any time. If the Employer terminates the services of
14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated January 10, 1994 (G.R. Nos. the Employee under this Agreement because of the completion or termination, or suspension of the work on which
105029-32, Rollo, Vol. II); the Employee's services were being utilized, or because of a reduction in force due to a decrease in scope of such
work, or by change in the type of construction of such work. The Employer will be responsible for his return
15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated August 25, 1994 (G.R. Nos. transportation to his country of origin. Normally on the most expeditious air route, economy class accommodation.
105029-32; G.R. No. 104776; G.R. Nos. 104911-14).
xxx xxx xxx
III
10. VACATION/SICK LEAVE BENEFITS
The facts as found by the NLRC are as follows:
a) After one (1) year of continuous service and/or satisfactory completion of contract, employee shall be entitled to
We have taken painstaking efforts to sift over the more than fifty volumes now comprising the records of these cases. 12-days vacation leave with pay. This shall be computed at the basic wage rate. Fractions of a year's service will be
From the records, it appears that the complainants-appellants allege that they were recruited by respondent- computed on a pro-rata basis.
appellant AIBC for its accredited foreign principal, Brown & Root, on various dates from 1975 to 1983. They were all
deployed at various projects undertaken by Brown & Root in several countries in the Middle East, such as Saudi b) Sick leave of 15-days shall be granted to the employee for every year of service for non-work connected injuries or
Arabia, Libya, United Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia. illness. If the employee failed to avail of such leave benefits, the same shall be forfeited at the end of the year in which
said sick leave is granted.
Having been officially processed as overseas contract workers by the Philippine Government, all the individual
complainants signed standard overseas employment contracts (Records, Vols. 25-32. Hereafter, reference to the 11. BONUS
records would be sparingly made, considering their chaotic arrangement) with AIBC before their departure from the
A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon satisfactory completion of
Philippines. These overseas employment contracts invariably contained the following relevant terms and conditions.
this contract.
PART B —
12. OFFDAY PAY
(1) Employment Position Classification :—————————
The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If work is performed on this
(Code) :—————————
day, all hours work shall be paid at the premium rate. However, this offday pay provision is applicable only when the
(2) Company Employment Status :————————— laws of the Host Country require payments for rest day.
(3) Date of Employment to Commence on :—————————
In the State of Bahrain, where some of the individual complainants were deployed, His Majesty Isa Bin Salman Al
(4) Basic Working Hours Per Week :—————————
Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise known as the Labour Law for the
(5) Basic Working Hours Per Month :—————————
Private Sector (Records, Vol. 18). This decree took effect on August 16, 1976. Some of the provisions of Amiri Decree
(6) Basic Hourly Rate :—————————
No. 23 that are relevant to the claims of the complainants-appellants are as follows (italics supplied only for
(7) Overtime Rate Per Hour :—————————
emphasis):
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Art. 79: . . . A worker shall receive payment for each extra hour equivalent to his wage entitlement increased by a
minimum of twenty-five per centum thereof for hours worked during the day; and by a minimum of fifty per centum
thereof for hours worked during the night which shall be deemed to being from seven o'clock in the evening until seven
o'clock in the morning. . . .
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
. . . an employer may require a worker, with his consent, to work on his weekly day of restif circumstances so require
and in respect of which an additional sum equivalent to 150% of his normal wage shall be paid to him. . . .
Art. 81: . . . When conditions of work require the worker to work on any official holiday, he shall be paid an additional
sum equivalent to 150% of his normal wage.
Art. 84: Every worker who has completed one year's continuous service with his employer shall be entitled to leave on full
pay for a period of not less than 21 days for each year increased to a period not less than 28 days after five continuous
years of service.
(a) Whether or not the respondent-appellant was denied its right to due process;
(b) Whether or not the admission of evidence by the POEA after these cases were submitted for decision was valid;
(c) Whether or not the POEA acquired jurisdiction over Brown & Root International, Inc.;
(d) Whether or not the judgment awards are supported by substantial evidence;
(e) Whether or not the awards based on the averages and formula presented by the complainants-appellants are
supported by substantial evidence;
(f) Whether or not the POEA awarded sums beyond what the complainants-appellants prayed for; and, if so, whether
or not these awards are valid.
Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointly are severally liable for
the judgment awards despite the alleged finding that the former was the employer of the complainants;

A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his service in that year. (a) Whether or not the POEA has acquired jurisdiction over Brown & Root;

Art. 107: A contract of employment made for a period of indefinite duration may be terminated by either party thereto (b) Whether or not the undisputed fact that AIBC was a licensed construction contractor precludes a finding that
after giving the other party thirty days' prior notice before such termination, in writing, in respect of monthly paid Brown & Root is liable for complainants claims.
workers and fifteen days' notice in respect of other workers. The party terminating a contract without giving the
Sixth: — Whether or not the POEA Administrator's failure to hold respondents in default constitutes a reversible
required notice shall pay to the other party compensation equivalent to the amount of wages payable to the worker for
error.
the period of such notice or the unexpired portion thereof.

Seventh: — Whether or not the POEA Administrator erred in dismissing the following claims:
Art. 111: . . . the employer concerned shall pay to such worker, upon termination of employment, a leaving indemnity
for the period of his employment calculated on the basis of fifteen days' wages for each year of the first three years of
a. Unexpired portion of contract;
service and of one month's wages for each year of service thereafter. Such worker shall be entitled to payment of leaving
indemnity upon a quantum meruit in proportion to the period of his service completed within a year. b. Interest earnings of Travel and Reserve Fund;

All the individual complainants-appellants have already been repatriated to the Philippines at the time of the filing of c. Retirement and Savings Plan benefits;
these cases (R.R. No. 104776, Rollo, pp. 59-65).
d. War Zone bonus or premium pay of at least 100% of basic pay;
IV
e. Area Differential Pay;
The issues raised before and resolved by the NLRC were:
f. Accrued interests on all the unpaid benefits;
First: — Whether or not complainants are entitled to the benefits provided by Amiri Decree No. 23 of Bahrain;
g. Salary differential pay;
(a) Whether or not the complainants who have worked in Bahrain are entitled to the above-mentioned benefits.
h. Wage differential pay;
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable treatment of alien employees)
bars complainants from enjoying its benefits. i. Refund of SSS premiums not remitted to SSS;

Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whether or not complainants' j. Refund of withholding tax not remitted to BIR;
claim for the benefits provided therein have prescribed.
k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of Amended Complaint);
Third: — Whether or not the instant cases qualify as a class suit.
l. Moral and exemplary damages;
Fourth: — Whether or not the proceedings conducted by the POEA, as well as the decision that is the subject of these
appeals, conformed with the requirements of due process; m. Attorney's fees of at least ten percent of the judgment award;
n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the accreditation of B & R issued
by POEA;
o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial requirements thereof.
Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L) 86-65-460 on the
ground of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading
and proof of a foreign law and admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976
(Labour Law for the Private Sector). NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the
Commission ample discretion to use every and all reasonable means to ascertain the facts in each case without regard
to the technicalities of law or procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23,
being more favorable and beneficial to the workers, should form part of the overseas employment contract of the
complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in Bahrain, and set aside
awards of the POEA Administrator in favor of the claimants, who worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the complainants was three
years, as provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of
the Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as a class suit for
the simple reason that not all the complainants worked in Bahrain and therefore, the subject matter of the action, the
claims arising from the Bahrain law, is not of common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due process: namely,
(1) the failure of the POEA Administrator to consider the evidence presented by AIBC and BRII; (2) some findings of
fact were not supported by substantial evidence; and (3) some of the evidence upon which the decision was based
were not disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are solidarily liable for the
claims of the complainants and held that BRII was the actual employer of the complainants, or at the very least, the
indirect employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the summons served on
AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to Declare AIBC in
default.
On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS premiums and refund of
withholding taxes and the claimants should file their claims for said refund with the appropriate government
agencies;
(2) the claimants failed to establish that they are entitled to the claims which are not based on the overseas
employment contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary damages and nonetheless,
the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion of their contract may be allowed if filed within
the three-year prescriptive period;
(5) that the allegation that complainants were prematurely repatriated prior to the expiration of their overseas
contract was not established; and
(6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or cancellation of the
AIBC's recruitment license and the cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have been dismissed on the
ground that the claimants in said case were also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing
POEA Case No. (L) 86-65-460, the POEA just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In
other words, the POEA did not pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:
(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their cases as guaranteed
by Section 16, Article III of the 1987 Constitution. The POEA Administrator allowed private respondents to file their
answers in two years (on June 19, 1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total
disregard of its own rules, affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and should have rendered
summary judgment on the basis of the pleadings and evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC and BRII cannot be
considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten years; and
(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-05-460, the case filed by Atty.
Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the disposition of the labor cases, considering the great difficulty of
getting all the records of the more than 1,500 claimants, the piece-meal filing of the complaints and the addition of
hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants, it was impossible to prepare the answers within the ten-
day period provided in the NLRC Rules, that when the motion to declare AIBC in default was filed on July 19, 1987,
said party had already filed its answer, and that considering the staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the parties, the ten-day rule to answer was not fair and
reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter of the controversy — which was the applicability of the
Amiri Decree No. 23. Likewise, the nature of the claims varied, some being based on salaries pertaining to the
unexpired portion of the contracts while others being for pure money claims. Each claimant demanded separate
claims peculiar only to himself and depending upon the particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor Code of the
Philippines (three years) and not the one prescribed by Article 1144 of the Civil Code of the Philippines (ten years);
and
(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be dismissed, this being
a private quarrel between the two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and motions of AIBC
and BRII dated September 2 and 11, 1992, claiming that all the claimants who entered into the compromise
agreements subject of said manifestations and motions were his clients and that Atty. Florante M. de Castro had no
right to represent them in said agreements. He also claimed that the claimants were paid less than the award given
them by NLRC; that Atty. De Castro collected additional attorney's fees on top of the 25% which he was entitled to
receive; and that the consent of the claimants to the compromise agreements and quitclaims were procured by fraud
(G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court denied the motion to
strike out the Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-
609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging that the
claimants who entered into compromise agreements with AIBC and BRII with the assistance of Atty. De Castro, had all
signed a retainer agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty. Katz Tierra
for contempt of court and for violation of Canons 1, 15 and 16 of the Code of Professional Responsibility. The said
lawyers allegedly misled this Court, by making it appear that the claimants who entered into the compromise
agreements were represented by Atty. De Castro, when in fact they were represented by Atty. Del Mundo (G.R. No.
104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical practices and
moved for the voiding of the quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC gravely abused its
discretion when it: (1) applied the three-year prescriptive period under the Labor Code of the Philippines; and (2) it
denied the claimant's formula based on an average overtime pay of three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during the negotiation for an amicable settlement of
their money claims in Bahrain as shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain
(Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive period in the
Labor Code of the Philippines, a special law, prevails over that provided in the Civil Code of the Philippines, a general
law.
As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime pay, BRII and
AIBC claimed that they were not bound by what appeared therein, because such memorandum was proposed by a
subordinate Bahrain official and there was no showing that it was approved by the Bahrain Minister of Labor.
Likewise, they claimed that the averaging method was discussed in the course of the negotiation for the amicable
settlement of the dispute and any offer made by a party therein could not be used as an admission by him (Rollo, pp.
228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1) enforced the
provisions of the Amiri Decree No. 23 of 1976 and not the terms of the employment contracts; (2) granted claims for
holiday, overtime and leave indemnity pay and other benefits, on evidence admitted in contravention of petitioner's
constitutional right to due process; and (3) ordered the POEA Administrator to hold new hearings for the 683
claimants whose claims had been dismissed for lack of proof by the POEA Administrator or NLRC itself. Lastly, they
allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply the one-
year prescription provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they disagreed as to the time that should be
embraced within the prescriptive period.
To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil Code of the
Philippines. NLRC believed otherwise, fixing the prescriptive period at three years as provided in Article 291 of the
Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that NLRC erred in
ruling that the prescriptive period applicable to the claims was three years, instead of ten years, as found by the POEA
Administrator.
The Solicitor General expressed his personal view that the prescriptive period was one year as prescribed by the
Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article 291 of the Labor Code of the Philippines
was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's violation of the
employee's right as provided by the Labor Code.
In the instant case, what the respondents violated are not the rights of the workers as provided by the Labor Code, but
the provisions of the Amiri Decree No. 23 issued in Bahrain, which ipso facto amended the worker's contracts of
employment. Respondents consciously failed to conform to these provisions which specifically provide for the
increase of the worker's rate. It was only after June 30, 1983, four months after the brown builders brought a suit
against B & R in Bahrain for this same claim, when respondent AIBC's contracts have undergone amendments in
Bahrain for the new hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the Civil Code of
the Philippines, which provides:
Art. 1144. The following actions may be brought within ten years from the time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the respondents shall prescribe in ten years from August 16,
1976. Inasmuch as all claims were filed within the ten-year prescriptive period, no claim suffered the infirmity of
being prescribed (G.R. No. 104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided in Article
291 of the Labor Code of the Philippines, the NLRC argued as follows:
The Labor Code provides that "all money claims arising from employer-employee relations . . . shall be filed within
three years from the time the cause of action accrued; otherwise they shall be forever barred" (Art. 291, Labor Code,
as amended). This three-year prescriptive period shall be the one applied here and which should be reckoned from
the date of repatriation of each individual complainant, considering the fact that the case is having (sic) filed in this
country. We do not agree with the POEA Administrator that this three-year prescriptive period applies only to money
claims specifically recoverable under the Philippine Labor Code. Article 291 gives no such indication. Likewise, We
can not consider complainants' cause/s of action to have accrued from a violation of their employment contracts.
There was no violation; the claims arise from the benefits of the law of the country where they worked. (G.R. No.
104776, Rollo, pp.
90-91).
Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of 1976, NLRC
opined that the applicability of said law was one of characterization, i.e., whether to characterize the foreign law on
prescription or statute of limitation as "substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic
Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the applicability of the Panama Labor Code in a
case filed in the State of New York for claims arising from said Code. In said case, the claims would have prescribed
under the Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals
held that the Panamanian Law was procedural as it was not "specifically intended to be substantive," hence, the
prescriptive period provided in the law of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not clear on the face of
the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned, of
the substantive rights to which the statute pertains, we think that as a yardstick for determining whether that was the
purpose this test is the most satisfactory one. It does not lead American courts into the necessity of examining into the
unfamiliar peculiarities and refinements of different foreign legal systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have failed to
satisfy us that the Panamanian period of limitation in question was specifically aimed against the particular rights
which the libelant seeks to enforce. The Panama Labor Code is a statute having broad objectives, viz: "The present
Code regulates the relations between capital and labor, placing them on a basis of social justice, so that, without
injuring any of the parties, there may be guaranteed for labor the necessary conditions for a normal life and to capital
an equitable return to its investment." In pursuance of these objectives the Code gives laborers various rights against
their employers. Article 623 establishes the period of limitation for all such rights, except certain ones which are
enumerated in Article 621. And there is nothing in the record to indicate that the Panamanian legislature gave special
consideration to the impact of Article 623 upon the particular rights sought to be enforced here, as distinguished from
the other rights to which that Article is also applicable. Were we confronted with the question of whether the
limitation period of Article 621 (which carves out particular rights to be governed by a shorter limitation period) is to
be regarded as "substantive" or "procedural" under the rule of "specifity" we might have a different case; but here on
the surface of things we appear to be dealing with a "broad," and not a "specific," statute of limitations (G.R. No.
104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the Philippines, which was
applied by NLRC, refers only to claims "arising from the employer's violation of the employee's right as provided by
the Labor Code." They assert that their claims are based on the violation of their employment contracts, as amended
by the Amiri Decree No. 23 of 1976 and therefore the claims may be brought within ten years as provided by Article
1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23 of 1976, argue
that there is in force in the Philippines a "borrowing law," which is Section 48 of the Code of Civil Procedure and that
where such kind of law exists, it takes precedence over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-
46).
First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of
1976 or a Philippine law on prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of the
expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of
process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This
is true even if the action is based upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685;
Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as
procedural or substantive, depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of limitations of New
York, instead of the Panamanian law, after finding that there was no showing that the Panamanian law on prescription
was intended to be substantive. Being considered merely a procedural law even in Panama, it has to give way to the
law of the forum on prescription of actions.
However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country
of the forum has a "borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation
as one of substance (Goodrich, Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum
to apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]).
While there are several kinds of "borrowing statutes," one form provides that an action barred by the laws of the place
where it accrued, will not be enforced in the forum even though the local statute has not run against it (Goodrich and
Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind. Said Section
provides:
If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the
Philippines Islands.
Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed
only those provisions of the Code of Civil Procedures as to which were inconsistent with it. There is no provision in
the Civil Code of the Philippines, which is inconsistent with or contradictory to Section 48 of the Code of Civil
Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the
application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy (Canadian Northern
Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year prescriptive period of
the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the
protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:
The state shall promote social justice in all phases of national development. (Sec. 10).
The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their
welfare (Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:
Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
Having determined that the applicable law on prescription is the Philippine law, the next question is whether the
prescriptive period governing the filing of the claims is three years, as provided by the Labor Code or ten years, as
provided by the Civil Code of the Philippines.
The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the Philippines, which
provides:
The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the Philippines,
which in pertinent part provides:
Money claims-all money claims arising from employer-employee relations accruing during the effectivity of this Code
shall be filed within three (3) years from the time the cause of action accrued, otherwise they shall be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244 (1976) invoked by the
claimants in G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said case involved the correct
computation of overtime pay as provided in the collective bargaining agreements and not the Eight-Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not make any reference as to the computation for
overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that work
computation provided in the collective bargaining agreements between the parties be observed. Since the claim for
pay differentials is primarily anchored on the written contracts between the litigants, the ten-year prescriptive period
provided by Art. 1144(1) of the New Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:
Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of
action accrued otherwise such action shall be forever barred, . . . .
The court further explained:
The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will apply, if the claim
for differentials for overtime work is solely based on said law, and not on a collective bargaining agreement or any
other contract. In the instant case, the claim for overtime compensation is not so much because of Commonwealth Act
No. 444, as amended but because the claim is demandable right of the employees, by reason of the above-mentioned
collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce any cause of
action under said law." On the other hand, Article 291 of the Labor Code of the Philippines provides the prescriptive
period for filing "money claims arising from employer-employee relations." The claims in the cases at bench all arose
from the employer-employee relations, which is broader in scope than claims arising from a specific law or from the
collective bargaining agreement.
The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of the Labor
Code of the Philippines applies only to money claims specifically recoverable under said Code, does not find support in
the plain language of the provision. Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article
refers only to claims "arising from the employer's violation of the employee's right," as provided by the Labor Code
supported by the facial reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their complaints were
filed on June 6, 1984 with POEA, the case was decided only on January 30, 1989, a clear denial of their right to a
speedy disposition of the case; and (2) that NLRC and the POEA Administrator should have declared AIBC and BRII in
default (Rollo, pp.
31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:
Sec. 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or
administrative bodies.
It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in criminal
proceedings but extends to all parties in all cases, including civil and administrative cases, and in all proceedings,
including judicial and quasi-judicial hearings. Hence, under the Constitution, any party to a case may demand
expeditious action on all officials who are tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is a relative term. Just
like the constitutional guarantee of "speedy trial" accorded to the accused in all criminal proceedings, "speedy
disposition of cases" is a flexible concept. It is consistent with delays and depends upon the circumstances of each
case. What the Constitution prohibits are unreasonable, arbitrary and oppressive delays which render rights
nugatory.
Caballero laid down the factors that may be taken into consideration in determining whether or not the right to a
"speedy disposition of cases" has been violated, thus:
In the determination of whether or not the right to a "speedy trial" has been violated, certain factors may be
considered and balanced against each other. These are length of delay, reason for the delay, assertion of the right or
failure to assert it, and prejudice caused by the delay. The same factors may also be considered in answering judicial
inquiry whether or not a person officially charged with the administration of justice has violated the speedy
disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
It must be here emphasized that the right to a speedy disposition of a case, like the right to speedy trial, is deemed
violated only when the proceeding is attended by vexatious, capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when without cause or justified motive a long period of time
is allowed to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended complaint, claimants had
been asking that AIBC and BRII be declared in default for failure to file their answers within the ten-day period
provided in Section 1, Rule III of Book VI of the Rules and Regulations of the POEA. At that time, there was a pending
motion of AIBC and BRII to strike out of the records the amended complaint and the "Compliance" of claimants to the
order of the POEA, requiring them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the administrative level
after seven years from their inception, cannot be said to be attended by unreasonable, arbitrary and oppressive delays
as to violate the constitutional rights to a speedy disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint had undergone
several amendments, the first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They were deployed in different areas, one group in
and the other groups outside of, Bahrain. The monetary claims totalling more than US$65 million according to Atty.
Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security System;
10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of 43 pages (Annex "Q" of
Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial requirements thereof (NLRC
Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the claimants were
ordered to comply with the motion of AIBC for a bill of particulars. When claimants filed their "Compliance and
Manifestation," AIBC moved to strike out the complaint from the records for failure of claimants to submit a proper
bill of particulars. While the POEA Administrator denied the motion to strike out the complaint, he ordered the
claimants "to correct the deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in response to the complaint, the records of employment of the more than
1,700 claimants had to be retrieved from various countries in the Middle East. Some of the records dated as far back
as 1975.
The hearings on the merits of the claims before the POEA Administrator were interrupted several times by the various
appeals, first to NLRC and then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on October 10, 1985
(POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in
exasperation, noted that the exact number of claimants had never been completely established (Resolution, Sept. 2,
1991, G.R. No. 104776, Rollo, p. 57). All the three new cases were consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:
These cases could have been spared the long and arduous route towards resolution had the parties and their counsel
been more interested in pursuing the truth and the merits of the claims rather than exhibiting a fanatical reliance on
technicalities. Parties and counsel have made these cases a litigation of emotion. The intransigence of parties and
counsel is remarkable. As late as last month, this Commission made a last and final attempt to bring the counsel of all
the parties (this Commission issued a special order directing respondent Brown & Root's resident agent/s to appear)
to come to a more conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to the lament of
NLRC, which complained:
It is very evident from the records that the protagonists in these consolidated cases appear to be not only the
individual complainants, on the one hand, and AIBC and Brown & Root, on the other hand. The two lawyers for the
complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to settle the right of representation,
each one persistently claiming to appear in behalf of most of the complainants. As a result, there are two appeals by
the complainants. Attempts by this Commission to resolve counsels' conflicting claims of their respective authority to
represent the complainants prove futile. The bickerings by these two counsels are reflected in their pleadings. In the
charges and countercharges of falsification of documents and signatures, and in the disbarment proceedings by one
against the other. All these have, to a large extent, abetted in confounding the issues raised in these cases, jumble the
presentation of evidence, and even derailed the prospects of an amicable settlement. It would not be far-fetched to
imagine that both counsel, unwittingly, perhaps, painted a rainbow for the complainants, with the proverbial pot of
gold at its end containing more than US$100 million, the aggregate of the claims in these cases. It is, likewise, not
improbable that their misplaced zeal and exuberance caused them to throw all caution to the wind in the matter of
elementary rules of procedure and evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants in both petitions
filed by the two lawyers. As noted by NLRC, "the problem created by this situation is that if one of the two petitions is
dismissed, then the parties and the public respondents would not know which claim of which petitioner was
dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all the named
complainants have similar money claims and similar rights sought irrespective of whether they worked in Bahrain,
United Arab Emirates or in Abu Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one of common or general interest to many and
the parties are so numerous that it is impracticable to bring them all before the court (Revised Rules of Court, Rule 3,
Sec. 12).
While all the claims are for benefits granted under the Bahrain Law, many of the claimants worked outside Bahrain.
Some of the claimants were deployed in Indonesia and Malaysia under different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement of a class suit is
not present (common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only
those who worked in Bahrain shall be entitled to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employee's
benefits), there is no common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many
of the claimants never worked in that country, but were deployed elsewhere. Thus, each claimant is interested only in
his own demand and not in the claims of the other employees of defendants. The named claimants have a special or
particular interest in specific benefits completely different from the benefits in which the other named claimants and
those included as members of a "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each
claimant is only interested in collecting his own claims. A claimants has no concern in protecting the interests of the
other claimants as shown by the fact, that hundreds of them have abandoned their co-claimants and have entered into
separate compromise settlements of their respective claims. A principle basic to the concept of "class suit" is that
plaintiffs brought on the record must fairly represent and protect the interests of the others (Dimayuga v. Court of
Industrial Relations, 101 Phil. 590 [1957]). For this matter, the claimants who worked in Bahrain can not be allowed
to sue in a class suit in a judicial proceeding. The most that can be accorded to them under the Rules of Court is to be
allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the exceptions to the condition sine qua non,
requiring the joinder of all indispensable parties.
In an improperly instituted class suit, there would be no problem if the decision secured is favorable to the plaintiffs.
The problem arises when the decision is adverse to them, in which case the others who were impleaded by their self-
appointed representatives, would surely claim denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should have declared Atty.
Florante De Castro guilty of "forum shopping, ambulance chasing activities, falsification, duplicity and other
unprofessional activities" and his appearances as counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice of some parties of
filing multiple petitions and complaints involving the same issues, with the result that the courts or agencies have to
resolve the same issues. Said Rule, however, applies only to petitions filed with the Supreme Court and the Court of
Appeals. It is entitled "Additional Requirements For Petitions Filed with the Supreme Court and the Court of Appeals
To Prevent Forum Shopping or Multiple Filing of Petitioners and Complainants." The first sentence of the circular
expressly states that said circular applies to an governs the filing of petitions in the Supreme Court and the Court of
Appeals.
While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to the lower courts
and administrative agencies, said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De Castro because NLRC
and POEA have no jurisdiction to investigate charges of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty. Gerardo A. Del Mundo
to protect his claim for attorney's fees for legal services rendered in favor of the claimants (G.R. No. 104776, Rollo, pp.
841-844).
A statement of a claim for a charging lien shall be filed with the court or administrative agency which renders and
executes the money judgment secured by the lawyer for his clients. The lawyer shall cause written notice thereof to be
delivered to his clients and to the adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim
for the charging lien of Atty. Del Mundo should have been filed with the administrative agency that rendered and
executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra for violation of the
Code of Professional Responsibility should be filed in a separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three Hours Average Daily
Overtime" in computing the overtime payments. They claim that it was BRII itself which proposed the formula during
the negotiations for the settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said offer
(Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which in pertinent part
states:
After the perusal of the memorandum of the Vice President and the Area Manager, Middle East, of Brown & Root Co. and
the Summary of the compensation offered by the Company to the employees in respect of the difference of pay of the
wages of the overtime and the difference of vacation leave and the perusal of the documents attached thereto i.e.,
minutes of the meetings between the Representative of the employees and the management of the Company, the
complaint filed by the employees on 14/2/83 where they have claimed as hereinabove stated, sample of the Service
Contract executed between one of the employees and the company through its agent in (sic) Philippines, Asia
International Builders Corporation where it has been provided for 48 hours of work per week and an annual leave of
12 days and an overtime wage of 1 & 1/4 of the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following averages:
A. 1. The average duration of the actual service of the employee is 35 months for the Philippino (sic) employees . . . .
2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the wages of the overtime done
for each Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate official in the
Bahrain Department of Labor; (2) that there was no showing that the Bahrain Minister of Labor had approved said
memorandum; and (3) that the offer was made in the course of the negotiation for an amicable settlement of the
claims and therefore it was not admissible in evidence to prove that anything is due to the claimants.
While said document was presented to the POEA without observing the rule on presenting official documents of a
foreign government as provided in Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be admitted in
evidence in proceedings before an administrative body. The opposing parties have a copy of the said memorandum,
and they could easily verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as contained in the memorandum is another matter. Under
Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offer to settle a claim is not an admission that anything
is due.
Said Rule provides:
Offer of compromise not admissible. — In civil cases, an offer of compromise is not an admission of any liability, and is
not admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence but a statement
of public policy. There is great public interest in having the protagonists settle their differences amicable before these
ripen into litigation. Every effort must be taken to encourage them to arrive at a settlement. The submission of offers
and counter-offers in the negotiation table is a step in the right direction. But to bind a party to his offers, as what
claimants would make this Court do, would defeat the salutary purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those stipulated in the
overseas-employment contracts of the claimants. It was of the belief that "where the laws of the host country are more
favorable and beneficial to the workers, then the laws of the host country shall form part of the overseas employment
contract." It quoted with approval the observation of the POEA Administrator that ". . . in labor proceedings, all doubts
in the implementation of the provisions of the Labor Code and its implementing regulations shall be resolved in favor
of labor" (Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the overseas-
employment contracts, which became the law of the parties. They contend that the principle that a law is deemed to
be a part of a contract applies only to provisions of Philippine law in relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the
host country became applicable to said contracts if they offer terms and conditions more favorable that those
stipulated therein. It was stipulated in said contracts that:
The Employee agrees that while in the employ of the Employer, he will not engage in any other business or
occupation, nor seek employment with anyone other than the Employer; that he shall devote his entire time and
attention and his best energies, and abilities to the performance of such duties as may be assigned to him by the
Employer; that he shall at all times be subject to the direction and control of the Employer; and that the benefits
provided to Employee hereunder are substituted for and in lieu of all other benefits provided by any applicable
law, provided of course, that total remuneration and benefits do not fall below that of the host country regulation or
custom, it being understood that should applicable laws establish that fringe benefits, or other such benefits additional to
the compensation herein agreed cannot be waived, Employee agrees that such compensation will be adjusted
downward so that the total compensation hereunder, plus the non-waivable benefits shall be equivalent to the
compensation herein agreed (Rollo, pp. 352-353).
The overseas-employment contracts could have been drafted more felicitously. While a part thereof provides that the
compensation to the employee may be "adjusted downward so that the total computation (thereunder) plus the non-
waivable benefits shall be equivalent to the compensation" therein agreed, another part of the same provision
categorically states "that total remuneration and benefits do not fall below that of the host country regulation and
custom."
Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that
drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the
stipulations of the employment contract and the employees merely "take it or leave it." The presumption is that there
was an imposition by one party against the other and that the employees signed the contracts out of necessity that
reduced their bargaining power (Fieldmen's Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment contracts in question as adopting the provisions
of the Amiri Decree No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be governed (Cheshire, Private International Law, 187
[7th ed.]). In such a case, the foreign law is adopted as a "system" to regulate the relations of the parties, including
questions of their capacity to enter into the contract, the formalities to be observed by them, matters of performance,
and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign
statute shall be deemed incorporated into their contract "as a set of terms." By such reference to the provisions of the
foreign law, the contract does not become a foreign contract to be governed by the foreign law. The said law does not
operate as a statute but as a set of contractual terms deemed written in the contract (Anton, Private International
Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts and Contracts, 16
Columbia Journal of Transnational Law 1, 21 [1977]). Such party expectation is protected by giving effect to the
parties' own choice of the applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of
law must, however, bear some relationship to the parties or their transaction (Scoles and Hayes, Conflict of Law 644-
647 [1982]). There is no question that the contracts sought to be enforced by claimants have a direct connection with
the Bahrain law because the services were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the "Employment Agreement,"
between Norse Management Co. and the late husband of the private respondent, expressly provided that in the event
of illness or injury to the employee arising out of and in the course of his employment and not due to his own
misconduct, "compensation shall be paid to employee in accordance with and subject to the limitation of the
Workmen's Compensation Act of the Republic of the Philippines or the Worker's Insurance Act of registry of the
vessel, whichever is greater." Since the laws of Singapore, the place of registry of the vessel in which the late husband
of private respondent served at the time of his death, granted a better compensation package, we applied said foreign
law in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission, 135 SCRA 278 (1985),
relied upon by AIBC and BRII is inapposite to the facts of the cases at bench. The issue in that case was whether the
amount of the death compensation of a Filipino seaman should be determined under the shipboard employment
contract executed in the Philippines or the Hongkong law. Holding that the shipboard employment contract was
controlling, the court differentiated said case from Norse Management Co. in that in the latter case there was an
express stipulation in the employment contract that the foreign law would be applicable if it afforded greater
compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said administrative agency
granted Friday-pay differential, holiday-pay differential, annual-leave differential and leave indemnity pay to the
claimants listed in Annex B of the Resolution. At first, NLRC reversed the resolution of the POEA Administrator
granting these benefits on a finding that the POEA Administrator failed to consider the evidence presented by AIBC
and BRII, that some findings of fact of the POEA Administrator were not supported by the evidence, and that some of
the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of remanding the case to the
POEA Administrator for a new hearing, which means further delay in the termination of the case, NLRC decided to
pass upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of as being irregular and a
"reversible error."
They pointed out that NLRC took into consideration evidence submitted on appeal, the same evidence which NLRC
found to have been "unilaterally submitted by the claimants and not disclosed to the adverse parties" (Rollo, pp. 37-
39).
NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrator by the claimants
after the cases were deemed submitted for resolution and which were taken cognizance of by the POEA Administrator
in resolving the cases. While AIBC and BRII had no opportunity to refute said evidence of the claimants before the
POEA Administrator, they had all the opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to present before NLRC
additional evidence which they failed to present before the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in
the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the evidence of both parties submitted before the
POEA Administrator and NLRC, the latter considered that it was not expedient to remand the cases to the POEA
Administrator for that would only prolong the already protracted legal controversies.
Even the Supreme Court has decided appealed cases on the merits instead of remanding them to the trial court for the
reception of evidence, where the same can be readily determined from the uncontroverted facts on record
(Development Bank of the Philippines v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National
Labor Relations Commission, 127 SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA Administrator to hold new
hearings for 683 claimants listed in Annex D of the Resolution dated September 2, 1991 whose claims had been
denied by the POEA Administrator "for lack of proof" and for 69 claimants listed in Annex E of the same Resolution,
whose claims had been found by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowers it "[to] conduct
investigation for the determination of a question, matter or controversy, within its jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a case involving claims
which had already been dismissed because such provision contemplates only situations where there is still a question
or controversy to be resolved (Rollo, pp. 41-42).
A principle well embedded in Administrative Law is that the technical rules of procedure and evidence do not apply to
the proceedings conducted by administrative agencies (First Asian Transport & Shipping Agency, Inc. v. Ople, 142
SCRA 542 [1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in
Article 221 of the Labor Code of the Philippines and is now the bedrock of proceedings before NLRC.
Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative proceedings,
there are cardinal rules which must be observed by the hearing officers in order to comply with the due process
requirements of the Constitution. These cardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil.
635 (1940).
VIII
The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that NLRC had committed
grave abuse of discretion amounting to lack of jurisdiction in issuing the questioned orders. We find no such abuse of
discretion.
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur. Ramon T. Barboza Rodolfo D. Arevalo
Felix M. Bobier Rexy De Leon Ascuncion
ANNEX A Jose H. Castillo Basilio Buenaventura
Emmanuel H. Castillo Alexander Bustamante
LIST OF CLAIMANTS WHO SIGNED QUITCLAIMS Remar R. Castrojerez Virgilio V. Butiong, Jr.
Romeo O. Cecilio Delfin Caballero
Bienvenido Cadalin Ardon Ello
Bayani M. Dayrit Danilo M. Castro
Antonio Acupan Josefino R. Enano
Felizardo S. Delos Santos Franscisco O. Corvera
Benjamin Alejandre Rolando E. Espiritu
Nestor N. Estava Edgardo N. Dayacap
Wilfredo Aligada Patricio L. Garcia Jr.
Rolando M. Garcia Napoleon S. De Luna
Robert Batica Felino M. Jocson
Angel D. Guda Benjamin E. Doza
Enrico Belen Eduardo S. Kolimlim
Henry L. Jacob Renato A. Eduarte
Guillermo Cabeza Emmanuel C. Labella
Dante A. Matreo Clyde C. Estuye
Rodolfo Cagatan Ernesto S. Lising
Renato S. Melo Buenaventura M. Francisco
Francisco De Guzman Edilberto G. Magat
Resurrecion D. Nazareno Rogelio D. Guanio
Ignacio De Vera Victoriano L. Matilla
Jaime C. Pollos Arnel L. Jacob
Ernesto De la Cruz Renato V. Morada
Domingo Pondales Renato S. Lising
Reynaldo Dizon Ildefonso C. Muñoz
Eugenio Ramirez Wilfredo S. Lising
Ricardo Ebrada Herbert G. Ng
Lucien M. Respall Rogelio S. Lopena
Antonio Ejercito Reynado Oczon
Alvin C. Reyes Bernardito G. Loreja
Eduardo Espiritu Romeo Orial
Rizalina R. Reyes Ignacio E. Muñoz
Ernesto Espiritu Ricardo Paguio
Quirino Ronquillo Romeo C. Quintos
Rodolfo Espiritu Emilio Pakingan
Avelino M. Roque Willafredo Dayrit Raymundo
Oligario Francisco Ernesto S. Pangan
Pedro L. Salgatar Virgilio L. Rosario
Antonio Jocson Albert L. Quinto
Rodolfo T. Sultan Joselito Santiago
Alejandro Olorino Romulo M. Reyes
Benedicto E. Torres Ernesto G. Sta. Maria
Efren Lirio Leonilo Tiposo
Sergio A. Ursolino Gavino U. Tuazon
Noel Martinez Manual P. Villanueva
Rogelio R. Valdez Elito S. Villanueva
Francis Mediodia Arnaldo J. Alonzo
Dionisio Bobongo Lamberto Q. Alcantara
Luciano Melendez Pastor M. Aquino
Crisenciano Miranda Arturo P. Apilado
Reymundo Milay Ramon Castro
Ildefonso C. Molina Turiano V. Concepcion
Jose Pancho Graciano Isla
Gorgonio C. Parala Domingo V. Dela Cruz
Modesto Pin Pin Renato Matilla
Virgilio Ricaza Eduardo R. Enguancho
Gaudencio Retana Ricardo B. Morada
Palconeri D. Banaag Melanio R. Esteron
Rodelio Rieta, Jr. Pacifico D. Navarro
Bayani S. Bracamante Santiago N. Galoso
Jose Robleza Eugenio A. Remonquillo
Onofre De Rama Joveniano Hilado
Nemeriano San Mateo Felix Barcena
Jose C. Melanes Eduardo Hipolito
Juanito Santos Eliseo Fajardo
Romeo I. Patag Romero M. Javier
Paquito Solanto Sergio S. Santiago
Valerio A. Evangelista Valentino S. Jocson
Conrado Solis, Jr. Antonio R. Rodriquez
Gilbert E. Ebrada Jose B. Lacson
Menandro Temprosa Luis Val B. Ronquillo
Juanito P. Villarino Armando M. Magsino
Maximiano Torres Teodorico C. Del Rosario
Aristeo M. Bicol Avelino O. Nuqui
Francisco Trias Joselito C. Solante
Quiterio R. Agudo Delmar F. Pineda
Delfin Victoria Ricardo C. Dayrit
Marianito J. Alcantara Federico T. Quiman
Gilbert Victoria Antonio P. Hilario
Jose Arevalo Alberto M. Redaza
Domingo Villahermosa Edgardo O. Salonga
Ramon A. Arevalo Renosa Ronquillo
Rogelio Villanueva Dante C. Aceres
Jesus Baya Rodolfo Ronquillo
Jose M. Aban Reynaldo S. Acojido
Guillermo Buenconsejo Antonio T. Valderama
Amorsolo S. Anading Esidro M. Aquino
Teresito A. Constantino Ramon Valderama
Alfredo S. Balogo Rosendo M. Aquino
Eduardo A. Diaz Benigno N. Melendez
Emigdio Abarquez Claudio A. Modesto
Herbert Ayo Solomon Reyes
Mario Bataclan Isaias Talactac
Ricardo Ordonez William G. Taruc
Bernardino Robillos Oscar C. Calderon
Francisco Villaflores Pacifico P. Campano
Angel Villarba Eulalio G. Arguelles
Honesto Jardiniano Ben G. Belir
Juan Y. Olindo Cornelio L. Castillo
Hernani T. Victoriano Valeriano B. Francisco
Ubed B. Ello, Sr. Jaime L. Relosa
Ernesto V. Macaraig Alex Q. Villahermosa
Espiritu A. Munoz, Sr. Vivencio V. Abello, Jr.
Rodrigo E. Ocampo Renato C. Corcuera
Rodolfo V. Ramirez Emiliano B. Dela Cruz, Jr.
Ceferino Batitis Esteban B. Jose, Jr.
Augusto R. Bondoc Ricardo B. Martinez
Jaime C. Catli Bienvenido Vergara
Gerardo B. Limuaco, Jr. Pedro G. Cagatan
Macario S. Magsino Francisco Apolinario
Domingo B. Solano Miguel Abestano
Ricardo De Rama Prudencio Araullo
Arturo V. Araullo
G.R. No. 110263 July 20, 2001 IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of $5, 108,290.23 (Ringgit Five million
one hundred and eight thousand two hundred and ninety and Sen twenty-three) together with interest at the rate of
ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner, 12% per annum on
vs.
COURT OF APPEALS and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, respondents. (i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

DELEON, JR., J.: (ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of payment; and $350.00 (Ringgit Three
Hundred and Fifty) costs.
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated May 19,1993 in CA-G.R.
CY No. 35871 affirming the Decision2 dated October 14,1991 of the Regional Trial Court of Pasig, Metro Manila, Dated the 13th day of September, 1985.
Branch 168 in Civil Case No. 56368 which dismissed the complaint of petitioner Asiavest Merchant Bankers (M)
Berhad for the enforcement of the money of the judgment of the High Court of Malaysia in Kuala Lumpur against Senior Assistant Registrar, High Court, Kuala Lumpur
private respondent Philippine National Construction Corporation.1âwphi1.nêt
This Judgment is filed by Messrs. Skrine & Co., 3rd Floor, Straits Trading Building, No.4, Leboh Pasar, Besar, Kuala
The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of Malaysia while Lumpur, Solicitors for the Plaintiffs abovenamed. (VP/Ong/81194.7/83)4
private respondent Philippine National Construction Corporation is a corporation duly incorporated and existing
under Philippine laws. On the same day, September 13, 1985, the High Court of Malaya issued an Order directing the private respondent
(also designated therein as the "2nd Defendant") to pay petitioner interest on the sums covered by the said Judgment,
It appears that sometime in 1983, petitioner initiated a suit for collection against private respondent, then known as thus:
Construction and Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur
entitled "Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development SUIT NO. C638 of 1983
Corporation of the Philippines."3
Between
Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private respondent to
guarantee the completion of the Felda Project and the nonpayment of the loan it extended to Asiavest-CDCP Sdn. Bhd.
Asiavest Merchant Bankers (M) Berhad Plaintiffs
for the completion of Paloh Hanai and Kuantan By Pass; Project.

On September 13, 1985, the High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner And
and against the private respondent which is also designated therein as the "2nd Defendant. "
1. Asiavest -CDCP Sdn. Bhd. Defendants
The judgment reads in full:

2. Construction & Development Corporation of the Philippines

SUIT NO. C638 of 1983

BEFORE THE SENIOR ASSISTANT REGISTRAR

Between

CIK SUSILA S. PARAM THIS 13th DAY OF SEPTEMBER 1985 IN CHAMBERS

Asiavest Merchant Bankers (M) Berhad Plaintiffs

ORDER
And
Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this action AND UPON READINGthe
1. Asiavest -CDCP Sdn. Bhd. Defendant Summons in Chambers dated the 16th day of August, 1984 and the Affidavit of Lee Foong Mee affirmed on the 14th
day of August 1984 both filed herein AND UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw
2. Construction & Development Corporation of the Philippines Chay Tee of Counsel for the 2nd Defendant abovenamed on the 26th day of December 1984 IT WAS ORDERED that the
Plaintiffs be at liberty to sign final judgment against the 2nd Defendant for the sum of $5,108,290.23 AND IT WAS
JUDGMENT ORDERED that the 2nd Defendant do pay the Plaintiffs the costs of suit at $350.00 AND IT WAS FURTHER
ORDERED that the plaintiffs be at liberty to apply for payment of interest AND upon the application of the Plaintiffs for
The 2nd Defendant having entered appearance herein and the Court having under Order 14, rule 3 ordered that payment of interest coming on for hearing on the 1st day of August in the presence of Mr. Palpanaban Devarajoo of
judgment as hereinafter provided be entered for the Plaintiffs against the 2nd Defendant. Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant above-named AND UPON
HEARING Counsel as aforesaid BY CONSENT IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at
a rate to be assessed AND the same coming on for assessment this day in the presence of Mr. Palpanaban Devarajoo of
Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING Counsel as
aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at the rate of 12% per
annum on:
(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and
(ii) the sum Of $2,521,423.32 from the 11th day of March 1983 to the date of Payment.
Dated the 13th day of September,1985.
Senior Assistant Registrar, High Court, Kuala Lumpur. 5
Following unsuccessful attempts6 to secure payment from private respondent under the judgment, petitioner initiated
on September 5, 1988 the complaint before Regional Trial Court of Pasig, Metro Manila, to enforce the judgment of the
High Court of Malaya.7
Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October 5, 1988, contending that
the alleged judgment of the High Court of Malaya should be denied recognition or enforcement since on in face, it is
tainted with want of jurisdiction, want of notice to private respondent, collusion and/or fraud, and there is a clear
mistake of law or fact.8 Dismissal was, however, denied by the trial court considering that the grounds relied upon are
not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court. 9
On May 22, 1989, private respondent filed its Answer with Compulsory Counter claim's10 and therein raised the
grounds it brought up in its motion to dismiss. In its Reply filed11 on June 8, 1989, the petitioner contended that the
High Court of Malaya acquired jurisdiction over the Person of private respondent by its voluntary submission the
court's jurisdiction through its appointed counsel, Mr. Khay Chay Tee. Furthermore, private respondent's counsel
waived any and all objections to the High Court's jurisdiction in a pleading filed before the court.
In due time, the trial court rendered its Decision dated October 14, 1991 dismissing petitioner's complaint. Petitioner
interposed an appeal with the Court of Appeals, but the appellate court dismissed the same and affirmed the decision
of the trial court in a Decision dated May 19, 1993.
Hence, the instant Petition which is anchored on two (2) assigned errors,12 to wit:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID NOT ACQUIRE PERSONAL
JURISDICTION OVER PNCC, NOTWITHSTANDING THAT (a) THE FOREIGN COURT HAD SERVED SUMMONS ON PNCC
AT ITS MALAYSlA OFFICE, AND (b) PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT.
II
THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT TO (SIC) THE MALAYSIAN COURT
JUDGMENT.
Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment
rendered by a tribunal of another country;13 however, the rules of comity, utility and convenience of nations have
established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are
reciprocally respected and rendered efficacious under certain conditions that may vary in different countries. 14
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate
parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an
opportunity for a full and fair hearing before a court of competent jurisdiction; that the trial upon regular proceedings
has been conducted, following due citation or voluntary appearance of the defendant and under a system of
jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a
prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment.15
A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing,
on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum Under
Section 50(b),16 Rule 39 of the Revised Rules of Court, which was the governing law at the time the instant case was
decided by the trial court and respondent appellate court, a judgment, against a person, of a tribunal of a foreign
country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title. The judgment may, however, be assailed by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. In addition, under Section
3(n), Rule 131 of the Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the presumption
that it was acting in the lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is
proved, the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive validity.
In the instant case, petitioner sufficiently established the existence of the money judgment of the High Court of Malaya
by the evidence it offered. Vinayak Prabhakar Pradhan, presented as petitioner's sole witness, testified to the effect
that he is in active practice of the law profession in Malaysia; 17 that he was connected with Skrine and Company as
Legal Assistant up to 1981;18 that private respondent, then known as Construction and Development Corporation of
the Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala Lumpur; 19that the writ of
summons were served on March 17, 1983 at the registered office of private respondent and on March 21, 1983 on
Cora S. Deala, a financial planning officer of private respondent for Southeast Asia operations; 20that upon the filing of
the case, Messrs. Allen and Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan
Sulaiman, Kuala Lumpur, entered their conditional appearance for private respondent questioning the regularity of
the service of the writ of summons but subsequently withdrew the same when it realized that the writ was properly
served;21 that because private respondent failed to file a statement of defense within two (2) weeks, petitioner filed an
application for summary judgment and submitted affidavits and documentary evidence in support of its claim;22 that
the matter was then heard before the High Court of Kuala Lumpur in a series of dates where private respondent was
represented by counsel; 23 and that the end result of all these proceedings is the judgment sought to be enforced.
In addition to the said testimonial evidence, petitioner offered the following documentary evidence:
(a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High Court dated September 13,
1985 directing private respondent to pay petitioner the sum of $5,108,290.23 Malaysian Ringgit plus interests from
March 1983 until fully paid;24
(b) A certified and authenticated copy of the Order dated September 13,1985 issued by the Malaysian High Court in
Civil Suit No. C638 of 1983;25
(c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged payable to petitioner by
private respondent;26
(d) Letter and Statement of Account of petitioner's counsel in Malaysia indicating the costs for prosecuting and
implementing the Malaysian High Court's Judgment;27
(e) Letters between petitioner's Malaysian counsel, Skrine and Co., and its local counsel, Sycip Salazar Law Offices,
relative to institution of the action in the Philippines; 28
(f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorney's fees paid by and due
from petitioner; 29
(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioner's suit against private
respondent before the Malaysian High Court;30
(h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private respondent with the
Malaysian High Court;31
(i) Summons in Chambers and Affidavit of Khaw Chay Tee, cotmsel for private respondent, submitted during the
proceedings before the Malaysian High Court;32
(j) Record of the Court's Proceedings in Civil Case No. C638 of 1983. 33
(k) Petitioner 's verified Application for Summary Judgment dated August 14, 1984; 34 and
(l) Letter dated November 6, 1985 from petitioner's Malaysian Counsel to private respondent's counsel in Malaysia. 35
Having thus proven, through the foregoing evidence, the existence and authenticity of the foreign judgment, said
foreign judgment enjoys presumptive validity and the burden then fell upon the party who disputes its validity, herein
private respondent, to prove otherwise.
Private respondent failed to sufficiently discharge the burden that fell upon it - to prove by clear and convincing
evidence the grounds which it relied upon to prevent enforcement of the Malaysian High Court judgment, namely, (a)
that jurisdiction was not acquired by the Malaysian Court over the person of private respondent due to alleged
improper service of summons upon private respondent and the alleged lack of authority of its counsel to appear and
represent private respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion, fraud and
clear mistake of fact or law; and (c) not only were the requisites for enforcement or recognition allegedly not
complied with but also that the Malaysian judgment is allegedly contrary to the Constitutional prescription that the
"every decision must state the facts and law on which it is based." 36
Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr. Alfredo. Calupitan, an
accountant of private respondent, and Virginia Abelardo, Executive Secretary and a member of the staff of the
Corporate Secretariat Section of the Corporate Legal Division, of private respondent, both of whom failed to shed light
and amplify its defense or claim for non-enforcement of the foreign judgment against it.
Mr. Calupitan's testimony centered on the following: that from January to December 1982 he was assigned in Malaysia
as Project Comptroller of the Pahang Project Package A and B for road construction under the joint venture of private
respondent and Asiavest Holdings;37 that under the joint venture, Asiavest Holdings would handle the financial aspect
of the project, which is fifty-one percent (51 %) while private respondent would handle the technical aspect of the
project, or forty-nine percent (49%);38 and, that Cora Deala was not authorized to receive summons for and in behalf
of the private respondent.39 Ms. Abelardo's testimony, on the other hand, focused on the following: that there was no
board resolution authorizing Allen and Gledhill to admit all the claims of petitioner in the suit brought before the High
Court of Malaya,40 though on cross-examination she admitted that Allen and Gledhill were the retained lawyers of
private respondent in Malaysia. 41
The foregoing reasons or grounds relied upon by private respondent in preventing enforcement and recognition of
the Malaysian judgment primarily refer to matters of remedy and procedure taken by the Malaysian High Court
relative to the suit for collection initiated by petitioner. Needless to stress, the recognition to be accorded a foreign
judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment
was rendered differs from that of the courts of the country in which the judgment is relied on. 42 Ultimately, matters of
remedy and procedure such as those relating to the service of summons or court process upon the defendant, the
authority of counsel to appear and represent a defendant and the formal requirements in a decision are governed by
the lex fori or the internal law of the forum,43 i.e., the law of Malaysia in this case.
In this case, it is the procedural law of Malaysia where the judgment was rendered that determines the validity of the
service of court process on private respondent as well as other matters raised by it. As to what the Malaysian
procedural law is, remains a question of fact, not of law. It may not be taken judicial notice of and must be pleaded and
proved like any other fact. Sections 24 and 25 of Rule 132 of the Revised Rules of Court provide that it may be
evidenced by an official publication or by a duly attested or authenticated copy thereof. It was then incumbent upon
private respondent to present evidence as to what that Malaysian procedural law is and to show that under it, the
assailed service of summons upon a financial officer of a corporation, as alleged by it, is invalid. It did not. Accordingly,
the presumption of validity and regularity of service of summons and the decision thereafter rendered by the High
Court of Malaya must stand.44
On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent private respondent, not
only did the private respondent's witnesses admit that the said law firm of Allen and Gledhill were its counsels in its
transactions in Malaysia,45 but of greater significance is the fact that petitioner offered in evidence relevant Malaysian
jurisprudence46 to the effect that (a) it is not necessary under Malaysian law for counsel appearing before the
Malaysian High Court to submit a special power of attorney authorizing him to represent a client before said court, (b)
that counsel appearing before the Malaysian High Court has full authority to compromise the suit, and (c) that counsel
appearing before the Malaysian High Court need not comply with certain pre-requisites as required under Philippine
law to appear and compromise judgments on behalf of their clients before said court.47
Furthermore, there is no basis for or truth to the appellate court's conclusion that the conditional appearance of
private respondent's counsel who was allegedly not authorized to appear and represent, cannot be considered as
voluntary submission to the jurisdiction of the High Court of Malaya, inasmuch as said conditional appearance was not
premised on the alleged lack of authority of said counsel but the conditional appearance was entered to question the
regularity of the service of the writ of summons. Such conditional appearance was in fact subsequently withdrawn
when counsel realized that the writ was properly served. 48
On the ground that collusion, fraud and, clear mistake of fact and law tainted the judgment of the High Court of
Malaya, no clear evidence of the same was adduced or shown. The facts which the trial court found "intriguing"
amounted to mere conjectures and specious observations. The trial court's finding on the absence of judgment against
Asiavest-CDCP Sdn. Bhd. is contradicted by evidence on record that recovery was also sought against Asiavest-CDCP
Sdn. Bhd. but the same was found insolvent.49 Furthermore, even when the foreign judgment is based on the drafts
prepared by counsel for the successful party, such is not per se indicative of collusion or fraud. Fraud to hinder the
enforcement within the jurisdiction of a foreign judgment must be extrinsic, i.e., fraud based on facts not controverted
or resolved in the case where judgment is rendered,50 or that which would go to the jurisdiction of the court or would
deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious
defense.51 Intrinsic fraud is one which goes to the very existence of the cause of action is deemed already adjudged,
and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment. 52 Evidence is
wanting on the alleged extrinsic fraud. Hence, such unsubstantiated allegation cannot give rise to liability therein.
Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view of the absence of any
statement of facts and law upon which the award in favor of the petitioner was based. As aforestated, the lex fori or
the internal law of the forum governs matters of remedy and procedure. 53 Considering that under the procedural rules
of the High Court of Malaya, a valid judgment may be rendered even without stating in the judgment every fact and
law upon which the judgment is based, then the same must be accorded respect and the courts in the jurisdiction
cannot invalidate the judgment of the foreign court simply because our rules provide otherwise.
All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of such foreign judgment,
being the party challenging the judgment rendered by the High Court of Malaya. But instead of doing so, private
respondent merely argued, to which the trial court agreed, that the burden lay upon petitioner to prove the validity of
the money judgment. Such is clearly erroneous and would render meaningless the presumption of validity accorded a
foreign judgment were the party seeking to enforce it be required to first establish its validity. 54

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated May 19,1993 in CA-G.R CY
No. 35871 sustaining the Decision dated October 14, 1991 in Civil Case No. 56368 of the Regional Trial Court of Pasig,
Branch 168 denying the enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya in Kuala
Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby rendered ORDERINGprivate respondent
Philippine National Construction Corporation to pay petitioner Asiavest Merchant Bankers (M) Berhad the amounts
adjudged in the said foreign Judgment, subject of the said case.

Costs against the private respondent.

SO ORDERED.
G.R. No. 138322 October 2, 2001
GRACE J. GARCIA, a.k.a. GRACE J. GARCIA-RECIO, petitioner,
vs.
REDERICK A. RECIO, respondents.
PANGANIBAN, J.:
A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such decree is valid according
to the national law of the foreigner. However, the divorce decree and the governing personal law of the alien spouse
who obtained the divorce must be proven. Our courts do not take judicial notice of foreign laws and judgment; hence,
like any other facts, both the divorce decree and the national law of the alien must be alleged and proven according to
our law on evidence.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to nullify the January 7, 1999
Decision1 and the March 24, 1999 Order2 of the Regional Trial Court of Cabanatuan City, Branch 28, in Civil Case No.
3026-AF. The assailed Decision disposed as follows:
"WHEREFORE, this Court declares the marriage between Grace J. Garcia and Rederick A. Recio solemnized on January
12, 1994 at Cabanatuan City as dissolved and both parties can now remarry under existing and applicable laws to any
and/or both parties."3
The assailed Order denied reconsideration of the above-quoted Decision.
The Facts
Rederick A. Recio, a Filipino, was married to Editha Samson, an Australian citizen, in Malabon, Rizal, on March 1,
1987.4 They lived together as husband and wife in Australia. On May 18, 1989, 5 a decree of divorce, purportedly
dissolving the marriage, was issued by an Australian family court.
On June 26, 1992, respondent became an Australian citizen, as shown by a "Certificate of Australian Citizenship"
issued by the Australian government.6 Petitioner – a Filipina – and respondent were married on January 12, 1994 in
Our Lady of Perpetual Help Church in Cabanatuan City. 7 In their application for a marriage license, respondent was
declared as "single" and "Filipino."8
Starting October 22, 1995, petitioner and respondent lived separately without prior judicial dissolution of their
marriage. While the two were still in Australia, their conjugal assets were divided on May 16, 1996, in accordance with
their Statutory Declarations secured in Australia.9
On March 3, 1998, petitioner filed a Complaint for Declaration of Nullity of Marriage 10
in the court a quo, on the
ground of bigamy – respondent allegedly had a prior subsisting marriage at the time he married her on January 12,
1994. She claimed that she learned of respondent's marriage to Editha Samson only in November, 1997.
In his Answer, respondent averred that, as far back as 1993, he had revealed to petitioner his prior marriage and its
subsequent dissolution.11 He contended that his first marriage to an Australian citizen had been validly dissolved by a
divorce decree obtained in Australian in 1989; 12 thus, he was legally capacitated to marry petitioner in
1994.1âwphi1.nêt
On July 7, 1998 – or about five years after the couple's wedding and while the suit for the declaration of nullity was
pending – respondent was able to secure a divorce decree from a family court in Sydney, Australia because the
"marriage ha[d] irretrievably broken down."13
Respondent prayed in his Answer that the Complained be dismissed on the ground that it stated no cause of
action.14 The Office of the Solicitor General agreed with respondent. 15 The court marked and admitted the
documentary evidence of both parties.16 After they submitted their respective memoranda, the case was submitted for
resolution.17
Thereafter, the trial court rendered the assailed Decision and Order.
Ruling of the Trial Court
The trial court declared the marriage dissolved on the ground that the divorce issued in Australia was valid and
recognized in the Philippines. It deemed the marriage ended, but not on the basis of any defect in an essential element
of the marriage; that is, respondent's alleged lack of legal capacity to remarry. Rather, it based its Decision on the
divorce decree obtained by respondent. The Australian divorce had ended the marriage; thus, there was no more
martial union to nullify or annual.
Hence, this Petition.18
Issues
Petitioner submits the following issues for our consideration:
"I
The trial court gravely erred in finding that the divorce decree obtained in Australia by the respondent ipso
facto terminated his first marriage to Editha Samson thereby capacitating him to contract a second marriage with the
petitioner.
"2
The failure of the respondent, who is now a naturalized Australian, to present a certificate of legal capacity to marry
constitutes absence of a substantial requisite voiding the petitioner' marriage to the respondent.
"3
The trial court seriously erred in the application of Art. 26 of the Family Code in this case.
"4
The trial court patently and grievously erred in disregarding Arts. 11, 13, 21, 35, 40, 52 and 53 of the Family Code as
the applicable provisions in this case.
"5
The trial court gravely erred in pronouncing that the divorce gravely erred in pronouncing that the divorce decree
obtained by the respondent in Australia ipso facto capacitated the parties to remarry, without first securing a
recognition of the judgment granting the divorce decree before our courts."19
The Petition raises five issues, but for purposes of this Decision, we shall concentrate on two pivotal ones: (1) whether
the divorce between respondent and Editha Samson was proven, and (2) whether respondent was proven to be
legally capacitated to marry petitioner. Because of our ruling on these two, there is no more necessity to take up the
rest.
The Court's Ruling
The Petition is partly meritorious.
First Issue:
Proving the Divorce Between Respondent and Editha Samson
Petitioner assails the trial court's recognition of the divorce between respondent and Editha Samson. Citing Adong v.
Cheong Seng Gee,20 petitioner argues that the divorce decree, like any other foreign judgment, may be given
recognition in this jurisdiction only upon proof of the existence of (1) the foreign law allowing absolute divorce and
(2) the alleged divorce decree itself. She adds that respondent miserably failed to establish these elements.
Petitioner adds that, based on the first paragraph of Article 26 of the Family Code, marriages solemnized abroad are
governed by the law of the place where they were celebrated (the lex loci celebrationist). In effect, the Code requires
the presentation of the foreign law to show the conformity of the marriage in question to the legal requirements of the
place where the marriage was performed.
At the outset, we lay the following basic legal principles as the take-off points for our discussion. Philippine law does
not provide for absolute divorce; hence, our courts cannot grant it.21 A marriage between two Filipinos cannot be
dissolved even by a divorce obtained abroad, because of Articles 1522 and 1723 of the Civil Code.24 In mixed marriages
involving a Filipino and a foreigner, Article 2625 of the Family Code allows the former to contract a subsequent
marriage in case the divorce is "validly obtained abroad by the alien spouse capacitating him or her to remarry." 26 A
divorce obtained abroad by a couple, who are both aliens, may be recognized in the Philippines, provided it is
consistent with their respective national laws.27
A comparison between marriage and divorce, as far as pleading and proof are concerned, can be made. Van Dorn v.
Romillo Jr. decrees that "aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they
are valid according to their national law." 28 Therefore, before a foreign divorce decree can be recognized by our
courts, the party pleading it must prove the divorce as a fact and demonstrate its conformity to the foreign law
allowing it.29 Presentation solely of the divorce decree is insufficient.
Divorce as a Question of Fact
Petitioner insists that before a divorce decree can be admitted in evidence, it must first comply with the registration
requirements under Articles 11, 13 and 52 of the Family Code. These articles read as follows:
"ART. 11. Where a marriage license is required, each of the contracting parties shall file separately a sworn
application for such license with the proper local civil registrar which shall specify the following:
xxx xxx xxx
"(5) If previously married, how, when and where the previous marriage was dissolved or annulled;
xxx xxx xxx
"ART. 13. In case either of the contracting parties has been previously married, the applicant shall be required to
furnish, instead of the birth of baptismal certificate required in the last preceding article, the death certificate of the
deceased spouse or the judicial decree of annulment or declaration of nullity of his or her previous marriage. x x x.
"ART. 52. The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the
properties of the spouses, and the delivery of the children's presumptive legitimes shall be recorded in the
appropriate civil registry and registries of property; otherwise, the same shall not affect their persons."
Respondent, on the other hand, argues that the Australian divorce decree is a public document – a written official act
of an Australian family court. Therefore, it requires no further proof of its authenticity and due execution.
Respondent is getting ahead of himself. Before a foreign judgment is given presumptive evidentiary value, the
document must first be presented and admitted in evidence. 30 A divorce obtained abroad is proven by the divorce
decree itself. Indeed the best evidence of a judgment is the judgment itself. 31 The decree purports to be a written act
or record of an act of an officially body or tribunal of a foreign country. 32
Under Sections 24 and 25 of Rule 132, on the other hand, a writing or document may be proven as a public or official
record of a foreign country by either (1) an official publication or (2) a copy thereof attested 33 by the officer having
legal custody of the document. If the record is not kept in the Philippines, such copy must be (a) accompanied by a
certificate issued by the proper diplomatic or consular officer in the Philippine foreign service stationed in the foreign
country in which the record is kept and (b) authenticated by the seal of his office.34
The divorce decree between respondent and Editha Samson appears to be an authentic one issued by an Australian
family court.35 However, appearance is not sufficient; compliance with the aforemetioned rules on evidence must be
demonstrated.
Fortunately for respondent's cause, when the divorce decree of May 18, 1989 was submitted in evidence, counsel for
petitioner objected, not to its admissibility, but only to the fact that it had not been registered in the Local Civil
Registry of Cabanatuan City.36 The trial court ruled that it was admissible, subject to petitioner's qualification. 37Hence,
it was admitted in evidence and accorded weight by the judge. Indeed, petitioner's failure to object properly rendered
the divorce decree admissible as a written act of the Family Court of Sydney, Australia. 38
Compliance with the quoted articles (11, 13 and 52) of the Family Code is not necessary; respondent was no longer
bound by Philippine personal laws after he acquired Australian citizenship in 1992.39 Naturalization is the legal act of
adopting an alien and clothing him with the political and civil rights belonging to a citizen. 40 Naturalized citizens, freed
from the protective cloak of their former states, don the attires of their adoptive countries. By becoming an Australian,
respondent severed his allegiance to the Philippines and the vinculum juris that had tied him to Philippine personal
laws.
Burden of Proving Australian Law
Respondent contends that the burden to prove Australian divorce law falls upon petitioner, because she is the party
challenging the validity of a foreign judgment. He contends that petitioner was satisfied with the original of the
divorce decree and was cognizant of the marital laws of Australia, because she had lived and worked in that country
for quite a long time. Besides, the Australian divorce law is allegedly known by Philippine courts: thus, judges may
take judicial notice of foreign laws in the exercise of sound discretion.
We are not persuaded. The burden of proof lies with "the party who alleges the existence of a fact or thing necessary
in the prosecution or defense of an action."41 In civil cases, plaintiffs have the burden of proving the material
allegations of the complaint when those are denied by the answer; and defendants have the burden of proving the
material allegations in their answer when they introduce new matters. 42 Since the divorce was a defense raised by
respondent, the burden of proving the pertinent Australian law validating it falls squarely upon him.
It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign laws. 43 Like any other facts,
they must be alleged and proved. Australian marital laws are not among those matters that judges are supposed to
know by reason of their judicial function.44 The power of judicial notice must be exercised with caution, and every
reasonable doubt upon the subject should be resolved in the negative.
Second Issue:
Respondent's Legal Capacity to Remarry
Petitioner contends that, in view of the insufficient proof of the divorce, respondent was legally incapacitated to marry
her in 1994.
Hence, she concludes that their marriage was void ab initio.
Respondent replies that the Australian divorce decree, which was validly admitted in evidence, adequately
established his legal capacity to marry under Australian law.
Respondent's contention is untenable. In its strict legal sense, divorce means the legal dissolution of a lawful union for
a cause arising after marriage. But divorces are of different types. The two basic ones are (1) absolute divorce or a
vinculo matrimonii and (2) limited divorce or a mensa et thoro. The first kind terminates the marriage, while the
second suspends it and leaves the bond in full force. 45 There is no showing in the case at bar which type of divorce was
procured by respondent.
Respondent presented a decree nisi or an interlocutory decree – a conditional or provisional judgment of divorce. It is
in effect the same as a separation from bed and board, although an absolute divorce may follow after the lapse of the
prescribed period during which no reconciliation is effected. 46
Even after the divorce becomes absolute, the court may under some foreign statutes and practices, still restrict
remarriage. Under some other jurisdictions, remarriage may be limited by statute; thus, the guilty party in a divorce
which was granted on the ground of adultery may be prohibited from remarrying again. The court may allow a
remarriage only after proof of good behavior.47
On its face, the herein Australian divorce decree contains a restriction that reads:
"1. A party to a marriage who marries again before this decree becomes absolute (unless the other party has died)
commits the offence of bigamy."48
This quotation bolsters our contention that the divorce obtained by respondent may have been restricted. It did not
absolutely establish his legal capacity to remarry according to his national law. Hence, we find no basis for the ruling
of the trial court, which erroneously assumed that the Australian divorce ipso facto restored respondent's capacity to
remarry despite the paucity of evidence on this matter.
We also reject the claim of respondent that the divorce decree raises a disputable presumption or presumptive
evidence as to his civil status based on Section 48, Rule 3949 of the Rules of Court, for the simple reason that no proof
has been presented on the legal effects of the divorce decree obtained under Australian laws.
Significance of the Certificate of Legal Capacity
Petitioner argues that the certificate of legal capacity required by Article 21 of the Family Code was not submitted
together with the application for a marriage license. According to her, its absence is proof that respondent did not
have legal capacity to remarry.
We clarify. To repeat, the legal capacity to contract marriage is determined by the national law of the party concerned.
The certificate mentioned in Article 21 of the Family Code would have been sufficient to establish the legal capacity of
respondent, had he duly presented it in court. A duly authenticated and admitted certificate is prima facie evidence of
legal capacity to marry on the part of the alien applicant for a marriage license. 50
As it is, however, there is absolutely no evidence that proves respondent's legal capacity to marry petitioner. A review
of the records before this Court shows that only the following exhibits were presented before the lower court: (1) for
petitioner: (a) Exhibit "A" – Complaint;51 (b) Exhibit "B" – Certificate of Marriage Between Rederick A. Recto (Filipino-
Australian) and Grace J. Garcia (Filipino) on January 12, 1994 in Cabanatuan City, Nueva Ecija; 52 (c) Exhibit "C" –
Certificate of Marriage Between Rederick A. Recio (Filipino) and Editha D. Samson (Australian) on March 1, 1987 in
Malabon, Metro Manila;53 (d) Exhibit "D" – Office of the City Registrar of Cabanatuan City Certification that no
information of annulment between Rederick A. Recto and Editha D. Samson was in its records; 54 and (e) Exhibit "E" –
Certificate of Australian Citizenship of Rederick A. Recto; 55 (2) for respondent: (Exhibit "1" – Amended Answer;56 (b)
Exhibit "S" – Family Law Act 1975 Decree Nisi of Dissolution of Marriage in the Family Court of Australia; 57 (c) Exhibit
"3" – Certificate of Australian Citizenship of Rederick A. Recto;58 (d) Exhibit "4" – Decree Nisi of Dissolution of
Marriage in the Family Court of Australia Certificate;59 and Exhibit "5" – Statutory Declaration of the Legal Separation
Between Rederick A. Recto and Grace J. Garcia Recio since October 22, 1995. 60
Based on the above records, we cannot conclude that respondent, who was then a naturalized Australian citizen, was
legally capacitated to marry petitioner on January 12, 1994. We agree with petitioner's contention that the court a
quo erred in finding that the divorce decree ipso facto clothed respondent with the legal capacity to remarry without
requiring him to adduce sufficient evidence to show the Australian personal law governing his status; or at the very
least, to prove his legal capacity to contract the second marriage.
Neither can we grant petitioner's prayer to declare her marriage to respondent null and void on the ground of bigamy.
After all, it may turn out that under Australian law, he was really capacitated to marry petitioner as a direct result of
the divorce decree. Hence, we believe that the most judicious course is to remand this case to the trial court to receive
evidence, if any, which show petitioner's legal capacity to marry petitioner. Failing in that, then the court a quo may
declare a nullity of the parties' marriage on the ground of bigamy, there being already in evidence two existing
marriage certificates, which were both obtained in the Philippines, one in Malabon, Metro Manila dated March 1, 1987
and the other, in Cabanatuan City dated January 12, 1994.
WHEREFORE, in the interest of orderly procedure and substantial justice, we REMAND the case to the court a quofor
the purpose of receiving evidence which conclusively show respondent's legal capacity to marry petitioner; and failing
in that, of declaring the parties' marriage void on the ground of bigamy, as above discussed. No costs.
SO ORDERED.
Melo, Puno, Vitug, and Sandoval-Gutierrez, JJ., concur.
G.R. No. 186571 August 11, 2010
GERBERT R. CORPUZ, Petitioner,
vs.
DAISYLYN TIROL STO. TOMAS and The SOLICITOR GENERAL, Respondents.
DECISION
BRION, J.:
Before the Court is a direct appeal from the decision 1 of the Regional Trial Court (RTC) of Laoag City, Branch 11,
elevated via a petition for review on certiorari 2 under Rule 45 of the Rules of Court (present petition).
Petitioner Gerbert R. Corpuz was a former Filipino citizen who acquired Canadian citizenship through naturalization
on November 29, 2000.3 On January 18, 2005, Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina, in Pasig
City.4 Due to work and other professional commitments, Gerbert left for Canada soon after the wedding. He returned
to the Philippines sometime in April 2005 to surprise Daisylyn, but was shocked to discover that his wife was having
an affair with another man. Hurt and disappointed, Gerbert returned to Canada and filed a petition for divorce. The
Superior Court of Justice, Windsor, Ontario, Canada granted Gerbert’s petition for divorce on December 8, 2005. The
divorce decree took effect a month later, on January 8, 2006.5
Two years after the divorce, Gerbert has moved on and has found another Filipina to love. Desirous of marrying his
new Filipina fiancée in the Philippines, Gerbert went to the Pasig City Civil Registry Office and registered the Canadian
divorce decree on his and Daisylyn’s marriage certificate. Despite the registration of the divorce decree, an official of
the National Statistics Office (NSO) informed Gerbert that the marriage between him and Daisylyn still subsists under
Philippine law; to be enforceable, the foreign divorce decree must first be judicially recognized by a competent
Philippine court, pursuant to NSO Circular No. 4, series of 1982.6
Accordingly, Gerbert filed a petition for judicial recognition of foreign divorce and/or declaration of marriage as
dissolved (petition) with the RTC. Although summoned, Daisylyn did not file any responsive pleading but submitted
instead a notarized letter/manifestation to the trial court. She offered no opposition to Gerbert’s petition and, in fact,
alleged her desire to file a similar case herself but was prevented by financial and personal circumstances. She, thus,
requested that she be considered as a party-in-interest with a similar prayer to Gerbert’s.
In its October 30, 2008 decision,7 the RTC denied Gerbert’s petition. The RTC concluded that Gerbert was not the
proper party to institute the action for judicial recognition of the foreign divorce decree as he is a naturalized
Canadian citizen. It ruled that only the Filipino spouse can avail of the remedy, under the second paragraph of Article
26 of the Family Code,8 in order for him or her to be able to remarry under Philippine law.9 Article 26 of the Family
Code reads:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where
they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited under
Articles 35(1), (4), (5) and (6), 36, 37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly
obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have
capacity to remarry under Philippine law.
This conclusion, the RTC stated, is consistent with the legislative intent behind the enactment of the second paragraph
of Article 26 of the Family Code, as determined by the Court in Republic v. Orbecido III; 10 the provision was enacted to
"avoid the absurd situation where the Filipino spouse remains married to the alien spouse who, after obtaining a
divorce, is no longer married to the Filipino spouse." 11
THE PETITION
From the RTC’s ruling,12 Gerbert filed the present petition.13
Gerbert asserts that his petition before the RTC is essentially for declaratory relief, similar to that filed in Orbecido; he,
thus, similarly asks for a determination of his rights under the second paragraph of Article 26 of the Family Code.
Taking into account the rationale behind the second paragraph of Article 26 of the Family Code, he contends that the
provision applies as well to the benefit of the alien spouse. He claims that the RTC ruling unduly stretched the doctrine
in Orbecido by limiting the standing to file the petition only to the Filipino spouse – an interpretation he claims to be
contrary to the essence of the second paragraph of Article 26 of the Family Code. He considers himself as a proper
party, vested with sufficient legal interest, to institute the case, as there is a possibility that he might be prosecuted for
bigamy if he marries his Filipina fiancée in the Philippines since two marriage certificates, involving him, would be on
file with the Civil Registry Office. The Office of the Solicitor General and Daisylyn, in their respective Comments, 14 both
support Gerbert’s position.
Essentially, the petition raises the issue of whether the second paragraph of Article 26 of the Family Code extends to
aliens the right to petition a court of this jurisdiction for the recognition of a foreign divorce decree.
THE COURT’S RULING
The alien spouse can claim no right under the second paragraph of Article 26 of the Family Code as the substantive
right it establishes is in favor of the Filipino spouse
The resolution of the issue requires a review of the legislative history and intent behind the second paragraph of
Article 26 of the Family Code.
The Family Code recognizes only two types of defective marriages – void15 and voidable16 marriages. In both cases, the
basis for the judicial declaration of absolute nullity or annulment of the marriage exists before or at the time of the
marriage. Divorce, on the other hand, contemplates the dissolution of the lawful union for cause arising after the
marriage.17 Our family laws do not recognize absolute divorce between Filipino citizens.18
Recognizing the reality that divorce is a possibility in marriages between a Filipino and an alien, President Corazon C.
Aquino, in the exercise of her legislative powers under the Freedom Constitution, 19 enacted Executive Order No. (EO)
227, amending Article 26 of the Family Code to its present wording, as follows:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where
they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited under
Articles 35(1), (4), (5) and (6), 36, 37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly
obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have
capacity to remarry under Philippine law.
Through the second paragraph of Article 26 of the Family Code, EO 227 effectively incorporated into the law this
Court’s holding in Van Dorn v. Romillo, Jr.20 and Pilapil v. Ibay-Somera.21 In both cases, the Court refused to
acknowledge the alien spouse’s assertion of marital rights after a foreign court’s divorce decree between the alien and
the Filipino. The Court, thus, recognized that the foreign divorce had already severed the marital bond between the
spouses. The Court reasoned in Van Dorn v. Romillo that:
To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still married to [the alien spouse]
and still subject to a wife's obligations x x x cannot be just. [The Filipino spouse] should not be obliged to live together
with, observe respect and fidelity, and render support to [the alien spouse]. The latter should not continue to be one of
her heirs with possible rights to conjugal property. She should not be discriminated against in her own country if the
ends of justice are to be served.22
As the RTC correctly stated, the provision was included in the law "to avoid the absurd situation where the Filipino
spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino
spouse."23 The legislative intent is for the benefit of the Filipino spouse, by clarifying his or her marital status, settling
the doubts created by the divorce decree. Essentially, the second paragraph of Article 26 of the Family Code provided
the Filipino spouse a substantive right to have his or her marriage to the alien spouse considered as dissolved,
capacitating him or her to remarry.24 Without the second paragraph of Article 26 of the Family Code, the judicial
recognition of the foreign decree of divorce, whether in a proceeding instituted precisely for that purpose or as a
related issue in another proceeding, would be of no significance to the Filipino spouse since our laws do not recognize
divorce as a mode of severing the marital bond;25 Article 17 of the Civil Code provides that the policy against absolute
divorces cannot be subverted by judgments promulgated in a foreign country. The inclusion of the second paragraph
in Article 26 of the Family Code provides the direct exception to this rule and serves as basis for recognizing the
dissolution of the marriage between the Filipino spouse and his or her alien spouse.
Additionally, an action based on the second paragraph of Article 26 of the Family Code is not limited to the recognition
of the foreign divorce decree. If the court finds that the decree capacitated the alien spouse to remarry, the courts can
declare that the Filipino spouse is likewise capacitated to contract another marriage. No court in this jurisdiction,
however, can make a similar declaration for the alien spouse (other than that already established by the decree),
whose status and legal capacity are generally governed by his national law. 26
Given the rationale and intent behind the enactment, and the purpose of the second paragraph of Article 26 of the
Family Code, the RTC was correct in limiting the applicability of the provision for the benefit of the Filipino spouse. In
other words, only the Filipino spouse can invoke the second paragraph of Article 26 of the Family Code; the alien
spouse can claim no right under this provision.
The foreign divorce decree is presumptive evidence of a right that clothes the party with legal interest to petition for
its recognition in this jurisdiction
We qualify our above conclusion – i.e., that the second paragraph of Article 26 of the Family Code bestows no rights in
favor of aliens – with the complementary statement that this conclusion is not sufficient basis to dismiss Gerbert’s
petition before the RTC. In other words, the unavailability of the second paragraph of Article 26 of the Family Code to
aliens does not necessarily strip Gerbert of legal interest to petition the RTC for the recognition of his foreign divorce
decree. The foreign divorce decree itself, after its authenticity and conformity with the alien’s national law have been
duly proven according to our rules of evidence, serves as a presumptive evidence of right in favor of Gerbert, pursuant
to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments. This Section states:
SEC. 48. Effect of foreign judgments or final orders.—The effect of a judgment or final order of a tribunal of a foreign
country, having jurisdiction to render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title of
the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right
as between the parties and their successors in interest by a subsequent title.
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
To our mind, direct involvement or being the subject of the foreign judgment is sufficient to clothe a party with the
requisite interest to institute an action before our courts for the recognition of the foreign judgment. In a divorce
situation, we have declared, no less, that the divorce obtained by an alien abroad may be recognized in the Philippines,
provided the divorce is valid according to his or her national law. 27
The starting point in any recognition of a foreign divorce judgment is the acknowledgment that our courts do not take
judicial notice of foreign judgments and laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give
effect within its dominion to a judgment rendered by a tribunal of another country."28 This means that the foreign
judgment and its authenticity must be proven as facts under our rules on evidence, together with the alien’s applicable
national law to show the effect of the judgment on the alien himself or herself. 29 The recognition may be made in an
action instituted specifically for the purpose or in another action where a party invokes the foreign decree as an
integral aspect of his claim or defense.
In Gerbert’s case, since both the foreign divorce decree and the national law of the alien, recognizing his or her
capacity to obtain a divorce, purport to be official acts of a sovereign authority, Section 24, Rule 132 of the Rules of
Court comes into play. This Section requires proof, either by (1) official publications or (2) copies attested by the
officer having legal custody of the documents. If the copies of official records are not kept in the Philippines, these
must be (a) accompanied by a certificate issued by the proper diplomatic or consular officer in the Philippine foreign
service stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his office.
The records show that Gerbert attached to his petition a copy of the divorce decree, as well as the required certificates
proving its authenticity,30 but failed to include a copy of the Canadian law on divorce. 31 Under this situation, we can, at
this point, simply dismiss the petition for insufficiency of supporting evidence, unless we deem it more appropriate to
remand the case to the RTC to determine whether the divorce decree is consistent with the Canadian divorce law.
We deem it more appropriate to take this latter course of action, given the Article 26 interests that will be served and
the Filipina wife’s (Daisylyn’s) obvious conformity with the petition. A remand, at the same time, will allow other
interested parties to oppose the foreign judgment and overcome a petitioner’s presumptive evidence of a right by
proving want of jurisdiction, want of notice to a party, collusion, fraud, or clear mistake of law or fact. Needless to
state, every precaution must be taken to ensure conformity with our laws before a recognition is made, as the foreign
judgment, once recognized, shall have the effect of res judicata32 between the parties, as provided in Section 48, Rule
39 of the Rules of Court.33
In fact, more than the principle of comity that is served by the practice of reciprocal recognition of foreign judgments
between nations, the res judicata effect of the foreign judgments of divorce serves as the deeper basis for extending
judicial recognition and for considering the alien spouse bound by its terms. This same effect, as discussed above, will
not obtain for the Filipino spouse were it not for the substantive rule that the second paragraph of Article 26 of the
Family Code provides.
Considerations beyond the recognition of the foreign divorce decree
As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has already recorded the
divorce decree on Gerbert and Daisylyn’s marriage certificate based on the mere presentation of the decree. 34 We
consider the recording to be legally improper; hence, the need to draw attention of the bench and the bar to what had
been done.
Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the civil status of persons shall
be recorded in the civil register." The law requires the entry in the civil registry of judicial decrees that produce legal
consequences touching upon a person’s legal capacity and status, i.e., those affecting "all his personal qualities and
relations, more or less permanent in nature, not ordinarily terminable at his own will, such as his being legitimate or
illegitimate, or his being married or not."35
A judgment of divorce is a judicial decree, although a foreign one, affecting a person’s legal capacity and status that
must be recorded. In fact, Act No. 3753 or the Law on Registry of Civil Status specifically requires the registration of
divorce decrees in the civil registry:
Sec. 1. Civil Register. – A civil register is established for recording the civil status of persons, in which shall be entered:
(a) births;
(b) deaths;
(c) marriages;
(d) annulments of marriages;
(e) divorces;
(f) legitimations;
(g) adoptions;
(h) acknowledgment of natural children;
(i) naturalization; and
(j) changes of name.
xxxx
Sec. 4. Civil Register Books. — The local registrars shall keep and preserve in their offices the following books, in
which they shall, respectively make the proper entries concerning the civil status of persons:
(1) Birth and death register;
(2) Marriage register, in which shall be entered not only the marriages solemnized but also divorces and dissolved
marriages.
(3) Legitimation, acknowledgment, adoption, change of name and naturalization register.
But while the law requires the entry of the divorce decree in the civil registry, the law and the submission of the
decree by themselves do not ipso facto authorize the decree’s registration. The law should be read in relation with the
requirement of a judicial recognition of the foreign judgment before it can be given res judicata effect. In the context of
the present case, no judicial order as yet exists recognizing the foreign divorce decree. Thus, the Pasig City Civil
Registry Office acted totally out of turn and without authority of law when it annotated the Canadian divorce decree
on Gerbert and Daisylyn’s marriage certificate, on the strength alone of the foreign decree presented by Gerbert.
Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court recognition, as it cited NSO
Circular No. 4, series of 1982,36 and Department of Justice Opinion No. 181, series of 198237 – both of which required a
final order from a competent Philippine court before a foreign judgment, dissolving a marriage, can be registered in
the civil registry, but it, nonetheless, allowed the registration of the decree. For being contrary to law, the registration
of the foreign divorce decree without the requisite judicial recognition is patently void and cannot produce any legal
effect.1avvphi1
Another point we wish to draw attention to is that the recognition that the RTC may extend to the Canadian divorce
decree does not, by itself, authorize the cancellation of the entry in the civil registry. A petition for recognition of a
foreign judgment is not the proper proceeding, contemplated under the Rules of Court, for the cancellation of entries
in the civil registry.
Article 412 of the Civil Code declares that "no entry in a civil register shall be changed or corrected, without judicial
order." The Rules of Court supplements Article 412 of the Civil Code by specifically providing for a special remedial
proceeding by which entries in the civil registry may be judicially cancelled or corrected. Rule 108 of the Rules of
Court sets in detail the jurisdictional and procedural requirements that must be complied with before a judgment,
authorizing the cancellation or correction, may be annotated in the civil registry. It also requires, among others, that
the verified petition must be filed with the RTC of the province where the corresponding civil registry is located; 38that
the civil registrar and all persons who have or claim any interest must be made parties to the proceedings; 39and that
the time and place for hearing must be published in a newspaper of general circulation.40 As these basic jurisdictional
requirements have not been met in the present case, we cannot consider the petition Gerbert filed with the RTC as one
filed under Rule 108 of the Rules of Court.
We hasten to point out, however, that this ruling should not be construed as requiring two separate proceedings for
the registration of a foreign divorce decree in the civil registry – one for recognition of the foreign decree and another
specifically for cancellation of the entry under Rule 108 of the Rules of Court. The recognition of the foreign divorce
decree may be made in a Rule 108 proceeding itself, as the object of special proceedings (such as that in Rule 108 of
the Rules of Court) is precisely to establish the status or right of a party or a particular fact. Moreover, Rule 108 of the
Rules of Court can serve as the appropriate adversarial proceeding 41 by which the applicability of the foreign
judgment can be measured and tested in terms of jurisdictional infirmities, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the October 30, 2008 decision of the
Regional Trial Court of Laoag City, Branch 11, as well as its February 17, 2009 order. We order the REMAND of the
case to the trial court for further proceedings in accordance with our ruling above. Let a copy of this Decision be
furnished the Civil Registrar General. No costs.
SO ORDERED.
G.R. No. 162894 February 26, 2008
RAYTHEON INTERNATIONAL, INC., petitioner,
vs.
STOCKTON W. ROUZIE, JR., respondent.
DECISION
TINGA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks
the reversal of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 67001 and the dismissal of the
civil case filed by respondent against petitioner with the trial court.
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing under the laws of
the State of Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American citizen,
entered into a contract whereby BMSI hired respondent as its representative to negotiate the sale of services in
several government projects in the Philippines for an agreed remuneration of 10% of the gross receipts. On 11 March
1992, respondent secured a service contract with the Republic of the Philippines on behalf of BMSI for the dredging of
rivers affected by the Mt. Pinatubo eruption and mudflows. 3
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a
suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and Walter G. Browning for alleged
nonpayment of commissions, illegal termination and breach of employment contract. 4 On 28 September 1995, Labor
Arbiter Pablo C. Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondent’s money claims. 5 Upon
appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter and dismissed respondent’s complaint on the
ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a Resolution dated 26
November 1997. The Resolution became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the Regional Trial
Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein
petitioner Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier labor
case. The complaint essentially reiterated the allegations in the labor case that BMSI verbally employed respondent to
negotiate the sale of services in government projects and that respondent was not paid the commissions due him from
the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also averred that BMSI and RUST as
well as petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondent’s claim, it was a foreign corporation duly licensed to do
business in the Philippines and denied entering into any arrangement with respondent or paying the latter any sum of
money. Petitioner also denied combining with BMSI and RUST for the purpose of assuming the alleged obligation of
the said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the written agreement
between respondent and BMSI and RUST, denominated as "Special Sales Representative Agreement," the rights and
obligations of the parties shall be governed by the laws of the State of Connecticut.10 Petitioner sought the dismissal of
the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed for damages by
way of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative Defenses and for
Summary Judgment12 seeking the dismissal of the complaint on grounds of forum non conveniens and failure to state a
cause of action. Respondent opposed the same. Pending the resolution of the omnibus motion, the deposition of
Walter Browning was taken before the Philippine Consulate General in Chicago. 13
In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The trial court held that the
factual allegations in the complaint, assuming the same to be admitted, were sufficient for the trial court to render a
valid judgment thereon. It also ruled that the principle of forum non conveniens was inapplicable because the trial
court could enforce judgment on petitioner, it being a foreign corporation licensed to do business in the Philippines.15
Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by respondent. 17 In an Order
dated 31 July 2001,18 the trial court denied petitioner’s motion. Thus, it filed a Rule 65 Petition 19 with the Court of
Appeals praying for the issuance of a writ of certiorari and a writ of injunction to set aside the twin orders of the trial
court dated 13 September 2000 and 31 July 2001 and to enjoin the trial court from conducting further proceedings. 20
On 28 August 2003, the Court of Appeals rendered the assailed Decision 21 denying the petition for certiorari for lack of
merit. It also denied petitioner’s motion for reconsideration in the assailed Resolution issued on 10 March 2004. 22
The appellate court held that although the trial court should not have confined itself to the allegations in the
complaint and should have also considered evidence aliunde in resolving petitioner’s omnibus motion, it found the
evidence presented by petitioner, that is, the deposition of Walter Browning, insufficient for purposes of determining
whether the complaint failed to state a cause of action. The appellate court also stated that it could not rule one way or
the other on the issue of whether the corporations, including petitioner, named as defendants in the case had indeed
merged together based solely on the evidence presented by respondent. Thus, it held that the issue should be
threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court when the latter
decided not to desist from assuming jurisdiction on the ground of the inapplicability of the principle of forum non
conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO
STATE A CAUSE OF ACTION AGAINST RAYTHEON INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT ON THE GROUND
OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law Office, counsel on
record for respondent, manifested that the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations
with the law firm even before the filing of the instant petition and that it could no longer find the whereabouts of Atty.
Karagdag or of respondent despite diligent efforts. In a Resolution 25 dated 20 November 2006, the Court resolved to
dispense with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law
clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the presence
of foreign elements in the dispute – namely, the parties and witnesses involved are American corporations and
citizens and the evidence to be presented is located outside the Philippines – that renders our local courts
inconvenient forums. Petitioner theorizes that the foreign elements of the dispute necessitate the immediate
application of the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution of
conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments. Thus,
in the instances27 where the Court held that the local judicial machinery was adequate to resolve controversies with a
foreign element, the following requisites had to be proved: (1) that the Philippine Court is one to which the parties
may conveniently resort; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.28
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and where
the court has jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case even if
the rules of conflict-of-laws or the convenience of the parties point to a foreign forum. This is an exercise of sovereign
prerogative of the country where the case is filed.29
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law 30 and by the
material allegations in the complaint, irrespective of whether or not the plaintiff is entitled to recover all or some of
the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an action for damages arising from an alleged breach
of contract. Undoubtedly, the nature of the action and the amount of damages prayed are within the jurisdiction of the
RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party plaintiff)
upon the filing of the complaint. On the other hand, jurisdiction over the person of petitioner (as party defendant) was
acquired by its voluntary appearance in court. 32
x x x Our examination of the deposition of Mr. Walter Browning as well as other documents produced in the hearing
shows that these evidence aliunde are not quite sufficient for us to mete a ruling that the complaint fails to state a
cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that Raytheon Engineers and
Constructors, Inc. (REC) assumed the warranty obligations of defendant Rust International in the Makar Port Project
in General Santos City, after Rust International ceased to exist after being absorbed by REC. Other documents already
submitted in evidence are likewise meager to preponderantly conclude that Raytheon International, Inc., Rust
International[,] Inc. and Brand Marine Service, Inc. have combined into one company, so much so that Raytheon
International, Inc., the surviving company (if at all) may be held liable for the obligation of BMSI to respondent Rouzie
for unpaid commissions. Neither these documents clearly speak otherwise. 38
As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST merged together
requires the presentation of further evidence, which only a full-blown trial on the merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

That the subject contract included a stipulation that the same shall be governed by the laws of the State of Connecticut
does not suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded from hearing
the civil action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to
cause a defendant to travel to this state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both parties. 33 The choice of law stipulation will
become relevant only when the substantive issues of the instant case develop, that is, after hearing on the merits
proceeds before the trial court.

Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking
remedies elsewhere.34 Petitioner’s averments of the foreign elements in the instant case are not sufficient to oust the
trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved.

Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual
determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the
trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the court’s desistance. 35

Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion that it can
assume jurisdiction over the dispute notwithstanding its foreign elements. In the same manner, the Court defers to
the sound discretion of the lower courts because their findings are binding on this Court.

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action against
petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the pleading. 36 As a general rule,
the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would
justify the relief demanded.37

The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner
contends that the deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court of
Appeals is instructive, thus: