Escolar Documentos
Profissional Documentos
Cultura Documentos
BENITO
August 6, 1999Petitioners:
E. B. VILLAROSA & PARTNER CO., LTD.
Respondents:
HON. HERMINIO I. BENITO, in his capacity as Presiding Judge, RTC, Branch
132, MakatiCity and IMPERIAL DEVELOPMENT
CORPORATIONSummary:FACTS:
Petitioner E.B. Villarosa & Partner Co., Ltd. is a limited partnership with
principal office at Davao City andwith branch offices at Paraaque, Metro Manila
and Cagayan de Oro City.
Private respondent,
as plaintiff
, filed a Complaint for Breach of Contract and Damages against petitioner,
as defendant
, before RTC of Makati allegedly for failure of latter to comply with its contractual
obligation inthat, other than a few unfinished low cost houses, there were no
substantial developments therein.
Summons, together with the complaint, were served upon the defendant, through its
Branch ManagerEngr. Wendell Sabulbero at the stated address at Kolambog, Lapasan,
Cagayan de Oro City but theSheriff's Return of Service stated that the summons was
duly served "upon defendant E.B. Villarosa & Partner Co., Ltd. thru its Branch Manager
Engr. WENDELL SALBULBERO on May 5, 1998 at their new office Villa Gonzalo,
Nazareth, Cagayan de Oro City, and evidenced by the signature on the face
of the originalcopy of the summons.
Defendant filed a Special Appearance with Motion to Dismiss alleging that on May 6,
1998, "summonsintended for defendant" was served upon Engr. Wendell Sabulbero, an
employee of defendant at itsbranch office at Cagayan de Oro City.
o
Defendant prayed for the dismissal of the complaint on the ground of improper service
of summons and for lack of jurisdiction over the person of the defendant.
o
Trial court did not acquire jurisdiction over its person since the summons was
improperly servedupon its employee who is not one of those persons named in Section
11, Rule 14 RoC uponwhom service of summons may be made.
Plaintiff filed a Motion to Declare Defendant in Default alleging that defendant has failed
to file an Answerdespite its receipt allegedly of the summons and the complaint, as
shown in the Sheriffs Return.
Plaintiff then filed an Opposition to Defendant's Motion to Dismiss alleging that the
records show that:
o
Defendant, through its branch manager, Engr. Wendell Sabulbero actually received
thesummons and the complaint as evidenced by the signature appearing on the copy
of thesummons
o
Defendant has transferred its office from Kolambog, Lapasan, Cagayan de Oro to its
new officeaddress at Villa Gonzalo, Nazareth, Cagayan de Oro; and
o
{urpose of the rule is to bring home to the corporation notice of the filing of the action.
New provision is very specific and clear in that the word "manager" was
changed to "generalmanager", "secretary" to "corporate secretary", and excluding
therefrom agent and director.
Plaintiff filed an Opposition to defendant's MR. Defendant filed a Reply contending that
the changes in thenew rules are substantial and not just general semantics.
Defendant's MR was denied hence, this presentpetition.
Private respondent filed its Comment to the petition citing the cases
Kanlaon Construction Enterprises Co.,Inc. vs. NLRC
wherein it was held that service upon a construction project manager is valid and in
Gesulgon vs. NLRC
which held that a corporation is bound by the service of summons upon its
assistantmanager.
ISSUE:
W/N the trial court acquired jurisdiction over the person of petitioner upon service of
summons on its BranchManager
NO
HELD:
WHEREFORE, the petition is hereby GRANTED. The assailed Orders of the public
respondent trial court are ANNULLED and SET ASIDE. The public respondent
Regional Trial Court of Makati, Branch 132 is declared without jurisdiction to
take cognizance of Civil Case No. 98-824, and all its orders and issuances in
connection therewith arehereby ANNULLED and SET ASIDE.
o0o
SECOND DIVISION
[G.R. No. 136154. February 7, 2001]
This Petition for Review on certiorari assails the 17 July 1998 Decision[1] of the Court of
Appeals affirming the 11 November 1997 Order [2] of the Regional Trial Court which denied
petitioners Motion to Suspend Proceedings in Civil Case No. 2637-MN. It also questions the
appellate courts Resolution[3] of 30 October 1998 which denied petitioners Motion for
Reconsideration.
On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte Corporation-USA
(DMC-USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole and
exclusive distributor of its Del Monte products in the Philippines for a period of five (5) years,
renewable for two (2) consecutive five (5) year periods with the consent of the parties. The
Agreement provided, among others, for an arbitration clause which states -
"warning to the trade" paid advertisement in leading newspapers. Petitioners DMC-USA and
Paul E. Derby, Jr., apparently upset with the publication, instructed private respondent MMI to
stop coordinating with Antonio Ongpin and to communicate directly instead with petitioner
DMC-USA through Paul E. Derby, Jr.
Private respondents further averred that petitioners knowingly and surreptitiously continued
to deal with the former in bad faith by involving disinterested third parties and by proposing
solutions which were entirely out of their control. Private respondents claimed that they had
exhausted all possible avenues for an amicable resolution and settlement of their grievances; that
as a result of the fraud, bad faith, malice and wanton attitude of petitioners, they should be held
responsible for all the actual expenses incurred by private respondents in the delayed shipment of
orders which resulted in the extra handling thereof, the actual expenses and cost of money for the
unused Letters of Credit (LCs) and the substantial opportunity losses due to created out-of-stock
situations and unauthorized shipments of Del Monte-USA products to the Philippine Duty Free
Area and Economic Zone; that the bad faith, fraudulent acts and willful negligence of petitioners,
motivated by their determination to squeeze private respondents out of the outstanding and
ongoing Distributorship Agreement in favor of another party, had placed private respondent
LILY SY on tenterhooks since then; and, that the shrewd and subtle manner with which
petitioners concocted imaginary violations by private respondent MMI of the Distributorship
Agreement in order to justify the untimely termination thereof was a subterfuge. For the
foregoing, private respondents claimed, among other reliefs, the payment of actual damages,
exemplary damages, attorneys fees and litigation expenses.
On 21 October 1996 petitioners filed a Motion to Suspend Proceedings[13] invoking the
arbitration clause in their Agreement with private respondents.
In a Resolution[14] dated 23 December 1996 the trial court deferred consideration of
petitioners Motion to Suspend Proceedings as the grounds alleged therein did not constitute the
suspension of the proceedings considering that the action was for damages with prayer for the
issuance of Writ of Preliminary Attachment and not on the Distributorship Agreement.
On 15 January 1997 petitioners filed a Motion for Reconsideration to which private
respondents filed their Comment/Opposition. On 31 January 1997 petitioners filed
their Reply. Subsequently, private respondents filed an Urgent Motion for Leave to Admit
Supplemental Pleading dated 2 April 1997. This Motion was admitted, over petitioners
opposition, in an Order of the trial court dated 27 June 1997.
As a result of the admission of the Supplemental Complaint, petitioners filed on 22 July
1997 a Manifestation adopting their Motion to Suspend Proceedings of 17 October 1996
and Motion for Reconsideration of 14 January 1997.
On 11 November 1997 the Motion to Suspend Proceedings was denied by the trial court on
the ground that it "will not serve the ends of justice and to allow said suspension will only delay
the determination of the issues, frustrate the quest of the parties for a judicious determination of
their respective claims, and/or deprive and delay their rights to seek redress."[15]
On appeal, the Court of Appeals affirmed the decision of the trial court. It held that the
alleged damaging acts recited in the Complaint, constituting petitioners causes of action,
required the interpretation of Art. 21 of the Civil Code [16] and that in determining whether
petitioners had violated it "would require a full blown trial" making arbitration "out of the
question."[17] Petitioners Motion for Reconsideration of the affirmation was denied. Hence,
this Petition for Review.
The crux of the controversy boils down to whether the dispute between the parties warrants
an order compelling them to submit to arbitration.
Petitioners contend that the subject matter of private respondents causes of action arises out
of or relates to the Agreement between petitioners and private respondents. Thus, considering
that the arbitration clause of the Agreement provides that all disputes arising out of or relating to
the Agreement or the parties relationship, including the termination thereof, shall be resolved by
arbitration, they insist on the suspension of the proceedings in Civil Case No. 2637-MN as
mandated by Sec. 7 of RA 876[18] -
Sec. 7. Stay of Civil Action. If any suit or proceeding be brought upon an issue
arising out of an agreement providing for arbitration thereof, the court in which such
suit or proceeding is pending, upon being satisfied that the issue involved in such suit
or proceeding is referable to arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the
agreement. Provided, That the applicant for the stay is not in default in proceeding
with such arbitration.
Private respondents claim, on the other hand, that their causes of action are rooted in Arts.
20, 21 and 23 of the Civil Code,[19] the determination of which demands a full blown trial, as
correctly held by the Court of Appeals. Moreover, they claim that the issues before the trial court
were not joined so that the Honorable Judge was not given the opportunity to satisfy himself that
the issue involved in the case was referable to arbitration. They submit that, apparently,
petitioners filed a motion to suspend proceedings instead of sending a written demand to private
respondents to arbitrate because petitioners were not sure whether the case could be a subject of
arbitration. They maintain that had petitioners done so and private respondents failed to answer
the demand, petitioners could have filed with the trial court their demand for arbitration that
would warrant a determination by the judge whether to refer the case to arbitration. Accordingly,
private respondents assert that arbitration is out of the question.
Private respondents further contend that the arbitration clause centers more on venue rather
than on arbitration. They finally allege that petitioners filed their motion for extension of time to
file this petition on the same date[20] petitioner DMC-USA filed a petition to compel private
respondent MMI to arbitrate before the United States District Court in Northern California,
docketed as Case No. C-98-4446. They insist that the filing of the petition to compel arbitration
in the United States made the petition filed before this Court an alternative remedy and, in a way,
an abandonment of the cause they are fighting for here in the Philippines, thus warranting the
dismissal of the present petition before this Court.
There is no doubt that arbitration is valid and constitutional in our jurisdiction. [21] Even
before the enactment of RA 876, this Court has countenanced the settlement of disputes through
arbitration. Unless the agreement is such as absolutely to close the doors of the courts against the
parties, which agreement would be void, the courts will look with favor upon such amicable
arrangement and will only interfere with great reluctance to anticipate or nullify the action of the
arbitrator.[22] Moreover, as RA 876 expressly authorizes arbitration of domestic disputes, foreign
arbitration as a system of settling commercial disputes was likewise recognized when the
Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement
of Foreign Arbitral Awards of 1958" under the 10 May 1965 Resolution No. 71 of the Philippine
Senate, giving reciprocal recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a contracting state.[23]
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent MMI is valid
and the dispute between the parties is arbitrable. However, this Court must deny the petition.
The Agreement between petitioner DMC-USA and private respondent MMI is a
contract. The provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are
respected as the law between the contracting parties and produce effect as between them, their
assigns and heirs.[24] Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its
Managing Director for Export Sales Paul E. Derby, Jr., and private respondents MMI and its
Managing Director LILY SY are bound by the Agreement and its arbitration clause as they are
the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent
SFI, not parties to the Agreement and cannot even be considered assigns or heirs of the parties,
are not bound by the Agreement and the arbitration clause therein. Consequently, referral to
arbitration in the State of California pursuant to the arbitration clause and the suspension of the
proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could be called
for[25] but only as to petitioners DMC-USA and Paul E. Derby, Jr., and private respondents MMI
and LILY SY, and not as to the other parties in this case, in accordance with the recent case
of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation,[26] which superseded that
of Toyota Motor Philippines Corp. v. Court of Appeals.[27]
In Toyota, the Court ruled that "[t]he contention that the arbitration clause has become
dysfunctional because of the presence of third parties is untenable ratiocinating that "[c]ontracts
are respected as the law between the contracting parties" [28] and that "[a]s such, the parties are
thereby expected to abide with good faith in their contractual commitments." [29] However,
in Salas, Jr., only parties to the Agreement, their assigns or heirs have the right to arbitrate or
could be compelled to arbitrate. The Court went further by declaring that in recognizing the
right of the contracting parties to arbitrate or to compel arbitration, the splitting of the
proceedings to arbitration as to some of the parties on one hand and trial for the others on the
other hand, or the suspension of trial pending arbitration between some of the parties, should not
be allowed as it would, in effect, result in multiplicity of suits, duplicitous procedure and
unnecessary delay.[30]
The object of arbitration is to allow the expeditious determination of a dispute. [31] Clearly, the
issue before us could not be speedily and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending
arbitration. Accordingly, the interest of justice would only be served if the trial court hears and
adjudicates the case in a single and complete proceeding.[32]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals affirming
the Order of the Regional Trial Court of Malabon, Metro Manila, in Civil Case No. 2637-MN,
which denied petitioners Motion to Suspend Proceedings, is AFFIRMED. The Regional Trial
Court concerned is directed to proceed with the hearing of Civil Case No. 2637-MN with
dispatch. No costs.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.
Quisumbing, J., no part, related to counsel of a party.
THIRD DIVISION
[G.R. No. 137378. October 12, 2000]
INC., petitioner,
vs. FASGI
DECISION
VITUG, J.:
"A. contrary to the terms of the Distributorship Agreement and in violation of U.S.
law, the country of origin (the Philippines) was not stamped on the wheels;
"B. the wheels did not have weight load limits stamped on them as required to avoid
mounting on excessively heavy vehicles, resulting in risk of damage or bodily injury
to consumers arising from possible shattering of the wheels;
"C. many of the wheels did not have an indication as to which models of automobile
they would fit;
"D. many of the wheels did not fit the model automobiles for which they were
purportedly designed;
"E. some of the wheels did not fit any model automobile in use in the United States;
"F. most of the boxes in which the wheels were packed indicated that the wheels were
approved by the Specialty Equipment Manufacturer's Association (hereafter,
`SEMA'); in fact no SEMA approval has been obtained and this indication was
therefore false and could result in fraud upon retail customers purchasing the
wheels."[1]
On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of
contract and recovery of damages in the amount of US$2,316,591.00 before the United
States District Court for the Central District of California. In January 1980, during the
pendency of the case, the parties entered into a settlement, entitled "Transaction" with
the corresponding Italian translation "Convenzione Transsativa," where it was stipulated
that FPS and PAWI would accept the return of not less than 8,100 wheels after restoring
to FASGI the purchase price of US$268,750.00 via four (4) irrevocable letters of credit
("LC"). The rescission of the contract of distributorship was to be effected within the
period starting January up until April 1980. [2]
In a telex message, dated 02 March 1980, PAWI president Romeo Rojas expressed
the company's inability to comply with the foregoing agreement and proposed a revised
schedule of payment. The message, in part, read:
"We are most anxious in fulfilling all our obligations under compromise agreement
executed by our Mr. Giancarlo Dallera and your Van Curen. We have tried our best to
comply with our commitments, however, because of the situation as mentioned in the
foregoing and currency regulations and restrictions imposed by our government on the
outflow, of foreign currency from our country, we are constrained to request for a
revised schedule of shipment and opening of L/Cs.
"After consulting with our bank and government monetary agencies and on the
assumption that we submit the required pro-forma invoices we can open the letters of
credit in your favor under the following schedule:
"A) First L/C - it will be issued in April 1980 payable 90 days thereafter
"B) Second L/C - it will be issued in June 1980 payable 90 days thereafter
"C) Third L/C - it will be issued in August 1980 payable 90 days thereafter
"D) Fourth L/C - it will be issued in November 1980 payable 90 days thereafter
"We understand your situation regarding the lease of your warehouse. For this reason, we are
willing to defray the extra storage charges resulting from this new schedule. If you cannot renew
the lease [of] your present warehouse, perhaps you can arrange to transfer to another warehouse
and storage charges transfer thereon will be for our account. We hope you understand our
position. The delay and the revised schedules were caused by circumstances totally beyond our
control."[3]
On 21 April 1980, again through a telex message, PAWI informed FASGI that it was
impossible to open a letter of credit on or before April 1980 but assured that it would do
its best to comply with the suggested schedule of payments. [4] In its telex reply of 29
April 1980, FASGI insisted that PAWI should meet the terms of the proposed schedule
of payments, specifically its undertaking to open the first LC within April of 1980, and
that "If the letter of credit is not opened by April 30, 1980, then x x x [it would]
immediately take all necessary legal action to protect [its] position." [5]
Despite its assurances, and FASGI's insistence, PAWI failed to open the first LC in
April 1980 allegedly due to Central Bank "inquiries and restrictions," prompting FASGI to
pursue its complaint for damages against PAWI before the California district court. Pretrial conference was held on 24 November 1980. In the interim, the parties, realizing the
protracted process of litigation, resolved to enter into another arrangement, this time
entitled "Supplemental Settlement Agreement," on 26 November 1980. In substance,
the covenant provided that FASGI would deliver to PAWI a container of wheels for every
LC opened and paid by PAWI:
"3. Agreement
"3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Thousand, Seven Hundred
Fifty and 00/100 Dollars ($268,750.00), plus interest and storage costs as described
below. Sellers shall pay such amount by delivering to FASGI the following four (4)
irrevocable letters of credit, confirmed by Crocker Bank, Main Branch, Fresno,
California, as set forth below:
"(i) on or before June 30, 1980, a documentary letter of credit in the amount of (a)
Sixty-Five Thousand, Three Hundred Sixty-nine and 00/100 Dollars ($65,369.00), (b)
plus interest on that amount at the annual rate of 16.25% from January 1, 1980 until
July 31, 1980, (c) plus Two Thousand Nine Hundred Forty Dollars and 00/100
($2,940.00) and (d) with interest on that sum at the annual rate of 16.25% from May
1, 1980 to July 31, 1980, payable on or after August 31, 1980;
"(ii) on or before September 1, 1980, a documentary letter of credit in the amount of
(a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven
Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars
($2,940.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank,
San Francisco, in effect from time to time, plus two percent on the amount in (a) from
January 1, 1980 until December 21, 1980, and on the amount set forth in (b) from
May 1, 1980 until December 21, 1980, payable ninety days after the date of the bill of
lading under the letter of credit;
"(iii) on or before November 1, 1980, a documentary letter of credit in the amount of
(a) Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven
Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars
($2,490.00), plus (c) interest at an annual rate equal to the prime rate of Crocker Bank,
San Francisco, in effect from time to time, plus two percent on the amount in (a) from
January 1, 1980 until February 21, 1981, and on the amount set forth in (b) from May
1, 1980 until February 21, 1981, payable ninety days after the date of the bill of lading
under the latter of credit;
"(iv) on or before January 1, 1981, a documentary letter of credit in the amount of (a) SixtySeven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67) plus
(b) Five Thousand, Eight Hundred Eighty and 00/100 Dollars ($5,880.00), plus (c) interest at an
annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time,
plus two percent on the amount in (a) from January 1, 1980 until April 21, 1981, and on the
amount set forth in (b) from May 1, 1980 until April 21, 1981, payable ninety days after the date
of the bill of lading under the latter of credit."[6]
Anent the wheels still in the custody of FASGI, the supplemental settlement agreement
provided that -
"3.4 (a) Upon execution of this Supplemental Settlement Agreement, the obligations
of FASGI to store or maintain the Containers and Wheels shall be limited to (i) storing
the Wheels and Containers in their present warehouse location and (ii) maintaining in
effect FASGI's current insurance in favor of FASGI, insuring against usual
commercial risks for such storage in the principal amount of the Letters of Credit
described in Paragraph 3.1. FASGI shall bear no liability, responsibility or risk for
uninsurable risks or casualties to the Containers or Wheels.
"x x x x x x x x x
"(e) From and after February 28, 1981, unless delivery of the Letters of Credit are
delayed past such date pursuant to the penultimate Paragraph 3.1, in which case from
and after such later date, FASGI shall have no obligation to maintain, store or deliver
any of the Containers or Wheels."[7]
The deal allowed FASGI to enter before the California court the foregoing stipulations in
the event of the failure of PAWI to make good the scheduled payments; thus -
"3.5 Concurrently with execution and delivery hereof, the parties have executed and
delivered a Mutual Release (the `Mutual Release'), and a Stipulation for Judgment
(the `Stipulation for Judgment') with respect to the Action. In the event of breach of
this Supplemental Settlement Agreement by Sellers, FASGI shall have the right to
apply immediately to the Court for entry of Judgment pursuant to the Stipulation for
Judgment in the full amount thereof, less credit for any payments made by Sellers
pursuant to this Supplemental Settlement Agreement. FASGI shall have the right
thereafter to enforce the Judgment against PAWI and FPS in the United States and in
any other country where assets of FPS or PAWI may be located, and FPS and PAWI
hereby waive all defenses in any such country to execution or enforcement of the
Judgment by FASGI. Specifically, FPS and PAWI each consent to the jurisdiction of
the Italian and Philippine courts in any action brought by FASGI to seek a judgment in
those countries based upon a judgment against FPS or PAWI in the Action." [8]
In accordance with the aforementioned paragraph 3.5 of the agreement, the parties
made the following stipulation before the California court:
"PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M. in the Courtroom of
the Honorable Laughlin E. Waters of the above Court, plaintiff FASGI
ENTERPRISES, INC. (hereinafter `FASGI') will move the Court for entry of
Judgment against defendant PHILIPPINE ALUMINUM WHEELS, INC. (hereinafter
`PAWI'), pursuant to the Stipulation for Judgment filed concurrently herewith,
executed on behalf of FASGI and PAWI by their respective attorneys, acting as their
authorized agents.
"Judgment will be sought in the total amount of P252,850.60, including principal and
interest accrued through May 17, 1982, plus the sum of $17,500.00 as reasonable
attorneys' fees for plaintiff in prosecuting this action.
"The Motion will be made under Rule 54 of the Federal Rules of Civil Procedure,
pursuant to and based upon the Stipulation for Judgment, the Supplemental Settlement
Agreement filed herein on or about November 21, 1980, the Memorandum of Points
and Authorities and Affidavits of Elena Buholzer, Franck G. Ker and Stan Cornwell
all filed herewith, and upon all the records, files and pleadings in this action.
"The Motion is made on the grounds that defendant PAWI has breached its obligations
as set forth in the Supplemental Settlement Agreement, and that the Supplemental
Settlement Agreement expressly permits FASGI to enter the Stipulation for Judgment
in the event that PAWI has not performed under the Supplemental Settlement
Agreement."[10]
On 24 August 1982, FASGI filed a notice of entry of judgment. A certificate of finality
of judgment was issued, on 07 September 1982, by the US District Judge of the District
Court for the Central District of California. PAWI, by this time, was approximately twenty
(20) months in arrears in its obligation under the supplemental settlement agreement.
Unable to obtain satisfaction of the final judgment within the United States, FASGI
filed a complaint for "enforcement of foreign judgment" in February 1983, before the
Regional Trial Court, Branch 61, of Makati, Philippines. The Makati court, however, in an
order of 11 September 1990, dismissed the case, thereby denying the enforcement of
the foreign judgment within Philippine jurisdiction, on the ground that the decree was
tainted with collusion, fraud, and clear mistake of law and fact. [11] The lower court ruled
that the foreign judgment ignored the reciprocal obligations of the parties. While the
assailed foreign judgment ordered the return by PAWI of the purchase amount, no
similar order was made requiring FASGI to return to PAWI the third and fourth
containers of wheels.[12] This situation, the trial court maintained, amounted to an unjust
enrichment on the part of FASGI. Furthermore, the trial court said, the supplemental
settlement agreement and the subsequent motion for entry of judgment upon which the
California court had based its judgment were a nullity for having been entered into by
Mr. Thomas Ready, counsel for PAWI, without the latter's authorization.
FASGI appealed the decision of the trial court to the Court of Appeals. In a decision,
dated 30 July 1997, the appellate court reversed the decision of the trial court and
ordered the full enforcement of the California judgment.
[13]
concerned so long as it is convincingly shown that there has been an opportunity for a
full and fair hearing before a court of competent jurisdiction; that trial upon regular
proceedings has been conducted, following due citation or voluntary appearance of the
defendant and under a system of jurisprudence likely to secure an impartial
administration of justice; and that there is nothing to indicate either a prejudice in court
and in the system of laws under which it is sitting or fraud in procuring the judgment. [16] A
foreign judgment is presumed to be valid and binding in the country from which it
comes, until a contrary showing, on the basis of a presumption of regularity of
proceedings and the giving of due notice in the foreign forum. Rule 39, section 48 of the
Rules of Court of the Philippines provides:
Sec. 48. Effect of foreign judgments or final orders - The effect of a judgment or final
order of a tribunal of a foreign country, having jurisdiction to render the judgment or
final order is as follows:
xxxx
(b) In case of a judgment or final order against a person, the judgment or final order is
presumptive evidence of a right as between the parties and their successors-in-interest
by a subsequent title.
In either case, the judgment or final order may be repelled by evidence a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact.
In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc., [17] one of the early
Philippine cases on the enforcement of foreign judgments, this Court has ruled that a
judgment for a sum of money rendered in a foreign court is presumptive evidence of a
right between the parties and their successors-in-interest by subsequent title, but when
suit for its enforcement is brought in a Philippine court, such judgment may be repelled
by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear
mistake of law or fact. In Northwest Orient Airlines, Inc., vs. Court of Appeals, [18] the
Court has said that a party attacking a foreign judgment is tasked with the burden of
overcoming its presumptive validity.
PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in
this jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle
the action or subject matter of the litigation even when he honestly believes that such a
settlement will best serve his client's interest.[19]
In the instant case, the supplemental settlement agreement was signed by the
parties, including Mr. Thomas Ready, on 06 October 1980. The agreement was lodged
in the California case on 26 November 1980 or two (2) days after the pre-trial
conference held on 24 November 1980. If Mr. Ready was indeed not authorized by
PAWI to enter into the supplemental settlement agreement, PAWI could have forthwith
signified to FASGI a disclaimer of the settlement. Instead, more than a year after the
execution of the supplemental settlement agreement, particularly on 09 October 1981,
PAWI President Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that
failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter
confirmed the terms of the agreement when Mr. Rojas sought forbearance for the
impending delay in the opening of the first letter of credit under the schedule stipulated
in the agreement.
It is an accepted rule that when a client, upon becoming aware of the compromise
and the judgment thereon, fails to promptly repudiate the action of his attorney, he will
not afterwards be heard to complain about it. [20]
Nor could PAWI claim any prejudice by the settlement. PAWI was spared from
possibly paying FASGI substantial amounts of damages and incurring heavy litigation
expenses normally generated in a full-blown trial. PAWI, under the agreement was
afforded time to reimburse FASGI the price it had paid for the defective wheels. PAWI,
should not, after its opportunity to enjoy the benefits of the agreement, be allowed to
later disown the arrangement when the terms thereof ultimately would prove to operate
against its hopeful expectations.
PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental
Settlement Agreement but denounced likewise his authority to enter into a stipulation for
judgment before the California court on 06 August 1982 on the ground that it had by
then already terminated the former's services. For his part, Mr. Ready admitted that
while he did receive a request from Manuel Singson of PAWI to withdraw from the
motion of judgment, the request unfortunately came too late. In an explanatory telex, Mr.
Ready told Mr. Singson that under American Judicial Procedures when a motion for
judgment had already been filed a counsel would not be permitted to withdraw
unilaterally without a court order. From the time the stipulation for judgment was entered
into on 26 April 1982 until the certificate of finality of judgment was issued by the
California court on 07 September 1982, no notification was issued by PAWI to FASGI
regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by
Mr. Ready who purportedly acted in collusion with FASGI, it should have aptly raised the
issue before the forum which issued the judgment in line with the principle of
international comity that a court of another jurisdiction should refrain, as a matter of
propriety and fairness, from so assuming the power of passing judgment on the
correctness of the application of law and the evaluation of the facts of the judgment
issued by another tribunal.[21]
Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must
be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where
judgment is rendered,[22] or that which would go to the jurisdiction of the court or would
deprive the party against whom judgment is rendered a chance to defend the action to
which he has a meritorious case or defense. In fine, intrinsic fraud, that is, fraud which
goes to the very existence of the cause of action - such as fraud in obtaining the
consent to a contract - is deemed already adjudged, and it, therefore, cannot militate
against the recognition or enforcement of the foreign judgment. [23]
Even while the US judgment was against both FPS and PAWI, FASGI had every
right to seek enforcement of the judgment solely against PAWI or, for that matter, only
against FPS.FASGI, in its complaint, explained:
"17. There exists, and at all times relevant herein there existed, a unity of interest and
ownership between defendant PAWI and defendant FPS, in that they are owned and
controlled by the same shareholders and managers, such that any individuality and
separateness between these defendants has ceased, if it ever existed, and defendant
FPS is the alter ego of defendant PAWI. The two entities are used interchangeably by
their shareholders and managers, and plaintiff has found it impossible to ascertain
with which entity it is dealing at any one time. Adherence to the fiction of separate
existence of these defendant corporations would permit an abuse of the corporate
privilege and would promote injustice against this plaintiff because assets can easily
be shifted between the two companies thereby frustrating plaintiff's attempts to collect
on any judgment rendered by this Court."[24]
Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and
FPS to be "joint and several" or solidary. The enforcement of the judgment against
PAWI alone would not, of course, preclude it from pursuing and recovering whatever
contributory liability FPS might have pursuant to their own agreement.
PAWI would argue that it was incumbent upon FASGI to first return the second and
the third containers of defective wheels before it could be required to return to FASGI
the purchase price therefor,[25] relying on their original agreement (the "Transaction").
[26]
Unfortunately, PAWI defaulted on its covenants thereunder that thereby occasioned
the subsequent execution of the supplemental settlement agreement. This time the
parties agreed, under paragraph 3.4(e) [27] thereof, that any further default by PAWI would
release FASGI from any obligation to maintain, store or deliver the rejected wheels. The
June 8, 2000
WILSON ONG CHING KIAN CHUNG and THE DIRECTOR OF THE NATIONAL
LIBRARY, petitioners,
vs.
CHINA NATIONAL CEREALS OIL AND FOODSTUFFS IMPORT AND EXPORT CORP.,
CEROILFOOD SHANDONG CEREAL AND OILS and BENJAMIN IRAO,
JR., respondents.
DECISION
BUENA, J.:
This is an appeal by way of a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure of the Decision 1 in Civil Case No. 94-68836 dated November 20,
1997 of the Regional Trial Court, Branch 33, Manila, which rendered a judgment on the
pleadings against herein petitioners, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs, and against defendant:
1. Decreeing the cancellation or annulment of the Copyrighted Registration No. 0-93-491 of
defendant WILSON ONG;
2. Directing defendant Director of the National Library to effect the cancellation or
annulment of the Copyrighted Registration No. 0-93-491 of defendant WILSON ONG; and
Damages cannot be awarded to Plaintiffs as no evidence was presented to substantiate
their claims.
With costs against defendant WILSON ONG.
SO ORDERED. 2
The antecedent facts are undisputed.
On September 16, 1993, petitioner Wilson Ong Ching Kian Chuan, doing business under
the firm name of C.K.C. Trading, filed a Complaint for Infringement of Copyright with prayer
for writ of injunction before the Regional Trial Court, Branch 94 of Quezon City (hereinafter
Quezon City Court) against Lorenzo Tan, doing business under the firm name Mcmaster
International Sales, and docketed as Q-93-17628. On the same day, said court issued a
temporary restraining order enjoining the defendant, his distributors and retailers from
selling vermicelli (sotanghon) using the plaintiffs copyrighted cellophane wrapper with the
two-dragons designed label, and setting the hearing of the injunctive relief for September
21, 1993.
On October 13, 1993, the Quezon City Court issued a Resolution which granted a writ of
preliminary injunction in favor of the petitioner, denied therein defendants application for a
writ of preliminary injunction and, issues having been joined, set the case for pre-trial on
November 12, 1993. On December 15, 1993, the Quezon City Court denied defendants
motion for dissolution of the writ off preliminary injunction.
On January 5, 1994, the China National Cereals Oils & Foodstuffs Import and Export
Corporation (CEROILFOOD SHANDONG), and Benjamin Irao, Jr., as representative and
attorney-in-fact of CEROILFOOD SHANDONG, herein respondents, filed a complaint 3 for
Annulment/Cancellation of Copyrighted Certificate No. Q-93-491 and damages with prayer
for restraining order/writ of preliminary injunction before the Regional Trial Court of Manila,
(hereinafter Manila Court) against Wilson Ong Ching Kian Chuan, doing business under the
firm name and style C.K.C. Trading and the Director of the National Library, docketed as
Civil Case No. 94-68836.
On January 7, 1994, Judge Rodolfo G. Palattao of the Manila Court issued a temporary
restraining order 4enjoining petitioner from using his copyrighted labels and selling his
vermicelli products which is similar to that of respondents. On January 14, 1994, petitioner
filed a motion to dissolve temporary restraining order 5 praying that the complaint be
dismissed on the following grounds: 1.) litis pendentia, 2.) the issue involved is one of
copyright under PD No. 49 and does not involve trademarks under Republic Act 166, 3.)
courts of co-equal and coordinate jurisdiction cannot interfere with the orders of other courts
having the same power and jurisdiction, 4.) plaintiff CEROILFOOD SHANDONG, being a
foreign corporation and with no license to do business in the Philippines, has no legal
capacity to sue, and 5.) courts should not issue injunctions which would in effect dispose of
the main case without trial.
On January 27, 1994, the Manila Court issued an Order 6 granting a writ of preliminary
injunction in favor of respondents and denying petitioners motion to dismiss.
On January 31, 1994, petitioner filed before the Court of Appeals a petition
for certiorari docketed as CA G.R. SP No. 33178, seeking for the annulment of the
January 27, 1994 Order of the Manila Court.
On July 22, 1994, after the parties have expounded their respective positions by way of
their comment, reply and rejoinder, the Court of Appeals rendered its Decision, 7 the
dispositive portion of which reads:
WHEREFORE, the instant petition is hereby GRANTED, and as prayed for by petitioner, the
Order dated January 27, 1994 issued in Civil Case 94-68836 by Branch 33, Regional Trial
Court, National Capital Judicial Region, Manila, is hereby ANNULLED and SET ASIDE,
although the prayer for dismissal of the complaint in Manila may be pursued before said
court during the proceedings.
In the same Decision, the Court of Appeals ruled that the case was dismissible on grounds
of litis pendentia, multiplicity of suits, and forum shopping.
On September 5, 1994, the Court of Appeals denied respondents motion for
reconsideration. 8 The Court of Appeals Decision became final on October 3, 1994. Entry of
Judgment 9 was made on November 15, 1994.
On November 21, 1994, petitioner filed a motion 10 praying for the dismissal of the Manila
case on the strength of the findings of the Court of Appeals, particularly on forum
shopping. In an Order 11 dated March 8, 1995, the Manila Court held in abeyance the
resolution of the motion to dismiss until further reception of evidence, stating therein that the
dispositive portion of the Court of Appeals Decision did not order the dismissal of the case.
In the meantime, respondents filed a motion to declare petitioners in default for failing to file
an Answer despite the March 8 Order, which motion was opposed by petitioners, there
being at that time a pending motion to dismiss which the court a quo refused to resolve on
the merits.
In an Order 12 dated July 19, 1996, the Manila court denied the motion to declare petitioners
in default, admittedmotu proprio the motion to dismiss filed by petitioner as its answer, and
directed the parties to submit their respective pre-trial briefs.
On September 17, 1996, petitioner filed a Motion for the Issuance of a Writ of
Execution 1 praying that a motion for execution dismissing the Manila case be issued, and
citing Atty. Benjamin Irao, Jr., counsel of CEROILFOOD SHANDONG and his co-counsel,
Atty. Antonio Albano, guilty of forum shopping, pursuant to the Decision of the Court of
Appeals in CA-G.R. SP. No. 33178.
On January 23, 1997, respondents filed before the Manila court a Supplement To Motion
For Judgment On The Pleadings, claiming that petitioner failed to tender an issue. 14
On November 20, 1997, Judge Rodolfo G. Palattao of the Manila Court rendered a
Judgment on the Pleadings in favor of respondents, and ruled that litis pendentia,
multiplicity of suits, and forum shopping were not present in the case.
Hence, the present appeal on pure questions of law.
Petitioners raise the following issues:
I
Whether or not the legal pronouncements of the Court of Appeals in CA-G.R. SP No. 33178
that the Manila case is dismissible on grounds of litis pendentia, multiplicity of suits and
forum shopping constitute the Law of the Case.
II
Whether or not the Regional Trial Judge of Branch 33, Manila erred in not applying the law
of the case.
III
Whether or not the court a quo can review the legal conclusions of an appellate court in the
same case, on issues squarely submitted to and passed upon by the appellate court under
identical set of facts and circumstances obtaining in the court a quo.
IV
Whether or not the court a quo erred in motu proprio considering a motion to dismiss as the
answer to the complaint and, thereafter, render a judgment on the pleadings on the ground
that the motion to dismiss did not tender an issue. 15
In support thereof, petitioners quote the ruling of the Court of Appeals on the issue of
whether there was litis pendentia and multiplicity of suits in the present case, as follows:
The Manila court should have considered also that Civil Case Q-93-17628 involves
practically the same parties, same subject-matter and same relief as in Civil Case 0-9468836. Petitioner filed the first case on September 16, 1993, for INFRINGEMENT OF HIS
REGISTERED COPYRIGHT, which covers the cellophane wrapper that he uses in
packaging the vermicelli which he imports from the CHINA NATIONAL CEREALS OILS &
FOODSTUFFS IMPORT AND EXPORT CORPORATION BASED IN BEIJING, CHINA, the
main or the principal of private respondent CEROILFOOD SHANDONG, the latter being the
branch of CEROILFOOD in Quingdao, China, and of which in Civil Case Q-93-17628,
LORENZO TAN avers in his answer he is the exclusive and sole distributor. In Civil Case
94-68836 subsequently filed in Manila, on January 5, 1994, LORENZO TAN admitted that
he is the sole distributor of plaintiff China National Cereals Oil and Foodstuffs Import and
Export Corporation of the latters PAGODA BRAND vermicelli products. Atty. Benjamin Irao,
Jr., the attorney of private respondents, also the attorney-in-fact of Ceroilfood Shandong,
admitted that his principal does not do business in the Philippines, and named LORENZO
TAN as his principals exclusive distributor of said product in the Philippines. Thus,
Lorenzo Tan in both Civil Cases Q-93-17628 and 94-68836 appears as principal defendant
in the first, and as sole distributor of Cereal Food Shandong, in the second. Indicatively, he
is defending and complaining substantively the same rights and interests in both cases, and
in effect there is identity of parties representing the same interests. While it is against TAN
with whom the QC RTC issued an injunction, that writ should also apply to CEROILFOOD
SHANDONG, as Tan is its exclusive and sole distributor in the Philippines, as private
respondent corporation does business in the Philippines through TAN who imports his
vermicelli wholly from said foreign corporation. And most importantly, TAN asserts rights to
the trademark PAGODA, also allegedly owned by CEROILFOOD between TAN and
CEROILFOOD SHANDONG that he is its corporate distributor. Also in 93-17628,
petitioners prayer for injunction is based on his registered copyright certificate, while TAN
averred in his answer thereon that petitioners copyright should be annulled and cancelled,
and also prayed for injunction. In 94-68836, private respondent CEROILFOOD
SHANDONG, as plaintiff, also prayed for ANNULMENT AND CANCELLATION OF
COPYRIGHT CERTIFICATE No. 0-93-491 WITH DAMAGES AND PRAYER FOR
RESTRAINING ORDER/WRIT OF PRELIMINARY INJUNCTION. As can well be seen from
those pertinent allegations/averments/prayers in both cases, they are identical with each
other. They involved one and the same CERTIFICATE OF COPYRIGHT REGISTRATION.
Though the first case is for INFRINGEMENT of copyright registration, while the second is
for ANNULMENT AND CANCELLATION of the same copyright, since the first involves a
breach, infraction, transgression, and the second for invalidation, discontinuance,
termination and suppression of the same copyright certificate, what the first seeks to
preserve is the exclusive use of the copyright, and the second seeks to terminate the very
use of the same copyright by the registrant/owner. Though the quest of petitioner and
private respondents in the two cases are aimed towards different ends the first to uphold
the validity and effectiveness of the same copyright, the second is merely a consequence of
the first, the real matter in controversy can be fully determined and resolved before the
Quezon City court, and would render the Manila case a surplus age and also constitutes
multiplicity of suits and dismissible on that ground, although such dismissal should be
considered as without prejudice to the continuance of the proceedings before the Quezon
City court. (pp. 8-10, CA Decision, Annex B of the Petition)
On the issue of forum shopping, the Court of Appeals ruled further, thus:
Finally, the Manila court should also have considered forum shopping as a third drawback to
private respondents cause. It is a term originally used to denominate a litigants privilege of
choosing the venue of his action where the law allows him to do so, or of an election of
remedies of one of two or more co-existing rights. In either of which situations, the litigant
actually shops for a forum of his action. However, instead of making a choice of the forum of
their actions, litigants through the encouragement of their lawyers, file their actions on all
available courts, or invoke irrelevant remedies simultaneously, or even file actions one after
the other, a practice which had not only resulted conflicting adjudications among different
courts, confusion inimical to an orderly administration of justice and created extreme
inconvenience to some of the parties to the action. And thus it has been held in Villanueva
vs. Andres, 172 SCRA 876, that forum shopping applies 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 forum. . . .
Observedly, Attys. IRAO and ALBANO, who are TANs lawyers in Quezon City, are also
private respondents lawyers in Manila. ATTY. IRAO who entered his appearance as
counsel for private respondents in the Manila case, is also the authorized representative
and attorney-in-fact of private respondent corporation in the Manila case. While Atty. Irao
withdrew as counsel of TAN in the Quezon City, that did not remove the case filed in
Manila outside the sphere of the rule on forum shopping. (pp. 10-11, CA Decision, Annex
B of the Petition).
Petitioners contend that the foregoing conclusions of fact and law of the Court of Appeals
are correct and should not be disturbed, especially since the decision of the Court of
Appeals had already become final and entered in the Books of Judgment; that the parties to
the case and the Regional Trial Judge in Branch 33, Manila are bound by the said
conclusions of fact and law and the same should not be reopened on remand of the case;
and that it is not within the Trial Judges discretion to take exception to, much less overturn,
any factual or legal conclusions laid down by the Court of Appeals in its verdict and to
dispose of the case in a manner diametrically opposed thereto, citing the case of PNB vs.
Noahs Ark Sugar Refinery, 226 SCRA 36, 48.
Petitioners further allege that the acts of the trial judge suffer from procedural infirmity: and
that it makes no sense for the trial judge to refuse to resolve the motion to dismiss on the
merits; to motu proprio consider the motion to dismiss as the answer to the complaint; and
to later rule that the motion to dismiss did not tender an issue and, therefore, a judgment on
the pleadings is in order. Petitioners also aver that a motion to dismiss is not a responsive
pleading (citing Prudence Realty Development Corporation vs. CA, 231 SCRA 379); that at
the time the trial judge considered the motion to dismiss to be the answer to the complaint,
he knew very well, or at least should have known that the motion to dismiss did not tender
an issue for indeed, it is not within the province of the motion to admit or deny the
allegations of the complaint, and there being no legitimate answer and no real joinder of
issues, the rendition of the subject Judgment on the Pleadings becomes suspect. According
to petitioners, in deviating from the usual procedure, the court a quo gave undue benefit and
advantage to the respondents at the expense of herein petitioners; and that the explanation
given by the trial judge that the dispositive portion of the Court of Appeals decision did not
expressly order him to dismiss the case is flimsy and untenable.
On the other hand, respondents assert that the doctrine of law of the case is not applicable
to the present case because the Court of Appeals never ordered the dismissal of the case
and that the Order of the Manila Court dated January 27, 1994 was annulled and set aside
only insofar as the preliminary injunction is concerned. Respondents cite the case
of Magdalena Estate, Inc. vs. Caluag, 11 SCRA 333 which ruled that the deficiencies in the
dispositive part of the decision cannot be supplied by any finding or opinion found in the
body of the decision. Respondents also allege that while petitioner Wilson Ong had
belatedly faulted the Court below in considering his motion to dismiss as his answer, he
never questioned the correctness of the findings of the court a quo in the assailed decision.
After a review of the records of the case and an examination of the pleadings filed by the
parties, the Court finds the petition to be meritorious.
Being interrelated, the first, second and third issues shall be discussed jointly.
Indeed, the court a quo erred in not resolving the petitioners motion to dismiss in
accordance with the decision of the Court of Appeals which found that The Manila court
should have considered also that Civil Case Q-93-17628 involves practically the same
parties, same subject-matter and same relief as in Civil Case 94-68836; that the real
matter in controversy can be fully determined and resolved before the Quezon City court
and would render the Manila case a surplusage and also constitutes multiplicity of suits and
dismissible on that ground, although such dismissal should be considered as without
prejudice to the continuance of the proceedings before the Quezon City court; and that the
Manila court should also have considered forum shopping as a third drawback to private
respondents cause.
While the Court of Appeals stated in the dispositive portion of its decision that the prayer for
dismissal of the complaint in Manila may be pursued before said court during the
proceedings, it is clear from the body of the Court of Appeals Decision that the case before
the Manila court should be dismissed on grounds of litis pendentia, and forum shopping.
While the general rule is that the portion of a decision that becomes the subject of execution
is that ordained or decreed in the dispositive part thereof, there are exceptions to this rule.
The exceptions where the dispositive part of the judgment does not always prevail over the
body of the opinion are:
(a) where there is ambiguity or uncertainty, the body of the opinion may be referred to for
purposes of construing the judgment because the dispositive part of a decision must find
support from the decisionsratio decidendi; 16
(b) where extensive and explicit discussion and settlement of the issue is found in the body
of the decision.17
Considering the circumstances of the instant case, the Court finds that the exception to the
general rule applies to the instant case. Since the statement of the Court of Appeals
regarding the prayer for the dismissal of the case seemingly gave the Manila court the
discretion to dismiss not to dismiss Civil Case No. 94-68836, the Manila court should have
referred to the body of the decision for purposes of construing the issue of whether or not
the complaint should be dismissed, because the dispositive part of a decision must find
support from the decisionsratio decidendi. Findings of the court are to be considered in the
interpretation of the dispositive portion of the judgment. 18 Moreover, extensive and explicit
discussion and settlement of the issues are found in the body of the Court of Appeals
decision so that it is grave error for the court a quo to rule again, as it did, on the issues
of litis pendentia and forum shopping in its decision, and to overturn that of the Court of
Appeals, thus:
The argument of Defendant Ong in his motion for execution that the case at bench should
now be dismissed on the grounds of forum shopping and litis pendentia as allegedly ruled
by the Court of Appeals, does not impress this Court. For while the appellate court urged
this Court to consider litis pendentia and forum shopping in the trial resolution of the case at
bench, nowhere in its (CA) decision could it be deduced that this Court is mandated to
dismiss the case on these precise grounds. The dispositive portion of the decision does not
contain such a mandate. 19
In Viva Productions, Inc. vs. Court of Appeals, 20 this Court set aside the decision of the
Makati court and declared null and void all orders of the RTC of Makati after ruling that:
Thus we find grave abuse of discretion on the part of the Makati court, being a mere coequal of the Paraaque court, in not giving due deference to the latter before which the
issue of the alleged violation of the sub-judice rule had already been raised and submitted.
In such instance, the Makati court, if it was wary of dismissing the action outrightly
under administrative Circular No. 04-94, should have, at least ordered the
consolidation of its case with that of the Paraaque court, which had first acquired 31
of the Revised Rules of Court. (emphasis ours.)
The Quezon City court and the Manila court have concurrent jurisdiction over the case.
However, when the Quezon City court acquired jurisdiction over the case, it excluded all
other courts of concurrent jurisdiction from acquiring jurisdiction over the same. The Manila
court is, therefore, devoid of jurisdiction over the complaint filed resulting in the herein
assailed decision which must perforce be declared null and void. To hold otherwise would
be to risk instances where courts of concurrent jurisdiction might have conflicting orders. 21
WHEREFORE, the assailed decision of the Regional Trial Court of Manila, Branch 33 in
Civil Case No. 94-68836 isANNULLED and SET ASIDE. Said case is ordered dismissed
without prejudice to the continuance of the proceedings before the Quezon City court where
Civil Case No. Q-93-17628 is pending.
SO ORDERED.
Bellosillo, Mendoza, Quisumbing and De Leon, Jr., JJ., concur.
SECOND DIVISION
contract entered into by and between both parties on February 26, 1983
whereby the private respondent undertook to supply the petitioner FOUR
THOUSAND THREE HUNDRED (4,300) metric tons of oil well cement. In
consideration therefor, the petitioner bound itself to pay the private
respondent the amount of FOUR HUNDRED SEVENTY-SEVEN THOUSAND
THREE HUNDRED U.S. DOLLARS ($477,300.00) by opening an irrevocable,
divisible, and confirmed letter of credit in favor of the latter. The oil well
cement was loaded on board the ship MV SURUTANA NAVA at the port of
Surigao City, Philippines for delivery at Bombay and Calcutta, India.
However, due to a dispute between the shipowner and the private
respondent, the cargo was held up in Bangkok and did not reach its point of
destination. Notwithstanding the fact that the private respondent had
already received payment and despite several demands made by the
petitioner, the private respondent failed to deliver the oil well cement.
Thereafter, negotiations ensued between the parties and they agreed that
the private respondent will replace the entire 4,300 metric tons of oil well
cement with Class G cement cost free at the petitioners designated port.
However, upon inspection, the Class G cement did not conform to the
petitioners specifications. The petitioner then informed the private
respondent that it was referring its claim to an arbitrator pursuant to Clause
16 of their contract which stipulates:
Except where otherwise provided in the supply order/contract all questions
and disputes, relating to the meaning of the specification designs, drawings
and instructions herein before mentioned and as to quality of workmanship
of the items ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply order/contract
design, drawing, specification, instruction or these conditions or otherwise
concerning the materials or the execution or failure to execute the same
during stipulated/extended period or after the completion/abandonment
thereof shall be referred to the sole arbitration of the persons appointed by
Member of the Commission at the time of dispute. It will be no objection to
any such appointment that the arbitrator so appointed is a Commission
employer (sic) that he had to deal with the matter to which the supply or
contract relates and that in the course of his duties as Commissions
employee he had expressed views on all or any of the matter in dispute or
difference.
The arbitrator to whom the matter is originally referred being transferred or
vacating his office or being unable to act for any reason the Member of the
Commission shall appoint another person to act as arbitrator in acordance
with the terms of the contract/supply order. Such person shall be entitled to
proceed with reference from the stage at which it was left by his
predecessor. Subject as aforesaid the provisions of the Arbitration Act, 1940,
No. 11/19
dated 28.2.1983
2.
- - - US $ 477,300.00
3,881.00
by the claimant
4.
- - - US$
- - - US $
1,252.82
- - - US $ 417,169.95
- - - US $ 899,603.77
In addition to the above, the respondent would also be liable to pay to the
claimant the interest at the rate of 6% on the above amount, with effect
from 24.7.1988 upto the actual date of payment by the Respondent in full
settlement of the claim as awarded or the date of the decree, whichever is
earlier.
I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the
expenses on Arbitration, legal expenses, stamps duly incurred by the
claimant. The cost will be shared by the parties in equal proportion.
Pronounced at Dehra Dun to-day, the 23rd of July 1988.[2]
To enable the petitioner to execute the above award in its favor, it filed a
Petition before the Court of the Civil Judge in Dehra Dun, India (hereinafter
referred to as the foreign court for brevity), praying that the decision of the
arbitrator be made the Rule of Court in India. The foreign court issued
notices to the private respondent for filing objections to the petition. The
private respondent complied and sent its objections dated January 16, 1989.
Subsequently, the said court directed the private respondent to pay the filing
fees in order that the latters objections could be given consideration.
Instead of paying the required filing fees, the private respondent sent the
following communication addressed to the Civil Judge of Dehra Dun:
The Civil Judge
Dehra Dun (U.P.) India
Re: Misc. Case No. 5 of 1989
M/S Pacific Cement Co.,
Inc. vs. ONGC Case
Sir:
1.
1989.
2.
Please inform us how much is the court fee to be paid. Your letter
did not mention the amount to be paid.
3.
Kindly give us 15 days from receipt of your letter advising
us how much to pay to comply with the same.
(2) any other question, claim, right or thing whatsoever, in any way arising
out of or relating to the supply order/contract design, drawing, specification,
instruction or these conditions; or
(3) otherwise concerning the materials or the execution or failure to execute
the
same
during
stipulated/extended
period
or
after
the
completion/abandonment thereof.
The first and second categories unmistakably refer to questions and disputes
relating to the design, drawing, instructions, specifications or quality of the
materials of the supply/order contract. In the third category, the clause,
execution or failure to execute the same, may be read as execution or
failure to execute the supply order/contract. But in accordance with the
doctrine of noscitur a sociis, this reference to the supply order/contract must
be construed in the light of the preceding words with which it is associated,
meaning to say, as being limited only to the design, drawing, instructions,
specifications or quality of the materials of the supply order/contract. The
non-delivery of the oil well cement is definitely not in the nature of a dispute
arising from the failure to execute the supply order/contract design, drawing,
instructions, specifications or quality of the materials. That Clause 16 should
pertain only to matters involving the technical aspects of the contract is but
a logical inference considering that the underlying purpose of a referral to
arbitration is for such technical matters to be deliberated upon by a person
possessed with the required skill and expertise which may be otherwise
absent in the regular courts.
This Court agrees with the appellate court in its ruling that the non-delivery
of the oil well cement is a matter properly cognizable by the regular courts
as stipulated by the parties in Clause 15 of their contract:
All questions, disputes and differences, arising under out of or in connection
with this supply order, shall be subject to theexclusive jurisdiction of the
court, within the local limits of whose jurisdiction and the place from which
this supply order is situated.[14]
The following fundamental principles in the interpretation of contracts and
other instruments served as our guide in arriving at the foregoing
conclusion:
"ART. 1373. If some stipulation of any contract should admit of several
meanings, it shall be understood as bearing that import which is most
adequate to render it effectual."[15]
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the
basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall
be a part of the decree. The plaintiff shall also be entitled to get from
defendant ( US$ 899, 603.77 (US$ Eight Lakhs ninety nine thousand six
hundred and three point seventy seven only) alongwith 9% interest per
annum till the last date of realisation.[24]
As specified in the order of the Civil Judge of Dehra Dun, Award Paper No.
3/B-1 shall be a part of the decree. This is a categorical declaration that the
foreign court adopted the findings of facts and law of the arbitrator as
contained in the latters Award Paper. Award Paper No. 3/B-1, contains an
exhaustive discussion of the respective claims and defenses of the parties,
and the arbitrators evaluation of the same. Inasmuch as the foregoing is
deemed to have been incorporated into the foreign courts judgment the
appellate court was in error when it described the latter to be a simplistic
decision containing literally, only the dispositive portion.[25]
The constitutional mandate that no decision shall be rendered by any court
without expressing therein clearly and distinctly the facts and the law on
which it is based does not preclude the validity of memorandum decisions
which adopt by reference the findings of fact and conclusions of law
contained in the decisions of inferior tribunals. In Francisco v. Permskul,[26]
this Court held that the following memorandum decision of the Regional Trial
Court of Makati did not transgress the requirements of Section 14, Article
VIII of the Constitution:
MEMORANDUM DECISION
After a careful perusal, evaluation and study of the records of this case, this
Court hereby adopts by reference the findings of fact and conclusions of law
contained in the decision of the Metropolitan Trial Court of Makati, Metro
Manila, Branch 63 and finds that there is no cogent reason to disturb the
same.
WHEREFORE,
judgment
appealed
toto.[27] (Underscoring supplied.)
from
is
hereby
affirmed in
This Court had occasion to make a similar pronouncement in the earlier case
of Romero v. Court of Appeals,[28] where the assailed decision of the Court
of Appeals adopted the findings and disposition of the Court of Agrarian
Relations in this wise:
We have, therefore, carefully reviewed the evidence and made a reassessment of the same, and We are persuaded, nay compelled, to affirm
the correctness of the trial courts factual findings and the soundness of its
conclusion. For judicial convenience and expediency, therefore, We hereby
adopt by way of reference, the findings of facts and conclusions of the
court a quo spread in its decision, as integral part of this Our
decision.[29] (Underscoring supplied)
Hence, even in this jurisdiction, incorporation by reference is allowed if only
to avoid the cumbersome reproduction of the decision of the lower courts, or
portions thereof, in the decision of the higher court.[30] This is particularly
true when the decision sought to be incorporated is a lengthy and thorough
discussion of the facts and conclusions arrived at, as in this case, where
Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages.
Furthermore, the recognition to be accorded a foreign judgment is not
necessarily affected by the fact that the procedure in the courts of the
country in which such judgment was rendered differs from that of the courts
of the country in which the judgment is relied on.[31] This Court has held
that matters of remedy and procedure are governed by the lex fori or the
internal law of the forum.[32] Thus, if under the procedural rules of the Civil
Court of Dehra Dun, India, a valid judgment may be rendered by adopting
the arbitrators findings, then the same must be accorded respect. In the
same vein, if the procedure in the foreign court mandates that an Order of
the Court becomes final and executory upon failure to pay the necessary
docket fees, then the courts in this jurisdiction cannot invalidate the order of
the foreign court simply because our rules provide otherwise.
The private respondent claims that its right to due process had been
blatantly violated, first by reason of the fact that the foreign court never
answered its queries as to the amount of docket fees to be paid then refused
to admit its objections for failure to pay the same, and second, because of
the presumed bias on the part of the arbitrator who was a former employee
of the petitioner.
Time and again this Court has held that the essence of due process is to be
found in the reasonable opportunity to be heard and submit any evidence
one may have in support of ones defense[33] or stated otherwise, what is
repugnant to due process is the denial of opportunity to be heard.[34] Thus,
there is no violation of due process even if no hearing was conducted, where
the party was given a chance to explain his side of the controversy and he
waived his right to do so.[35]
In the instant case, the private respondent does not deny the fact that it was
notified by the foreign court to file its objections to the petition, and
subsequently, to pay legal fees in order for its objections to be given
and
PHILIPPINE
NATIONAL
CONSTRUCTION
DECISION
DE LEON, JR., J.:
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 Decision 2 dated October 14,1991 of
the Regional Trial Court of Pasig, Metro Manila, 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 private respondent Philippine National Construction Corporation.
The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the
laws of Malaysia while private respondent Philippine National Construction Corporation is a
corporation duly incorporated and existing under Philippine laws.
It appears that sometime in 1983, petitioner initiated a suit for collection against private
respondent, then known as 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 Corporation of the
Philippines. 3
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. 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 against the private respondent which is also
designated therein as the 2nd Defendant.
The judgment reads in full:
SUIT NO. C638 of 1983
Between
Asiavest Merchant Bankers (M) Berhad
Plaintiffs
And
1. Asiavest -CDCP Sdn. Bhd.
Defendant
Plaintiffs
And
1. Asiavest -CDCP Sdn. Bhd.
2. Construction & Development Corporation of
the Philippines
Defendants
BEFORE
THE
REGISTRAR
SENIOR
ASSISTANT
IN
CHAMBERS
ORDER
Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this
action AND UPON READING the 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
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 ORDERED that the 2nd
Defendant do pay the Plaintiffs the costs of suit at $350.00AND IT WAS FURTHER
ORDERED that the plaintiffs be at liberty to apply for payment of interest AND upon the
application of the Plaintiffs for payment of interest coming on for hearing on the 1st day of
August in the presence of Mr. Palpanaban Devarajoo of 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 attempts 6 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
claims 10 and therein raised the grounds it brought up in its motion to dismiss. In its Reply
filed 11 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 courts
jurisdiction through its appointed counsel, Mr. Khay Chay Tee. Furthermore, private
respondents counsel waived any and all objections to the High Courts jurisdiction in a
pleading filed before the court.
In due time, the trial court rendered its Decision dated October 14, 1991 dismissing
petitioners 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 MALAYSIA 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 petitioners 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; 19 that 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; 20 that
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 petitioners counsel in Malaysia indicating the costs
for prosecuting and implementing the Malaysian High Courts Judgment; 27
(e) Letters between petitioners 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
attorneys fees paid by and due from petitioner; 29
(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioners
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 Courts 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 petitioners Malaysian Counsel to private
respondents 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. Calupitans 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. Abelardos
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. 42Ultimately, 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 respondents 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
jurisprudence 46 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 courts conclusion that the
conditional appearance of private respondents 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 courts 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
renderedORDERING private 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.
ENGINEERING
CONSULTANTS
CO.,
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the April 18, 2001 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
60827, and the July 25, 2001 Resolution2 denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a
Japanese consultancy firm providing technical and management support in the
infrastructure projects of foreign governments, 3 entered into an Independent Contractor
Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently
residing in the Philippines.4 The agreement provides that respondent was to extend
professional services to Nippon for a year starting on April 1, 1999. 5 Nippon then assigned
respondent to work as the project manager of the Southern Tagalog Access Road (STAR)
Project in the Philippines, following the companys consultancy contract with the Philippine
Government.6
When the STAR Project was near completion, the Department of Public Works and
Highways (DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this
time for the detailed engineering and construction supervision of the Bongabon-Baler Road
Improvement (BBRI) Project.7 Respondent was named as the project manager in the
contracts Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippons general manager for its
International Division, informed respondent that the company had no more intention of
automatically renewing his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000, just in time for the ICAs
expiry.9
Threatened with impending unemployment, respondent, through his lawyer, requested a
negotiation conference and demanded that he be assigned to the BBRI project. Nippon
insisted that respondents contract was for a fixed term that had already expired, and
refused to negotiate for the renewal of the ICA.10
As he was not able to generate a positive response from the petitioners, respondent
consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and
damages with the Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been perfected in Japan and
executed by and between Japanese nationals, moved to dismiss the complaint for lack of
jurisdiction. They asserted that the claim for improper pre-termination of respondents ICA
could only be heard and ventilated in the proper courts of Japan following the principles
of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippons request for the
replacement of Kitamura by a certain Y. Kotake as project manager of the BBRI Project. 13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank14 that
matters connected with the performance of contracts are regulated by the law prevailing at
the place of performance,15 denied the motion to dismiss.16 The trial court subsequently
denied petitioners motion for reconsideration,17 prompting them to file with the appellate
court, on August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CAG.R. SP No. 60205].18 On August 23, 2000, the CA resolved to dismiss the petition on
procedural groundsfor
lack
of statement of
material dates
and
for
19
insufficient verification and certification against forum shopping. An Entry of Judgment was
later issued by the appellate court on September 20, 2000. 20
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still
within the reglementary period, a second Petition for Certiorari under Rule 65 already
stating therein the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the same issues as those in the
first, was docketed as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the assailed April
18, 2001 Decision 22finding no grave abuse of discretion in the trial courts denial of the
motion to dismiss. The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in the pleadings was the
validity of the written agreement put in issue. The CA thus declared that the trial court was
correct in applying instead the principle of lex loci solutionis.23
Petitioners motion for reconsideration was subsequently denied by the CA in the assailed
July 25, 2001 Resolution.24
Remaining steadfast in their stance despite the series of denials, petitioners instituted the
instant Petition for Review on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF
THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN
TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE
NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE
INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the subject matter
jurisdiction of Philippine courts in civil cases for specific performance and damages
involving contracts executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the state of the most significant
relationship rule, or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised
by the respondent.
Kitamura contends that the finality of the appellate courts decision in CA-G.R. SP No.
60205 has already barred the filing of the second petition docketed as CA-G.R. SP No.
60827 (fundamentally raising the same issues as those in the first one) and the instant
petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the
petitions defective certification of non-forum shopping, it was a dismissal without
prejudice.27 The same holds true in the CAs dismissal of the said case due to defects in the
formal requirement of verification28 and in the other requirement in Rule 46 of the Rules of
Court on the statement of the material dates. 29 The dismissal being without prejudice,
petitioners can re-file the petition, or file a second petition attaching thereto the
appropriate verification and certificationas they, in fact didand stating therein the
material dates, within the prescribed period 30 in Section 4, Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the merits
and leaves the parties free to litigate the matter in a subsequent action as though the
dismissed action had not been commenced. In other words, the termination of a case not on
the merits does not bar another action involving the same parties, on the same subject
matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res judicata effect,
and even if petitioners still indicated in the verification and certification of the
second certiorari petition that the first had already been dismissed on procedural
grounds,33 petitioners are no longer required by the Rules to indicate in their certification of
non-forum shopping in the instant petition for review of the second certiorari petition, the
status of the aforesaid first petition before the CA. In any case, an omission in the certificate
of non-forum shopping about any event that will not constitute res judicata and litis
pendentia, as in the present case, is not a fatal defect. It will not warrant the dismissal and
nullification of the entire proceedings, considering that the evils sought to be prevented by
the said certificate are no longer present. 34
The Court also finds no merit in respondents contention that petitioner Hasegawa is only
authorized to verify and certify, on behalf of Nippon, the certiorari petition filed with the CA
and not the instant petition. True, the Authorization 35 dated September 4, 2000, which is
attached to the second certiorari petition and which is also attached to the instant petition
for review, is limited in scopeits wordings indicate that Hasegawa is given the authority to
sign for and act on behalf of the company only in the petition filed with the appellate court,
and that authority cannot extend to the instant petition for review. 36 In a plethora of cases,
however, this Court has liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment of the requirements have
been made.37 Given that petitioners herein sufficiently explained their misgivings on this
point and appended to their Reply38 an updated Authorization39 for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the same as sufficient
compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the verification
and certification. As respondent pointed out, and to which we agree, Hasegawa is truly not
authorized to act on behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001 Authorization were issued only by
Nippons president and chief executive officer, not by the companys board of directors. In
not a few cases, we have ruled that corporate powers are exercised by the board of
directors; thus, no person, not even its officers, can bind the corporation, in the absence of
authority from the board.40 Considering that Hasegawa verified and certified the petition only
on his behalf and not on behalf of the other petitioner, the petition has to be denied pursuant
to Loquias v. Office of the Ombudsman.41 Substantial compliance will not suffice in a matter
that demands strict observance of the Rules. 42 While technical rules of procedure are
designed not to frustrate the ends of justice, nonetheless, they are intended to effect the
proper and orderly disposition of cases and effectively prevent the clogging of court
dockets.43
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to
question the trial courts denial of their motion to dismiss. It is a well-established rule that an
order denying a motion to dismiss is interlocutory, and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The appropriate recourse is to file an
answer and to interpose as defenses the objections raised in the motion, to proceed to trial,
and, in case of an adverse decision, to elevate the entire case by appeal in due
course.44 While there are recognized exceptions to this rule, 45 petitioners case does not fall
among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its
jurisdiction to hear and resolve the civil case for specific performance and damages filed by
the respondent. The ICA subject of the litigation was entered into and perfected in Tokyo,
Japan, by Japanese nationals, and written wholly in the Japanese language. Thus,
petitioners posit that local courts have no substantial relationship to the parties 46following the
[state of the] most significant relationship rule in Private International Law. 47
The Court notes that petitioners adopted an additional but different theory when they
elevated the case to the appellate court. In the Motion to Dismiss 48 filed with the trial court,
petitioners never contended that the RTC is an inconvenient forum. They merely argued
that the applicable law which will determine the validity or invalidity of respondents claim is
that of Japan, following the principles of lex loci celebrationis and lex contractus.49 While
not abandoning this stance in their petition before the appellate court, petitioners
on certiorari significantly invoked the defense of forum non conveniens.50 On petition for
review before this Court, petitioners dropped their other arguments, maintained the forum
non conveniens defense, and introduced their new argument that the applicable principle is
the [state of the] most significant relationship rule. 51
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the
change in theory, as explained in Philippine Ports Authority v. City of Iloilo.52 We only pointed
out petitioners inconstancy in their arguments to emphasize their incorrect assertion of
conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are
involved: jurisdiction, choice of law, and recognition and enforcement of judgments.
Corresponding to these phases are the following questions: (1) Where can or should
litigation be initiated? (2) Which law will the court apply? and (3) Where can the resulting
judgment be enforced?53
Analytically, jurisdiction and choice of law are two distinct concepts. 54 Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will determine the merits of the
case is fair to both parties. The power to exercise jurisdiction does not automatically give a
state constitutional authority to apply forum law. While jurisdiction and the choice of the lex
fori will often coincide, the minimum contacts for one do not always provide the necessary
significant contacts for the other.55 The question of whether the law of a state can be
applied to a transaction is different from the question of whether the courts of that state
have jurisdiction to enter a judgment.56
In this case, only the first phase is at issuejurisdiction. Jurisdiction, however, has various
aspects. For a court to validly exercise its power to adjudicate a controversy, it must have
jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over the
subject matter, over the issues of the case and, in cases involving property, over the res or
the thing which is the subject of the litigation. 57 In assailing the trial courts jurisdiction herein,
petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign
authority which establishes and organizes the court. It is given only by law and in the
manner prescribed by law.58 It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims asserted
therein.59 To succeed in its motion for the dismissal of an action for lack of jurisdiction over
the subject matter of the claim, 60 the movant must show that the court or tribunal cannot act
on the matter submitted to it because no law grants it the power to adjudicate the claims. 61
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is
not properly vested by law with jurisdiction to hear the subject controversy for, indeed, Civil
Case No. 00-0264 for specific performance and damages is one not capable of pecuniary
estimation and is properly cognizable by the RTC of Lipa City. 62What they rather raise as
grounds to question subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the state of the most significant relationship rule.
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the law of the place of the ceremony 63 or the law of the
place where a contract is made.64 The doctrine of lex contractus or lex loci contractus means
the law of the place where a contract is executed or to be performed. 65 It controls the
nature, construction, and validity of the contract 66 and it may pertain to the law voluntarily
agreed upon by the parties or the law intended by them either expressly or implicitly. 67 Under
the state of the most significant relationship rule, to ascertain what state law to apply to a
dispute, the court should determine which state has the most substantial connection to the
occurrence and the parties. In a case involving a contract, the court should consider where
the contract was made, was negotiated, was to be performed, and the domicile, place of
business, or place of incorporation of the parties. 68 This rule takes into account several
contacts and evaluates them according to their relative importance with respect to the
particular issue to be resolved.69
Since these three principles in conflict of laws make reference to the law applicable to a
dispute, they are rules proper for the second phase, the choice of law. 70 They determine
which states law is to be applied in resolving the substantive issues of a conflicts
problem.71 Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law
rules are not only inapplicable but also not yet called for.
Further, petitioners premature invocation of choice-of-law rules is exposed by the fact that
they have not yet pointed out any conflict between the laws of Japan and ours. Before
determining which law should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules. 72 Also, when the law of a foreign
country is invoked to provide the proper rules for the solution of a case, the existence of
such law must be pleaded and proved.73
It should be noted that when a conflicts case, one involving a foreign element, is brought
before a court or administrative agency, there are three alternatives open to the latter in
disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to
assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the
internal law of the forum; or (3) assume jurisdiction over the case and take into account or
apply the law of some other State or States. 74 The courts power to hear cases and
controversies is derived from the Constitution and the laws. While it may choose to
recognize laws of foreign nations, the court is not limited by foreign sovereign law short of
treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial
court of its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because
Section 1, Rule 16 of the Rules of Court does not include it as a ground. 77 Second, whether
a suit should be entertained or dismissed on the basis of the said doctrine depends largely
upon the facts of the particular case and is addressed to the sound discretion of the trial
court.78 In this case, the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual determination; hence, this
conflicts principle is more properly considered a matter of defense. 79
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil
case filed by respondent and the grounds raised by petitioners to assail that jurisdiction are
inappropriate, the trial and appellate courts correctly denied the petitioners motion to
dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.
Antonio Eduardo Nachura, J.
Consuelo Ynares-Santiago, Ma. Alicia Austria-Martine
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing
under the laws of the State of Connecticut, United States of America, and respondent Stockton W.
Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its
representative to negotiate the sale of services in several government projects in the Philippines for
an agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a
service contract with the Republic of the Philippines on behalf of BMSI for the dredging of rivers
affected by the Mt. Pinatubo eruption and mudflows.3
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations
Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and
Walter G. Browning for alleged nonpayment of commissions, illegal termination and breach of
employment contract.4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered
judgment ordering BMSI and RUST to pay respondents money claims. 5 Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed respondents complaint on the
ground of lack of jurisdiction.6 Respondent elevated the case to this Court but 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 respondents claim, it was a foreign corporation duly
licensed to do business in the Philippines and denied entering into any arrangement with respondent
or paying the latter any sum of money. Petitioner also denied combining with BMSI and RUST for the
purpose of assuming the alleged obligation of the said companies.9 Petitioner also referred to the
NLRC decision which disclosed that per the written agreement between respondent and BMSI and
RUST, denominated as "Special Sales Representative Agreement," the rights and obligations of the
parties shall be governed by the laws of the State of Connecticut.10Petitioner 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 petitioners omnibus motion. The trial court
held that the factual allegations in the complaint, assuming the same to be admitted, were sufficient
for the trial court to render a valid judgment thereon. It also ruled that the principle of forum non
conveniens was inapplicable because the trial court could enforce judgment on petitioner, it being a
foreign corporation licensed to do business in the Philippines.15
Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioners motion. Thus, it filed
a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a writ of certiorari and a writ
of injunction to set aside the twin orders of the trial court dated 13 September 2000 and 31 July 2001
and to enjoin the trial court from conducting further proceedings.20
On 28 August 2003, the Court of Appeals rendered the assailed Decision 21 denying the petition for
certiorari for lack of merit. It also denied petitioners motion for reconsideration in the assailed
Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have confined itself to the allegations
in the complaint and should have also considered evidence aliunde in resolving petitioners omnibus
motion, it found the evidence presented by petitioner, that is, the deposition of Walter Browning,
insufficient for purposes of determining whether the complaint failed to state a cause of action. The
appellate court also stated that it could not rule one way or the other on the issue of whether the
corporations, including petitioner, named as defendants in the case had indeed merged together
based solely on the evidence presented by respondent. Thus, it held that the issue should be
threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court
when the latter decided not to desist from assuming jurisdiction on the ground of the inapplicability of
the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law
Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty. Rogelio
Karagdag, had severed relations with the law firm even before the filing of the instant petition and
that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite diligent
efforts. In a Resolution25 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
law30 and by the material allegations in the complaint, irrespective of whether or not the plaintiff is
entitled to recover all or some of the claims or reliefs sought therein. 31 Civil Case No. 1192-BG is an
action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the action
and the amount of damages prayed are within the jurisdiction of the RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent
(as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person of
petitioner (as party defendant) was acquired by its voluntary appearance in court. 32
That the subject contract included a stipulation that the same shall be governed by the laws of the
State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that
matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two distinct
concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice
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.33The 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 Petitioners averments of the foreign elements
in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No.
1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly considered as a matter of
defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this
ground, it should do so only after vital facts are established, to determine whether special
circumstances require the courts desistance.35
Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion
that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In the same
manner, the Court defers to the sound discretion of the lower 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:
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.
DANTE O. TINGA
Associate Justice
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
Subsequently, three other passengers with Caucasian features were graciously allowed to baord,
after the Fontanillas were told that the flight had been overbooked.7
The plane then took off with the Fontanillas baggage in tow, leaving them behind. 8
The Fontanillas then complained to Linda, who in turn gave them an ugly stare and rudely uttered,
"its not my fault. Its the fault of the company. Just sit down and wait."9 When Mr. Fontanilla reminded
Linda of the inconvenience being caused to them, she bluntly retorted, "Who do you think you are?
You lousy Flips are good for nothing beggars. You always ask for American aid." After which she
remarked "Dont worry about your baggage. Anyway there is nothing in there. What are you doing
here anyway? I will report you to immigration. You Filipinos should go home." 10 Such rude
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
After some time, Linda, without any explanation, offered the Fontanillas $50.00 each. She simply
said "Take it or leave it." This, the Fontanillas declined.12
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
The Fontanillas were not booked on the next flight, which departed for San Francisco at 11:00 a.m. It
was only at 12:00 noon that they were able to leave Los Angeles on United Airlines Flight No. 803.
Petitioner United Airlines has a different version of what occurred at the Los Angeles Airport on May
5, 1989.
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 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, Linda Allen, the United Airlines
Customer Representative at the counter informed them that the flight was overbooked. She booked
them on the next available flight and offered them denied boarding compensation. Allen vehemently
denies uttering the derogatory and racist words attributed to her by the Fontanillas. 14
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:
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
On appeal, the Court of Appeals ruled in favor of the Fontanillas. The appellate court found that
there was an admission on the part of United Airlines that the Fontanillas did in fact observe the
check-in requirement. It ruled further that even assuming there was a failure to observe the check-in
requirement, United Airlines failed to comply with the procedure laid down in cases where a
passenger is denied boarding. The appellate court likewise gave credence to the claim of Aniceto
Fontanilla that the employees of United Airlines were discourteous and arbitrary and, worse,
discriminatory. In light of such treatment, the Fontanillas were entitled to moral damages. The
dispositive portion of the decision of the respondent Court of Appeals dated 29 September 1995,
states as follows:
WHEREFORE, in view of the foregoing, judgment appealed herefrom is hereby
REVERSED and SET ASIDE, and a new judgment is entered ordering defendantappellee to pay plaintiff-appellant the following:
I
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 RESPONDENTS 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
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 petitioners 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 plaintiffsappellants indeed observed the "check-in" requirement at the Los Angeles Airport on
May 5, 1989. In view of defendant-appellees 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 defendants
designated counter at the airport in Los Angeles for their scheduled flight to San
Francisco on defendants 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 rule authorizing an answer that the defendant has no knowledge or information sufficient to form
a belief as to the truth of an averment giving such answer is asserted is so plainly and necessarily
within the defendants knowledge that his averment of ignorance must be palpably untrue. 22 Whether
or not private respondents checked in at petitioners designated counter at the airport at 9:45 a.m. on
May 5, 1989 must necessarily be within petitioners 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 opponents
case) of establishing which such adverse party is notified by his opponents
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 defendants evidence in refutation; all this evidence is now
competent and the case must be decided thereupon. 23
The determination of the other issues raised is dependent on whether or not there was a breach of
contract in bad 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
defendants.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.26While 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 Fontanillas 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 "CheckIn 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. 28 Hence,
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
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 carriers contract of carriage
or tariff provisions regarding ticketing, reconfirmation, check-in, and
acceptability for transformation.
The appellate court, however, erred in applying the laws of the United States as, in the case at bar,
Philippine law is the applicable law. Although, the contract of carriage was to be performed in the
United States, the tickets were purchased through petitioners agent in Manila. It is true that the
tickets were "rewritten" in Washington, D.C. however, such fact did not change the nature of the
original contract of carriage entered into by the parties in Manila.
In the case of Zalanea vs. Court of Appeals,30 this Court applied the doctrine of lex loci contractus.
According to the 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 contract was made is different from the place where
it is to be performed, and particularly so, if the place of the making and the place of performance are
the same. Hence, the court should apply the law of the place where the airline ticket was issued,
when the passengers are residents and nationals of the forum and the ticket is issued in such State
by the defendant airline.
The law of the forum on the subject matter is Economic Regulations No. 7 as amended by Boarding
Priority and Denied Board Compensation of the Civil Aeronautics Board which provides that the
check-in requirement be complied with before a passenger may claim against a carrier for being
denied boarding:
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 place
and time and fully complied with the carriers check-in and reconfirmation procedures
and who are acceptable for carriage under the Carriers tariff but who have been
denied boarding for lack of space, a compensation at the rate of: xxx
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 enable the Court to reach the conclusion that plaintiffs have, by a
FIRST DIVISION
On February 12, 1996, the Subic Bay Metropolitan Authority (or SBMA) advertised
in leading national daily newspapers and in one international publication, [1] an invitation
offering to the private sector the opportunity to develop and operate a modern marine
container terminal within the Subic Bay Freeport Zone. Out of seven bidders who
responded to the published invitation, three were declared by the SBMA as qualified
bidders after passing the pre-qualification evaluation conducted by the SBMAs
Technical Evaluation Committee (or SBMA-TEC). These are: (1) International
Container Terminal Services, Inc. (or ICTSI); (2) a consortium consisting of Royal Port
Services, Inc. and HPC Hamburg Port Consulting GMBH (or RPSI); and (3) Hutchison
Ports Philippines Limited (or HPPL), representing a consortium composed of HPPL,
Guoco Holdings (Phils.), Inc. and Unicol Management Services, Inc. All three qualified
bidders were required to submit their respective formal bid package on or before July 1,
1996 by the SBMAs Pre-qualification, Bids and Awards Committee (or SBMA-PBAC).
Thereafter, the services of three (3) international consultants [2] recommended by the
World Bank for their expertise were hired by SBMA to evaluate the business plans
submitted by each of the bidders, and to ensure that there would be a transparent and
comprehensive review of the submitted bids. The SBMA also hired the firm of Davis,
Langdon and Seah Philippines, Inc. to assist in the evaluation of the bids and in the
negotiation process after the winning bidder is chosen. All the consultants, after such
review and evaluation unanimously concluded that HPPLs Business Plan was far
superior to that of the two other bidders. [3]
However, even before the sealed envelopes containing the bidders proposed
royalty fees could be opened at the appointed time and place, RPSI formally protested
that ICTSI is legally barred from operating a second port in the Philippines based on
Executive Order No. 212 and Department of Transportation and Communication
(DOTC) Order 95-863. RPSI thus requested that the financial bid of ICTSI should be
set aside.[4]
Nevertheless, the opening of the sealed financial bids proceeded under
advisement relative to the protest signified by RPSI. The financial bids, more
particularly the proposed royalty fee of each bidder, was as follows:
2.
3.
4.
In the re-evaluation, the COA should actively participate to determine
which of the financial bids is more advantageous.
5.
In addition, all the parties should be given ample opportunity to
elucidate or clarify the components/justification for their respective financial
bids in order to ensure fair play and transparency in the proceedings.
6.
The Presidents authority to review the final award shall
remain.[8] (Underscoring supplied)
The recommendation of CPLC Cayetano was approved by President Ramos, and a
copy of President Ramos handwritten approval was sent to the SBMA Board of
Directors. Accordingly, the SBMA Board, with the concurrence of representatives of the
Commission on Audit, agreed to focus the reevaluation of the bids in accordance with
the evaluation criteria and the detailed components contained in the Tender Document,
including all relevant information gleaned from the bidding documents, as well as the
reports of the three international experts and the consultancy firm hired by the SBMA.
On September 19, 1996, the SBMA Board issued a Resolution, declaring:
SBMA, through the unanimous vote of all the Board Members, excluding the
Chairman of the Board who voluntarily inhibited himself from participating in
the re-evaluation, selected the HPPL bid as the winning bid, being: the
conforming bid with a realistic Business Plan offering the greatest financial
return to the SBMA; the best possible offer in the market, and the most
advantageous to the government in accordance with the Tender Document.[10]
Royalty fees
2.
a.
Tariff rates;
b.
Marketing strategy;
c.
d.
With the preceding parameters for the evaluation of bidders business plan,
the respondents were fairly guided by, as they aligned their judgment in
congruence with, the opinion of the panel of experts and the SBMAs
Technical Evaluation Committee to the effect that HPPLs business is superior
while that of ICTSIs appeared to be unrealistically high which may eventually
hinder the competitiveness of the SBMA port with the rest of the
world. Respondents averred that the panel of World Bank experts noted that
ICTSIs high tariff rates at U.S. $119.00 per TEU is already higher by 37%
through HPPL, which could further increase by 20% in the first two (2) years
and by 5% hike thereafter. In short, high tariffs would discourage potential
customers which may be translated into low cargo volume that will eventually
reduce financial return to SBMA. Respondents asserted that HPPLs
business plan offers the greatest financial return which could be equated that
over the five years, HPPL offers 1.25 billion pesos while ICTSI offers P0.859
billion, and RPSI offers P.420 billion. Over the first ten years HPPL gives
P2.430 billion, ICTSI tenders P2.197 billion and RPSI has P1.632 billion.
Viewed from this perspective alongside with the evidence on record, the
undersigned panel does not find respondents to have exceeded their
discretion in awarding the bid to HPPL. Consequently, it could not be said that
respondents act had placed the government at a grossly disadvantageous
plight that could have jeopardized the interest of the Republic of the
Philippines.[13]
On July 7, 1997, the HPPL, feeling aggrieved by the SBMAs failure and refusal to
commence negotiations and to execute the Concession Agreement despite its earlier
pronouncements that HPPL was the winning bidder, filed a complaint [14] against SBMA
before the Regional Trial Court (RTC) of Olongapo City, Branch 75, for specific
performance, mandatory injunction and damages. In due time, ICTSI, RPSI and the
Office of the President filed separate Answers-in-Intervention [15] to the complaint
opposing the reliefs sought by complainant HPPL.
Complainant HPPL alleged and argued therein that a binding and legally
enforceable contract had been established between HPPL and defendant SBMA under
Article 1305 of the Civil Code, considering that SBMA had repeatedly declared and
confirmed that HPPL was the winning bidder. Having accepted HPPLs offer to operate
and develop the proposed container terminal, defendant SBMA is duty-bound to comply
with its obligation by commencing negotiations and drawing up a Concession
Agreement with plaintiff HPPL. HPPL also pointed out that the bidding procedure
followed by the SBMA faithfully complied with existing laws and rules established by
SBMA itself; thus, when HPPL was declared the winning bidder it acquired the exclusive
right to negotiate with the SBMA. Consequently, plaintiff HPPL posited that SBMA
should be: (1) barred from conducting a re-bidding of the proposed project and/or
performing any such acts relating thereto; and (2) prohibited from negotiating with any
party other than plaintiff HPPL until negotiations between HPPL and SBMA have been
concluded or in the event that no acceptable agreement could be arrived at. Plaintiff
HPPL also alleged that SBMAs continued refusal to negotiate the Concession Contract
is a substantial infringement of its proprietary rights, and caused damage and prejudice
to plaintiff HPPL.
Hence, HPPL prayed that:
(1) Upon the filing of this complaint, hearings be scheduled to determine the
propriety of plaintiffs mandatory injunction application which seeks to order
defendant or any of its appropriate officers or committees to forthwith specify
the date as well as to perform any and all such acts (e.g. laying the ground
rules for discussion) for the commencement of negotiations with plaintiff with
the view to signing at the earliest possible time a Concession Agreement for
the development and operation of the Subic Bay Container Terminal.
(2) Thereafter, judgment be rendered in favor of plaintiff and against
defendant:
2.1.
presented. Further, the ethics of the profession require that counsel should
discontinue any act which tends to render the issues academic.
The Opposition is anchored on lack of jurisdiction since the issuance of a
cease-and-desist order would be tantamount to the issuance of a Temporary
Restraining Order or a Writ of Injunction which this Court cannot do in light of
the provision of Section 21 of R.A. 7227 which states:
Section 21. Injunction and Restraining Order. The implementation of the
projects for the conversion into alternative productive uses of the military
reservations are urgent and necessary and shall not be restrained or enjoined
except by an order issued by the Supreme Court of the Philippines.
During the hearing on October 30, 1997, SBMAs counsel revealed that there
is no law or administrative rule or regulation which requires that a bidding be
accomplished within a definite time frame.
Truly, the matter of the deferment of the re-bidding on November 4, 1997 rests
on the sound discretion of the SBMA. For this Court to issue a cease-anddesist order would be tantamount to an issuance of a Temporary Restraining
Order or a Writ of Preliminary Injunction. (Prado v. Veridiano II, G.R. No.
98118, December 6, 1991).
The Court notes that the Office of the President has not been heard fully on
the issues. Moreover, one of the intervenors is of the view that the issue of
jurisdiction must be resolved first, ahead of all the other issues.
WHEREFORE, and viewed from the foregoing considerations, plaintiffs
motion is DENIED.
SO ORDERED.[20] (Underscoring supplied)
Hence, this petition filed by petitioner (plaintiff below) HPPL against respondents
SBMA, ICTSI, RPSI and the Executive Secretary seeking to obtain a prohibitory
injunction. The grounds relied upon by petitioner HPPL to justify the filing of the instant
petition are summed up as follows:
29.
It is respectfully submitted that to allow or for this Honorable Court
to otherwise refrain from restraining SBMA, during the pendency of this suit,
from committing the aforementioned act(s) which will certainly occur on 5
December 1997 such action (or inaction) will work an injustice upon petitioner
which has validly been announced as the winning bidder for the operation of
the Subic Bay Container Terminal.
30.
To allow or for this Honorable Court to otherwise refrain from
restraining SBMA, during the pendency of this suit, from committing the
aforementioned threatened acts would be in violation of petitioners rights in
respect of the action it had filed before the RTC of Olongapo City in Civil Case
No. 243-O-97, and could render any judgment which may be reached by said
Court moot and ineffectual. As stated, the legal issues raised by the parties in
that proceedings are of far reaching importance to the national pride and
prestige, and they impact on the integrity of government agencies engaged in
international bidding of privatization projects. Its resolution on the merits by
the trial court below and, thereafter, any further action to be taken by the
parties before the appellate courts will certainly benefit respondents and the
entire Filipino people.[21]
WHEREFORE, petitioner HPPL sought relief praying that:
a) Upon the filing of this petition, the same be given due course and a
temporary restraining order and/or writ of preliminary injunction be issued ex
parte, restraining SBMA or any of its committees, or other persons acting
under its control or direction or upon its instruction, from declaring any winner
on 5 December 1997 or at any other date thereafter, in connection with the
rebidding for the privatization of the Subic Bay Container Terminal and/or for
any, some or all of the respondents to perform any such act(s) in pursuance
thereof, until further orders from this Honorable Court;
b) After appropriate proceedings, judgment be rendered in favor of petitioner
and against respondents -(1) Ordering SBMA to desist from conducting any rebidding or in declaring the
winner of any such rebidding in respect of the development and operation of
the Subic Bay Container Terminal until the judgment which the RTC of
Olongapo City may render in Civil Case No. 243-O-97 is resolved with finality;
(2) Declaring null and void any award which SBMA may announce or issue on
5 December 1997; and
(3) Ordering respondents to pay for the cost of suit.
Petitioner prays for other equitable reliefs.[22]
The instant petition seeks the issuance of an injunctive writ for the sole purpose of
holding in abeyance the conduct by respondent SBMA of a rebidding of the proposed
SBICT project until the case for specific performance is resolved by the trial court. In
other words, petitioner HPPL prays that the status quo be preserved until the issues
raised in the main case are litigated and finally determined. Petitioner was constrained
to invoke this Courts exclusive jurisdiction and authority by virtue of the above-quoted
Republic Act 7227, Section 21.
On December 3, 1997, this Court granted petitioner HPPLs application for a
temporary restraining order enjoining the respondent SBMA or any of its committees, or
other persons acting under its control or direction or upon its instruction, from declaring
any winner on December 5, 1997 or at any other date thereafter, in connection with the
rebidding for the privatization of the Subic Bay Container Terminal and/or for any, some
or all of the respondents to perform any such act or acts in pursuance thereof. [23]
There is no doubt that since this controversy arose, precious time has been lost and
a vital infrastructure project has in essense been mothballed to the detriment of all
parties involved, not the least of which is the Philippine Government, through its officials
and agencies, who serve the interest of the nation. It is, therefore, imperative that the
issues raised herein and in the court a quo be resolved without further delay so as not
to exacerbate an already untenable situation.
At the outset, the application for the injunctive writ is only a provisional remedy, a
mere adjunct to the main suit. [24] Thus, it is not uncommon that the issues in the main
action are closely intertwined, if not identical, to the allegations and counter allegations
propounded by the opposing parties in support of their contrary positions concerning the
propriety or impropriety of the injunctive writ. While it is not our intention to preempt the
trial courts determination of the issues in the main action for specific performance, this
Court has a bounden duty to perform; that is, to resolve the matters before this Court in
a manner that gives essence to justice, equity and good conscience.
While our pronouncements are for the purpose only of determining whether or not
the circumstances warrant the issuance of the writ of injunction, it is inevitable that it
may have some impact on the main action pending before the trial court. Nevertheless,
without delving into the merits of the main case, our findings herein shall be confined to
the necessary issues attendant to the application for an injunctive writ.
For an injunctive writ to be issued, the following requisites must be proven:
First.
right.
approval of the President of the Philippines under Letter of Instruction No. 620, which places the
SBMA under its ambit as an instrumentality, defined in Section 10 thereof as an agency of the
national government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government owned and controlled
corporations.[26] (Underscoring supplied)
As a chartered institution, the SBMA is always under the direct control of the Office
of the President, particularly when contracts and/or projects undertaken by the SBMA
entail substantial amounts of money. Specifically, Letter of Instruction No. 620 dated
October 27, 1997 mandates that the approval of the President is required in all
contracts of the national government offices, agencies and instrumentalities, including
government-owned or controlled corporations involving two million pesos
(P2,000,000.00) and above, awarded through public bidding or negotiation. The
President may, within his authority, overturn or reverse any award made by the SBMA
Board of Directors for justifiable reasons. It is well-established that the discretion to
accept or reject any bid, or even recall the award thereof, is of such wide latitude that
the courts will not generally interfere with the exercise thereof by the executive
department, unless it is apparent that such exercise of discretion is used to shield
unfairness or injustice. When the President issued the memorandum setting aside the
award previously declared by the SBMA in favor of HPPL and directing that a rebidding
be conducted, the same was, within the authority of the President and was a valid
exercise of his prerogative. Consequently, petitioner HPPL acquired no clear and
unmistakable right as the award announced by the SBMA prior to the Presidents
revocation thereof was not final and binding.
There being no clear and unmistakable right on the part of petitioner HPPL, the
rebidding of the proposed project can no longer be enjoined as there is no material and
substantial invasion to speak of. Thus, there is no longer any urgent or permanent
necessity for the writ to prevent any perceived serious damage. In fine, since the
requisites for the issuance of the writ of injunction are not present in the instant case,
petitioners application must be denied for lack of merit. [27]
Finally, we focus on the matter of whether or not petitioner HPPL has the legal
capacity to even seek redress from this Court. Admittedly, petitioner HPPL is a foreign
corporation, organized and existing under the laws of the British Virgin Islands. While
the actual bidder was a consortium composed of petitioner, and two other corporations,
namely, Guoco Holdings (Phils.) Inc. and Unicol Management Servises, Inc., it is only
petitioner HPPL that has brought the controversy before the Court, arguing that it is
suing only on an isolated transaction to evade the legal requirement that foreign
corporations must be licensed to do business in the Philippines to be able to file and
prosecute an action before Philippines courts.
The maelstrom of this issue is whether participating in the bidding is a mere isolated
transaction, or did it constitute engaging in or transacting business in the Philippines
such that petitioner HPPL needed a license to do business in the Philippines before it
could come to court.
On April 3, 2006, petitioner sought redress via a Petition for Certiorari9 with the Court of Appeals,
alleging that the trial court committed grave abuse of discretion in denying its Motion to Dismiss. The
Petition was docketed as CA-G.R. SP No. 94382.
On September 8, 2006, the Court of Appeals rendered the assailed Decision dismissing the Petition
for Certiorari. The Court of Appeals ruled that since the denial of a Motion to Dismiss is an
interlocutory order, it cannot be the subject of a Petition for Certiorari, and may only be reviewed in
the ordinary course of law by an appeal from the judgment after trial. On December 12, 2006, the
Court of Appeals rendered the assailed Resolution denying the petitioners Motion for
Reconsideration.
Meanwhile, on December 28, 2006, the trial court issued an Order directing respondent to answer
some of the questions in petitioners Interrogatories to Plaintiff dated September 7, 2006.
Notwithstanding the foregoing, petitioner filed the present petition assailing the September 8, 2006
Decision and the December 12, 2006 Resolution of the Court of Appeals. Arguing against the ruling
of the appellate court, petitioner insists that (a) an order denying a motion to dismiss may be the
proper subject of a petition for certiorari; and (b) the trial court committed grave abuse of discretion
in not finding that it had not validly acquired jurisdiction over petitioner and that the plaintiff had no
cause of action.
Respondent, on the other hand, posits that: (a) the present Petition should be dismissed for not
being filed by a real party in interest and for lack of a proper verification and certificate of non-forum
shopping; (b) the Court of Appeals correctly ruled that certiorari was not the proper remedy; and (c)
the trial court correctly denied petitioners motion to dismiss.
Our discussion of the issues raised by the parties follows:
Whether petitioner is a real party in interest
Respondent argues that the present Petition should be dismissed on the ground that petitioner no
longer existed as a corporation at the time said Petition was filed on February 1, 2007. Respondent
points out that as of the date of the filing of the Petition, there is no such corporation that goes by the
name NM Rothschild and Sons (Australia) Limited. Thus, according to respondent, the present
Petition was not filed by a real party in interest, citing our ruling in Philips Export B.V. v. Court of
Appeals,10 wherein we held:
A name is peculiarly important as necessary to the very existence of a corporation (American Steel
Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R.
Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co., 40 W Va 530, 23 SE 792). Its name
is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher [Perm Ed],
pp. 3-4). The general rule as to corporations is that each corporation must have a name by which it
is to sue and be sued and do all legal acts. The name of a corporation in this respect designates the
corporation in the same manner as the name of an individual designates the person (Cincinnati
Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10 NH
123); and the right to use its corporate name is as much a part of the corporate franchise as any
other privilege granted (Federal Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66
ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165, 26 A 36). 11
In its Memorandum12 before this Court, petitioner started to refer to itself as Investec Australia
Limited (formerly "NM Rothschild & Sons [Australia] Limited") and captioned said Memorandum
accordingly. Petitioner claims that NM Rothschild and Sons (Australia) Limited still exists as a
corporation under the laws of Australia under said new name. It presented before us documents
evidencing the process in the Australian Securities & Investment Commission on the change of
petitioners company name from NM Rothschild and Sons (Australia) Limited to Investec Australia
Limited.13
We find the submissions of petitioner on the change of its corporate name satisfactory and resolve
not to dismiss the present Petition for Review on the ground of not being prosecuted under the name
of the real party in interest. While we stand by our pronouncement in Philips Export on the
importance of the corporate name to the very existence of corporations and the significance thereof
in the corporations right to sue, we shall not go so far as to dismiss a case filed by the proper party
using its former name when adequate identification is presented. A real party in interest is the party
who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of
the suit.14 There is no doubt in our minds that the party who filed the present Petition, having
presented sufficient evidence of its identity and being represented by the same counsel as that of
the defendant in the case sought to be dismissed, is the entity that will be benefited if this Court
grants the dismissal prayed for.
Since the main objection of respondent to the verification and certification against forum shopping
likewise depends on the supposed inexistence of the corporation named therein, we give no credit to
said objection in light of the foregoing discussion.
Propriety of the Resort to a Petition for Certiorari with the Court of Appeals
We have held time and again that an order denying a Motion to Dismiss is an interlocutory order
which neither terminates nor finally disposes of a case as it leaves something to be done by the
court before the case is finally decided on the merits. The general rule, therefore, is that the denial of
a Motion to Dismiss cannot be questioned in a special civil action for Certiorari which is a remedy
designed to correct errors of jurisdiction and not errors of judgment.15 However, we have likewise
held that when the denial of the Motion to Dismiss is tainted with grave abuse of discretion, the grant
of the extraordinary remedy of Certiorari may be justified. By "grave abuse of discretion" is meant:
[S]uch capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act all in
contemplation of law.16
The resolution of the present Petition therefore entails an inquiry into whether the Court of Appeals
correctly ruled that the trial court did not commit grave abuse of discretion in its denial of petitioners
Motion to Dismiss. A mere error in judgment on the part of the trial court would undeniably be
inadequate for us to reverse the disposition by the Court of Appeals.
Issues more properly ventilated during the trial of the case
As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782 on the following
grounds: (a) lack of jurisdiction over the person of petitioner due to the defective and improper
service of summons; (b) failure of the Complaint to state a cause of action and absence of a cause
of action; (c) the action is barred by estoppel; and (d) respondent did not come to court with clean
hands.
As correctly ruled by both the trial court and the Court of Appeals, the alleged absence of a cause of
action (as opposed to the failure to state a cause of action), the alleged estoppel on the part of
petitioner, and the argument that respondent is in pari delicto in the execution of the challenged
contracts, are not grounds in a Motion to Dismiss as enumerated in Section 1, Rule 16 17 of the Rules
of Court. Rather, such defenses raise evidentiary issues closely related to the validity and/or
existence of respondents alleged cause of action and should therefore be threshed out during the
trial.
As regards the allegation of failure to state a cause of action, while the same is usually available as
a ground in a Motion to Dismiss, said ground cannot be ruled upon in the present Petition without
going into the very merits of the main case.
It is basic that "[a] cause of action is the act or omission by which a party violates a right of
another."18 Its elements are the following: (1) a right existing in favor of the plaintiff, (2) a duty on the
part of the defendant to respect the plaintiff's right, and (3) an act or omission of the defendant in
violation of such right.19 We have held that to sustain a Motion to Dismiss for lack of cause of action,
the complaint must show that the claim for relief does not exist and not only that the claim was
defectively stated or is ambiguous, indefinite or uncertain.20
The trial court held that the Complaint in the case at bar contains all the three elements of a cause of
action, i.e., it alleges that: (1) plaintiff has the right to ask for the declaration of nullity of the Hedging
Contracts for being null and void and contrary to Article 2018 of the Civil Code of the Philippines; (2)
defendant has the corresponding obligation not to enforce the Hedging Contracts because they are
in the nature of wagering or gambling agreements and therefore the transactions implementing
those contracts are null and void under Philippine laws; and (3) defendant ignored the advice and
intends to enforce the Hedging Contracts by demanding financial payments due therefrom. 21
The rule is that in a Motion to Dismiss, a defendant hypothetically admits the truth of the material
allegations of the ultimate facts contained in the plaintiff's complaint.22 However, this principle of
hypothetical admission admits of exceptions. Thus, in Tan v. Court of Appeals, 23 we held:
The flaw in this conclusion is that, while conveniently echoing the general rule that averments in the
complaint are deemed hypothetically admitted upon the filing of a motion to dismiss grounded on the
failure to state a cause of action, it did not take into account the equally established limitations to
such rule, i.e., that a motion to dismiss does not admit the truth of mere epithets of fraud;
nor allegations of legal conclusions; nor an erroneous statement of law; nor mere inferences or
conclusions from facts not stated; nor mere conclusions of law; nor allegations of fact the falsity of
which is subject to judicial notice; nor matters of evidence; nor surplusage and irrelevant matter; nor
scandalous matter inserted merely to insult the opposing party; nor to legally impossible facts; nor to
facts which appear unfounded by a record incorporated in the pleading, or by a document referred
to; and, nor to general averments contradicted by more specific averments. A more judicious
resolution of a motion to dismiss, therefore, necessitates that the court be not restricted to the
consideration of the facts alleged in the complaint and inferences fairly deducible therefrom. Courts
may consider other facts within the range of judicial notice as well as relevant laws and
jurisprudence which the courts are bound to take into account, andthey are also fairly entitled to
examine records/documents duly incorporated into the complaint by the pleader himself in
ruling on the demurrer to the complaint.24 (Emphases supplied.)
In the case at bar, respondent asserts in the Complaint that the Hedging Contracts are void for being
contrary to Article 201825 of the Civil Code. Respondent claims that under the Hedging Contracts,
despite the express stipulation for deliveries of gold, the intention of the parties was allegedly merely
to compel each other to pay the difference between the value of the gold at the forward price stated
in the contract and its market price at the supposed time of delivery.
Whether such an agreement is void is a mere allegation of a conclusion of law, which therefore
cannot be hypothetically admitted. Quite properly, the relevant portions of the contracts sought to be
nullified, as well as a copy of the contract itself, are incorporated in the Complaint. The determination
of whether or not the Complaint stated a cause of action would therefore involve an inquiry into
whether or not the assailed contracts are void under Philippine laws. This is, precisely, the very issue
to be determined in Civil Case No. 05-782. Indeed, petitioners defense against the charge of nullity
of the Hedging Contracts is the purported intent of the parties that actual deliveries of gold be made
pursuant thereto. Such a defense requires the presentation of evidence on the merits of the case. An
issue that "requires the contravention of the allegations of the complaint, as well as the full
ventilation, in effect, of the main merits of the case, should not be within the province of a mere
Motion to Dismiss."26 The trial court, therefore, correctly denied the Motion to Dismiss on this ground.
It is also settled in jurisprudence that allegations of estoppel and bad faith require proof. Thus, in
Paraaque Kings Enterprises, Inc. v. Court of Appeals,27 we ruled:
Having come to the conclusion that the complaint states a valid cause of action for breach of the
right of first refusal and that the trial court should thus not have dismissed the complaint, we find no
more need to pass upon the question of whether the complaint states a cause of action for damages
or whether the complaint is barred by estoppel or laches. As these matters require presentation
and/or determination of facts, they can be best resolved after trial on the merits.28 (Emphases
supplied.)
On the proposition in the Motion to Dismiss that respondent has come to court with unclean hands,
suffice it to state that the determination of whether one acted in bad faith and whether damages may
be awarded is evidentiary in nature. Thus, we have previously held that "[a]s a matter of defense, it
can be best passed upon after a full-blown trial on the merits." 29
Jurisdiction over the person of petitioner
Petitioner alleges that the RTC has not acquired jurisdiction over its person on account of the
improper service of summons. Summons was served on petitioner through the DFA, with
respondents counsel personally bringing the summons and Complaint to the Philippine Consulate
General in Sydney, Australia.
In the pleadings filed by the parties before this Court, the parties entered into a lengthy debate as to
whether or not petitioner is doing business in the Philippines. However, such discussion is
completely irrelevant in the case at bar, for two reasons. Firstly, since the Complaint was filed on
August 30, 2005, the provisions of the 1997 Rules of Civil Procedure govern the service of
summons. Section 12, Rule 14 of said rules provides:
Sec. 12. Service upon foreign private juridical entity. When the defendant is a foreign private
juridical entitywhich has transacted business in the Philippines, service may be made on its
resident agent designated in accordance with law for that purpose, or, if there be no such agent, on
the government official designated by law to that effect, or on any of its officers or agents within the
Philippines. (Emphasis supplied.)
This is a significant amendment of the former Section 14 of said rule which previously provided:
Sec. 14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a
nonresident joint stock company or association, doing business in the Philippines, service may be
made on its resident agent designated in accordance with law for that purpose, or if there be no such
agent, on the government official designated by law to that effect, or on any of its officers or agents
within the Philippines. (Emphasis supplied.)
The coverage of the present rule is thus broader.30 Secondly, the service of summons to petitioner
through the DFA by the conveyance of the summons to the Philippine Consulate General in Sydney,
Australia was clearly made not through the above-quoted Section 12, but pursuant to Section 15 of
the same rule which provides:
Sec. 15. Extraterritorial service. When the defendant does not reside and is not found in the
Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of
which is property within the Philippines, in which the defendant has or claims a lien or interest, actual
or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant
from any interest therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as under
section 6; or by publication in a newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order of the court shall be sent by
registered mail to the last known address of the defendant, or in any other manner the court may
deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be
less than sixty (60) days after notice, within which the defendant must answer.
Respondent argues31 that extraterritorial service of summons upon foreign private juridical entities is
not proscribed under the Rules of Court, and is in fact within the authority of the trial court to adopt,
in accordance with Section 6, Rule 135:
Sec. 6. Means to carry jurisdiction into effect. When by law jurisdiction is conferred on a court or
judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may be
employed by such court or officer; and if the procedure to be followed in the exercise of such
jurisdiction is not specifically pointed out by law or by these rules, any suitable process or mode of
proceeding may be adopted which appears comformable to the spirit of said law or rules.
Section 15, Rule 14, however, is the specific provision dealing precisely with the service of summons
on a defendant which does not reside and is not found in the Philippines, while Rule 135 (which is in
Part V of the Rules of Court entitled Legal Ethics) concerns the general powers and duties of courts
and judicial officers.
Breaking down Section 15, Rule 14, it is apparent that there are only four instances wherein a
defendant who is a non-resident and is not found in the country may be served with summons by
extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiffs; (2)
when the action relates to, or the subject of which is property, within the Philippines, in which the
defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such
action consists, wholly or in part, in excluding the defendant from any interest in property located in
the Philippines; and (4) when the defendant non-resident's property has been attached within the
Philippines. In these instances, service of summons may be effected by (a) personal service out of
the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the
court may deem sufficient.32
Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd. v. Dakila Trading
Corporation33that:
Undoubtedly, extraterritorial service of summons applies only where the action is in rem or
quasi in rem, but not if an action is in personam.
When the case instituted is an action in rem or quasi in rem, Philippine courts already have
jurisdiction to hear and decide the case because, in actions in rem and quasi in rem, jurisdiction over
the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the
court acquires jurisdiction over the res. Thus, in such instance, extraterritorial service of summons
can be made upon the defendant. The said extraterritorial service of summons is not for the purpose
of vesting the court with jurisdiction, but for complying with the requirements of fair play or due
process, so that the defendant will be informed of the pendency of the action against him and the
possibility that property in the Philippines belonging to him or in which he has an interest may be
subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest
if he is so minded. On the other hand, when the defendant or respondent does not reside and
is not found in the Philippines, and the action involved is in personam, Philippine courts
cannot try any case against him because of the impossibility of acquiring jurisdiction over
his person unless he voluntarily appears in court.34 (Emphases supplied.)
In Domagas v. Jensen,35 we held that:
[T]he aim and object of an action determine its character. Whether a proceeding is in rem, or in
personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these
only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right to,
or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to impose,
through the judgment of a court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to specifically perform some act or
actions to fasten a pecuniary liability on him.36
It is likewise settled that "[a]n action in personam is lodged against a person based on personal
liability; an action in rem is directed against the thing itself instead of the person; while an action
quasi in rem names a person as defendant, but its object is to subject that persons interest in a
property to a corresponding lien or obligation."37
The Complaint in the case at bar is an action to declare the loan and Hedging Contracts
between the parties void with a prayer for damages. It is a suit in which the plaintiff seeks to be
freed from its obligations to the defendant under a contract and to hold said defendant pecuniarily
liable to the plaintiff for entering into such contract. It is therefore an action in personam, unless and
until the plaintiff attaches a property within the Philippines belonging to the defendant, in which case
the action will be converted to one quasi in rem.
Since the action involved in the case at bar is in personam and since the defendant, petitioner
Rothschild/Investec, does not reside and is not found in the Philippines, the Philippine courts cannot
try any case against it because of the impossibility of acquiring jurisdiction over its person unless it
voluntarily appears in court.38
In this regard, respondent vigorously argues that petitioner should be held to have voluntarily
appeared before the trial court when it prayed for, and was actually afforded, specific reliefs from the
trial court.39 Respondent points out that while petitioners Motion to Dismiss was still pending,
petitioner prayed for and was able to avail of modes of discovery against respondent, such as written
interrogatories, requests for admission, deposition, and motions for production of documents. 40
Petitioner counters that under this Courts ruling in the leading case of La Naval Drug Corporation v.
Court of Appeals,41 a party may file a Motion to Dismiss on the ground of lack of jurisdiction over its
person, and at the same time raise affirmative defenses and pray for affirmative relief, without
waiving its objection to the acquisition of jurisdiction over its person. 42
It appears, however, that petitioner misunderstood our ruling in La Naval. A close reading of La
Naval reveals that the Court intended a distinction between the raising of affirmative defenses in an
Answer (which would notamount to acceptance of the jurisdiction of the court) and the prayer for
affirmative reliefs (which would be considered acquiescence to the jurisdiction of the court):
In the same manner that a plaintiff may assert two or more causes of action in a court suit, a
defendant is likewise expressly allowed, under Section 2, Rule 8, of the Rules of Court, to put
up his own defenses alternatively or even hypothetically. Indeed, under Section 2, Rule 9, of the
Rules of Court, defenses and objections not pleaded either in a motion to dismiss or in an answer,
except for the failure to state a cause of action, are deemed waived. We take this to mean that a
defendant may, in fact, feel enjoined to set up, along with his objection to the court's jurisdiction over
his person, all other possible defenses. It thus appears that it is not the invocation of any of such
defenses, but the failure to so raise them, that can result in waiver or estoppel. By defenses, of
course, we refer to the grounds provided for in Rule 16 of the Rules of Court that must be
asserted in a motion to dismiss or by way of affirmative defenses in an answer.
Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and Freuhauf
Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:
"This is not to say, however, that the petitioner's right to question the jurisdiction of the court
over its person is now to be deemed a foreclosed matter. If it is true, as Signetics claims, that its
only involvement in the Philippines was through a passive investment in Sigfil, which it even later
disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business
in the Philippines. It is a defense, however, that requires the contravention of the allegations of the
complaint, as well as a full ventilation, in effect, of the main merits of the case, which should not thus
be within the province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to
whether a foreign corporation which has done business in the country, but which has ceased to do
business at the time of the filing of a complaint, can still be made to answer for a cause of action
which accrued while it was doing business, is another matter that would yet have to await the
reception and admission of evidence. Since these points have seasonably been raised by the
petitioner, there should be no real cause for what may understandably be its apprehension,
i.e., that by its participation during the trial on the merits, it may, absent an invocation of
separate or independent reliefs of its own, be considered to have voluntarily submitted itself
to the court's jurisdiction."43 (Emphases supplied.)
In order to conform to the ruling in La Naval, which was decided by this Court in 1994, the former
Section 23, Rule 1444 concerning voluntary appearance was amended to include a second sentence
in its equivalent provision in the 1997 Rules of Civil Procedure:
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.)
The new second sentence, it can be observed, merely mentions other grounds in a Motion to
Dismiss aside from lack of jurisdiction over the person of the defendant. This clearly refers to
affirmative defenses, rather than affirmative reliefs.
Thus, while mindful of our ruling in La Naval and the new Section 20, Rule 20, this Court, in several
cases, ruled that seeking affirmative relief in a court is tantamount to voluntary appearance
therein.45 Thus, in Philippine Commercial International Bank v. Dy Hong Pi, 46 wherein defendants filed
a "Motion for Inhibition without submitting themselves to the jurisdiction of this Honorable Court"
subsequent to their filing of a "Motion to Dismiss (for Lack of Jurisdiction)," we held:
Besides, any lingering doubts on the issue of voluntary appearance dissipate when the respondents'
motion for inhibition is considered. This motion seeks a sole relief: inhibition of Judge Napoleon
Inoturan from further hearing the case. Evidently, by seeking affirmative relief other than
dismissal of the case, respondents manifested their voluntary submission to the court's
jurisdiction. It is well-settled that the active participation of a party in the proceedings is tantamount
to an invocation of the court's jurisdiction and a willingness to abide by the resolution of the case,
and will bar said party from later on impugning the court's jurisdiction. 47 (Emphasis supplied.)
1wphi1
In view of the above, we therefore rule that petitioner, by seeking affirmative reliefs from the trial
court, is deemed to have voluntarily submitted to the jurisdiction of said court. A party cannot invoke
the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or
failing to obtain such relief, repudiate or question that same jurisdiction. 48 Consequently, the trial
court cannot be considered to have committed grave abuse of discretion amounting to lack or
excess of jurisdiction in the denial of the Motion to Dismiss on account of failure to acquire
jurisdiction over the person of the defendant.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court of
Appeals dated September 8, 2006 and its Resolution dated December 12, 2006 in CA-G.R. SP No.
94382 are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
WE CONCUR:
RENATO C. CORONA
vs.
RON ZABARTE, respondent.
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no genuine issue as to any
material fact, other than the amount of damages. If this verity is evident from the pleadings
and the supporting affidavits, depositions and admissions on file with the court, the moving
party is entitled to such remedy as a matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the August 31, 1999 Decision[1] of the Court of Appeals (CA), which affirmed the
Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil Case No. 64107; and the
January 20, 2000 CA Resolution[2] which denied reconsideration.
The assailed CA Decision disposed as follows:
WHEREFORE, finding no error in the judgment appealed from, the same is AFFIRMED. [3]
The Facts
The facts of this case, as narrated by the Court of Appeals, are as follows: [4]
It appears that on 24 January 1994, [Respondent] Ron Zabarte commenced [an action] to
enforce the money judgment rendered by the Superior Court for the State of California,
County of Contra Costa, U.S.A. On 18 March 1994, [petitioner] filed his Answer with the
following special and affirmative defenses:
x x x
x x x
x x x
8) The Superior Court for the State of California, County of Contra Costa[,] did not
properly acquire jurisdiction over the subject matter of and over the persons involved in
[C]ase #C21-00265.
9) The Judgment on Stipulations for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 was obtained without the assistance of counsel for [petitioner] and
without sufficient notice to him and therefore, was rendered in clear violation of [petitioners]
constitutional rights to substantial and procedural due process.
10) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 was procured by means of fraud or collusion or undue influence and/or
based on a clear mistake of fact and law.
11) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 is contrary to the laws, public policy and canons of morality obtaining in
the Philippines and the enforcement of such judgment in the Philippines would result in the
unjust enrichment of [respondent] at the expense of [petitioner] in this case.
12) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 is null and void and unenforceable in the Philippines.
13) In the transaction, which is the subject matter in Case #C21-00265, [petitioner] is not
in any way liable, in fact and in law, to [respondent] in this case, as contained in
[petitioners] Answer to Complaint in Case #C21-00265 dated April 1, 1991, Annex B of
[respondents] Complaint dated December 6, 1993.
14) [Respondent] is guilty of misrepresentation or falsification in the filing of his
Complaint in this case dated December 6, 1993. Worse, [respondent] has no capacity to
sue in the Philippines.
15)
any genuine issue of fact and was merely maneuvering to delay the full effects of the
judgment.
Citing Ingenohl v. Olsen,[8] the CA also rejected petitioners argument that the RTC should
have dismissed the action for the enforcement of a foreign judgment, on the ground
of forum non conveniens. It reasoned out that the recognition of the foreign judgment was
based on comity, reciprocity and res judicata.
Hence, this Petition.[9]
Issue
In his Memorandum, petitioner submits this lone but all-embracing issue:
Whether or not the Court of Appeals acted in a manner x x x contrary to law when it
affirmed the Order of the trial court granting respondents Motion for Summary Judgment
and rendering judgment against the petitioner.[10]
In his discussion, petitioner contends that the CA erred in ruling in this wise:
1. That his Answer failed to tender a genuine issue of fact regarding the following:
(a) the jurisdiction of a foreign court over the subject matter
(b) the validity of the foreign judgment
(c) the judgments conformity to Philippine laws, public policy, canons of morality, and
norms against unjust enrichment
2. That the principle of forum non conveniens was inapplicable to the instant case.
This Courts Ruling
The Petition has no merit.
First Question: Summary Judgment
Petitioner vehemently insists that summary judgment is inappropriate to resolve the case at
bar, arguing that his Answer allegedly raised genuine and material factual matters which he
should have been allowed to prove during trial.
On the other hand, respondent argues that the alleged genuine issues of fact raised by
petitioner are mere conclusions of law, or propositions arrived at not by any process of
natural reasoning from a fact or a combination of facts stated but by the application of the
artificial rules of law to the facts pleaded. [11]
The RTC granted respondents Motion for Summary Judgment because petitioner, in his
Answer, admitted the existence of the Judgment on Stipulation for Entry in
Judgment. Besides, he had already paid $5,000 to respondent, as provided in the foreign
judgment sought to be enforced.[12] Hence, the trial court ruled that, there being no genuine
issue as to any material fact, the case should properly be resolved through summary
judgment. The CA affirmed this ruling.
We concur with the lower courts. Summary judgment is a procedural device for the prompt
disposition of actions in which the pleadings raise only a legal issue, and not a genuine
issue as to any material fact. By genuine issue is meant a question of fact that calls for the
presentation of evidence. It should be distinguished from an issue that is sham, contrived,
set in bad faith and patently unsubstantial. [13]
Summary judgment is resorted to in order to avoid long drawn out litigations and useless
delays. When affidavits, depositions and admissions on file show that there are no genuine
issues of fact to be tried, the Rules allow a party to pierce the allegations in the pleadings
and to obtain immediate relief by way of summary judgment. In short, since the facts are
not in dispute, the court is allowed to decide the case summarily by applying the law to the
material facts.
Petitioner contends that by allowing summary judgment, the two courts a quo prevented him
from presenting evidence to substantiate his claims. We do not agree. Summary judgment
is based on facts directly proven by affidavits, depositions or admissions. [14] In this case, the
CA and the RTC both merely ruled that trial was not necessary to resolve the
case. Additionally and correctly, the RTC specifically ordered petitioner to submit opposing
affidavits to support his contentions that (1) the Judgment on Stipulation for Entry in
Judgment was procured on the basis of fraud, collusion, undue influence, or a clear mistake
of law or fact; and (2) that it was contrary to public policy or the canons of morality. [15]
Again, in its Order[16] dated November 29, 1995, the trial court clarified that the opposing
affidavits were for [petitioner] to spell out the facts or circumstances [that] would constitute
lack of jurisdiction over the subject matter of and over the persons involved in Case No.
C21-00265, and that would render the judgment therein null and void. In this light,
petitioners contention that he was not allowed to present evidence to substantiate his
claims is clearly untenable.
For summary judgment to be valid, Rule 34, Section 3 of the Rules of Court, requires (a)
that there must be no genuine issue as to any material fact, except for the amount of
damages; and (b) that the party presenting the motion for summary judgment must be
entitled to a judgment as a matter of law.[17] As mentioned earlier, petitioner admitted that a
foreign judgment had been rendered against him and in favor of respondent, and that he
had paid $5,000 to the latter in partial compliance therewith. Hence, respondent, as the
party presenting the Motion for Summary Judgment, was shown to be entitled to the
judgment.
The CA made short shrift of the first requirement. To show that petitioner had raised no
genuine issue, it relied instead on the finality of the foreign judgment which was, in fact,
partially executed. Hence, we shall show in the following discussion how the defenses
presented by petitioner failed to tender any genuine issue of fact, and why a full-blown trial
was not necessary for the resolution of the issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265, which involved partnership
interest, was vested in the Securities and Exchange Commission, not in the Superior Court
of California, County of Contra Costa.
We disagree. In the absence of proof of California law on the jurisdiction of courts, we
presume that such law, if any, is similar to Philippine law. We base this conclusion on the
presumption of identity or similarity, also known as processual presumption. [18] The
Complaint,[19] which respondent filed with the trial court, was for the enforcement of a foreign
judgment. He alleged therein that the action of the foreign court was for the collection of a
sum of money, breach of promissory notes, and damages. [20]
In our jurisdiction, such a case falls under the jurisdiction of civil courts, not of the Securities
and Exchange Commission (SEC). The jurisdiction of the latter is exclusively over matters
enumerated in Section 5, PD 902-A, [21] prior to its latest amendment. If the foreign court did
not really have jurisdiction over the case, as petitioner claims, it would have been very easy
for him to show this. Since jurisdiction is determined by the allegations in a complaint, he
only had to submit a copy of the complaint filed with the foreign court. Clearly, this issue did
not warrant trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the form of a Compromise
Agreement, cannot be executed without the parties being assisted by their chosen
lawyers. The reason for this, he points out, is to eliminate collusion, undue influence and/or
improper exertion of ascendancy by one party over the other. He alleges that he
discharged his counsel during the proceedings, because he felt that the latter was not
properly attending to the case. The judge, however, did not allow him to secure the
services of another counsel. Insisting that petitioner settle the case with respondent, the
judge practically imposed the settlement agreement on him. In his Opposing Affidavit,
petitioner states:
It is true that I was initially represented by a counsel in the proceedings in #C21-00625. I
discharged him because I then felt that he was not properly attending to my case or was not
competent enough to represent my interest. I asked the Judge for time to secure another
counsel but I was practically discouraged from engaging one as the Judge was insistent
that I settle the case at once with the [respondent]. Being a foreigner and not a lawyer at
that I did not know what to do. I felt helpless and the Judge and [respondents] lawyer were
the ones telling me what to do. Under ordinary circumstances, their directives should have
been taken with a grain of salt especially so [since respondents] counsel, who was telling
me what to do, had an interest adverse to mine. But [because] time constraints and undue
influence exerted by the Judge and [respondents] counsel on me disturbed and seriously
affected my freedom to act according to my best judgment and belief. In point of fact, the
terms of the settlement were practically imposed on me by the Judge seconded all the time
by [respondents] counsel. I was then helpless as I had no counsel to assist me and the
collusion between the Judge and [respondents] counsel was becoming more evident by the
way I was treated in the Superior Court of [t]he State of California. I signed the Judgment
on Stipulation for Entry in Judgment without any lawyer assisting me at the time and without
being fully aware of its terms and stipulations. [22]
The manifestation of petitioner that the judge and the counsel for the opposing party had
pressured him would gain credibility only if he had not been given sufficient time to engage
the services of a new lawyer. Respondents Affidavit[23] dated May 23, 1994, clarified,
however, that petitioner had sufficient time, but he failed to retain a counsel. Having
dismissed his lawyer as early as June 19, 1991, petitioner directly handled his own defense
and negotiated a settlement with respondent and his counsel in December
1991. Respondent also stated that petitioner, ignoring the judges reminder of the
importance of having a lawyer, argued that he would be the one to settle the case and pay
anyway. Eventually, the Compromise Agreement was presented in court and signed before
Judge Ellen James on January 3, 1992. Hence, petitioners rights to counsel and to due
process were not violated.
Unjust Enrichment
Petitioner avers that the Compromise Agreement violated the norm against unjust
enrichment because the judge made him shoulder all the liabilities in the case, even if there
were two other defendants, G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the foreign judgment, even if there
are other defendants who are not being held liable together with him. First, the foreign
judgment itself does not mention these other defendants, their participation or their liability
to respondent. Second, petitioners undated Opposing Affidavit states: [A]lthough myself
and these entities were initially represented by Atty. Lawrence L. Severson of the Law Firm
Kouns, Quinlivan & Severson, x x x I discharged x x x said lawyer. Subsequently, I
assumed the representation for myself and these firms and this was allowed by the Superior
Court of the State of California without any authorization from G.G.P. & Sons, Inc. and the
Genesis Group.[24] Clearly, it was petitioner who chose to represent the other defendants;
hence, he cannot now be allowed to impugn a decision based on this ground.
In any event, contrary to petitioners contention, unjust enrichment or solutio indebiti does
not apply to this case. This doctrine contemplates payment when there is no duty to pay,
and the person who receives the payment has no right to receive it. [25] In this case, petitioner
merely argues that the other two defendants whom he represented were liable together with
him. This is not a case of unjust enrichment.
We do not see, either, how the foreign judgment could be contrary to law, morals, public
policy or the canons of morality obtaining in the country. Petitioner owed money, and the
judgment required him to pay it. That is the long and the short of this case.
In addition, the maneuverings of petitioner before the trial court reinforce our belief that his
claims are unfounded. Instead of filing opposing affidavits to support his affirmative
defenses, he filed a Motion for Reconsideration of the Order allowing summary judgment,
as well as a Motion to Dismiss the action on the ground of forum non conveniens. His
opposing affidavits were filed only after the Order of November 29, 1995 had denied both
Motions.[26] Such actuation was considered by the trial court as a dilatory ploy which justified
the resolution of the action by summary judgment. According to the CA, petitioners
allegations sought to delay the full effects of the judgment; hence, summary judgment was
proper. On this point, we concur with both courts.
Second Question: Forum Non Conveniens
Petitioner argues that the RTC should have refused to entertain the Complaint for
enforcement of the foreign judgment on the principle of forum non conveniens. He claims
that the trial court had no jurisdiction, because the case involved partnership interest, and
there was difficulty in ascertaining the applicable law in California. All the aspects of the
transaction took place in a foreign country, and respondent is not even Filipino.
We disagree. Under the principle of forum non conveniens, even if the exercise of
jurisdiction is authorized by law, courts may nonetheless refuse to entertain a case for any
of the following practical reasons:
1) The belief that the matter can be better tried and decided elsewhere, either because the
main aspects of the case transpired in a foreign jurisdiction or the material witnesses have
their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum
shopping[,] merely to secure procedural advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non-residents or aliens when the
docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to be
maintained; and
The difficulty of ascertaining foreign law. [27]
None of the aforementioned reasons barred the RTC from exercising its jurisdiction. In the
present action, there was no more need for material witnesses, no forum shopping or
harassment of petitioner, no inadequacy in the local machinery to enforce the foreign
judgment, and no question raised as to the application of any foreign law.
Authorities agree that the issue of whether a suit should be entertained or dismissed on the
basis of the above-mentioned principle depends largely upon the facts of each case and on
the sound discretion of the trial court. [28] Since the present action lodged in the RTC was for
the enforcement of a foreign judgment, there was no need to ascertain the rights and the
obligations of the parties based on foreign laws or contracts. The parties needed only to
perform their obligations under the Compromise Agreement they had entered into.
Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a judgment in an action in
personam rendered by a foreign tribunal clothed with jurisdiction is presumptive evidence of
a right as between the parties and their successors-in-interest by a subsequent title. [29]
Also, under Section 5(n) of Rule 131, a court whether in the Philippines or elsewhere
enjoys the presumption that it is acting in the lawful exercise of its jurisdiction, and that it is
regularly performing its official duty.[30] Its judgment may, however, be assailed if there is
evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake
of law or fact. But precisely, this possibility signals the need for a local trial court to exercise
jurisdiction. Clearly, the application of forum non coveniens is not called for.
The grounds relied upon by petitioner are contradictory. On the one hand, he insists that
the RTC take jurisdiction over the enforcement case in order to invalidate the foreign
judgment; yet, he avers that the trial court should not exercise jurisdiction over the same
case on the basis of forum non conveniens. Not only do these defenses weaken each
other, but they bolster the finding of the lower courts that he was merely maneuvering to
avoid or delay payment of his obligation.
WHEREFORE, the Petition is hereby DENIED and
Resolution AFFIRMED. Double costs against petitioner.
SO ORDERED.
the
assailed
Decision
and
June 8, 2007
In its Order dated January 4, 1999, the RTC of Makati, Branch 147, denied herein petitioners'
respective motions to dismiss.6 Herein petitioners, as defendants, filed an Urgent Omnibus
Motion7 for the reconsideration of the trial court's Order of January 4, 1999 but the trial court denied it
via its Order8 dated June 3, 1999.
On August 3, 1999, herein petitioners filed a Petition for Certiorari with the CA.9 On October 31,
2000, the CA rendered its presently assailed Decision denying herein petitioners' Petition
for Certiorari. Petitioners filed a Motion for Reconsideration but the CA denied it in its Resolution
dated August 21, 2002.
Hence, herein Petition for Review on Certiorari based on the following assignment of errors:
A.
THE COURT OF APPEALS' CONCLUSION THAT THE COMPLAINT STATES A CAUSE OF
ACTION AGAINST PETITIONERS IS WITHOUT ANY LEGAL BASIS. THE ANNEXES TO
THE COMPLAINT CLEARLY BELIE THE ALLEGATION OF EXISTENCE OF AN
EMPLOYMENT CONTRACT BETWEEN PRIVATE RESPONDENT AND PETITIONERS.
B.
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT UPHELD THE JURISDICTION OF THE TRIAL COURT DESPITE THE FACT
THAT THE COMPLAINT INDUBITABLY SHOWS THAT IT IS AN ACTION FOR AN
ALLEGED BREACH OF EMPLOYMENT CONTRACT, AND HENCE, FALLS WITHIN THE
EXLCUSIVE JURISDICTION OF THE NATIONAL LABOR RELATIONS COMMISSION.
C
THE COURT OF APPEALS DISREGARDED AND FAILED TO CONSIDER THE PRINCIPLE
OF "FORUM NON CONVENIENS" AS A VALID GROUND FOR DISMISSING A
COMPLAINT.10
In their first assigned error, petitioners contend that there was no perfected employment contract
between PIL and herein respondent. Petitioners assert that the annexes to respondent's complaint
show that PIL's offer was for respondent to be employed as the manager only of its pre-mixed
concrete operations and not as the company's managing director or CEO. Petitioners argue that
when respondent reiterated his intention to become the manager of PIL's overall business venture in
the Philippines, he, in effect did not accept PIL's offer of employment and instead made a counteroffer, which, however, was not accepted by PIL. Petitioners also contend that under Article 1318 of
the Civil Code, one of the requisites for a contract to be perfected is the consent of the contracting
parties; that under Article 1319 of the same Code, consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the contract; that the offer
must be certain and the acceptance absolute; that a qualified acceptance constitutes a counter-offer.
Petitioners assert that since PIL did not accept respondent's counter-offer, there never was any
employment contract that was perfected between them.
Petitioners further argue that respondent's claim for damages based on the provisions of Articles 19
and 21 of the Civil Code is baseless because it was shown that there was no perfected employment
contract.
Assuming, for the sake of argument, that PIL may be held liable for breach of employment contract,
petitioners contend that PCPI and PPHI, may not also be held liable because they are juridical
entities with personalities which are separate and distinct from PIL, even if they are subsidiary
corporations of the latter. Petitioners also aver that the annexes to respondent's complaint show that
the negotiations on the alleged employment contract took place between respondent and PIL
through its office in Hongkong. In other words, PCPI and PPHI were not privy to the negotiations
between PIL and respondent for the possible employment of the latter; and under Article 1311 of the
Civil Code, a contract is not binding upon and cannot be enforced against one who was not a party
to it even if he be aware of such contract and has acted with knowledge thereof.
Petitioners further assert that petitioner Klepzig may not be held liable because he is simply acting in
his capacity as president of PCPI and PPHI and settled is the rule that an officer of a corporation is
not personally liable for acts done in the performance of his duties and within the bounds of the
authority conferred on him. Furthermore, petitioners argue that even if PCPI and PPHI are held
liable, respondent still has no cause of action against Klepzig because PCPI and PPHI have
personalities which are separate and distinct from those acting in their behalf, such as Klepzig.
As to their second assigned error, petitioners contend that since herein respondent's claims for
actual, moral and exemplary damages are solely premised on the alleged breach of employment
contract, the present case should be considered as falling within the exclusive jurisdiction of the
NLRC.
With respect to the third assigned error, petitioners assert that the principle of forum non
conveniens dictates that even where exercise of jurisidiction is authorized by law, courts may refuse
to entertain a case involving a foreign element where the matter can be better tried and decided
elsewhere, either because the main aspects of the case transpired in a foreign jurisdiction or the
material witnesses have their residence there and the plaintiff sought the forum merely to secure
procedural advantage or to annoy or harass the defendant. Petitioners also argue that one of the
factors in determining the most convenient forum for conflicts problem is the power of the court to
enforce its decision. Petitioners contend that since the majority of the defendants in the present case
are not residents of the Philippines, they are not subject to compulsory processes of the Philippine
court handling the case for purposes of requiring their attendance during trial. Even assuming that
they can be summoned, their appearance would entail excessive costs. Petitioners further assert
that there is no allegation in the complaint from which one can conclude that the evidence to be
presented during the trial can be better obtained in the Philippines. Moreover, the events which led
to the present controversy occurred outside the Philippines. Petitioners conclude that based on the
foregoing factual circumstances, the case should be dismissed under the principle of forum non
conveniens.
In his Comment, respondent extensively quoted the assailed CA Decision maintaining that the
factual allegations in the complaint determine whether or not the complaint states a cause of action.
As to the question of jurisdiction, respondent contends that the complaint he filed was not based on
a contract of employment. Rather, it was based on petitioners' unwarranted breach of their
contractual obligation to employ respondent. This breach, respondent argues, gave rise to an action
for damages which is cognizable by the regular courts.
Even assuming that there was an employment contract, respondent asserts that for the NLRC to
acquire jurisdiction, the claim for damages must have a reasonable causal connection with the
employer-employee relationship of petitioners and respondent.
Respondent further argues that there is a perfected contract between him and petitioners as they
both agreed that the latter shall employ him to manage and operate their ready-mix concrete
operations in the Philippines. Even assuming that there was no perfected contract, respondent
contends that his complaint alleges an alternative cause of action which is based on the provisions
of Articles 19 and 21 of the Civil Code.
As to the applicability of the doctrine of forum non conveniens, respondent avers that the question of
whether a suit should be entertained or dismissed on the basis of the principle of forum non
conveniens depends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial judge, who is in the best position to determine whether special circumstances
require that the court desist from assuming jurisdiction over the suit.
The petition lacks merit.
Section 2, Rule 2 of the Rules of Court, as amended, defines a cause of action as the act or
omission by which a party violates a right of another. A cause of action exists if the following
elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law
it arises or is created; (2) an obligation on the part of the named defendant to respect or not to
violate such right; and, (3) an act or omission on the part of such defendant violative of the right of
the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the
latter may maintain an action for recovery of damages.11
In Hongkong and Shanghai Banking Corporation Limited v. Catalan,12 this Court held:
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. Stated otherwise, may the court render
a valid judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the
veracity of the material allegations. If the allegations in the complaint furnish sufficient basis
on which it can be maintained, it should not be dismissed regardless of the defense that may
be presented by the defendants.13
Moreover, the complaint does not have to establish or allege facts proving the existence of a cause
of action at the outset; this will have to be done at the trial on the merits of the case. 14 To sustain a
motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does
not exist, rather than that a claim has been defectively stated, or is ambiguous, indefinite or
uncertain.15
Hence, in resolving whether or not the Complaint in the present case states a cause of action, the
trial court correctly limited itself to examining the sufficiency of the allegations in the Complaint as
well as the annexes thereto. It is proscribed from inquiring into the truth of the allegations in the
Complaint or the authenticity of any of the documents referred or attached to the Complaint, since
these are deemed hypothetically admitted by the respondent.
This Court has reviewed respondents allegations in its Complaint. In a nutshell, respondent alleged
that herein petitioners reneged on their contractual obligation to employ him on a permanent basis.
This allegation is sufficient to constitute a cause of action for damages.
The issue as to whether or not there was a perfected contract between petitioners and respondent is
a matter which is not ripe for determination in the present case; rather, this issue must be taken up
during trial, considering that its resolution would necessarily entail an examination of the veracity of
the allegations not only of herein respondent as plaintiff but also of petitioners as defendants.
The Court does not agree with petitioners' contention that they were not privy to the negotiations for
respondent's possible employment. It is evident from paragraphs 24 to 28 of the Complaint 16 that, on
various occasions, Klepzig conducted negotiations with respondent regarding the latter's possible
employment. In fact, Annex "H"17of the complaint shows that it was Klepzig who informed respondent
that his company was no longer interested in employing respondent. Hence, based on the
allegations in the Complaint and the annexes attached thereto, respondent has a cause of action
against herein petitioners.
As to the question of jurisdiction, this Court has consistently held that where no employer-employee
relationship exists between the parties and no issue is involved which may be resolved by reference
to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction.18 In the present case, no employer-employee relationship exists
between petitioners and respondent. In fact, in his complaint, private respondent is not seeking any
relief under the Labor Code, but seeks payment of damages on account of petitioners' alleged
breach of their obligation under their agreement to employ him. It is settled that an action for breach
of contractual obligation is intrinsically a civil dispute.19 In the alternative, respondent seeks redress
on the basis of the provisions of Articles 19 and 21 of the Civil Code. Hence, it is clear that the
present action is within the realm of civil law, and jurisdiction over it belongs to the regular courts. 20
With respect to the applicability of the principle of forum non conveniens in the present case, this
Court's ruling inBank of America NT & SA v. Court of Appeals21 is instructive, to wit:
The doctrine of forum non conveniens, literally meaning the forum is inconvenient, emerged
in private international law to deter the practice of global forum shopping, that is to prevent
non-resident litigants from choosing the forum or place wherein to bring their suit for
malicious reasons, such as to secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this
doctrine, a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it
is not the most "convenient" or available forum and the parties are not precluded from
seeking remedies elsewhere.
Whether a suit should be entertained or dismissed on the basis of said doctrine depends
largely upon the facts of the particular case and is addressed to the sound discretion of the
trial court. In the case ofCommunication Materials and Design, Inc. vs. Court of Appeals, this
Court held that "xxx [a] Philippine Court may assume jurisdiction over the case if it chooses
to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to
which the parties may conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has
or is likely to have power to enforce its decision."
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,
that the doctrine of forum non conveniens should not be used as a ground for a
motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said
doctrine as a ground. This Court further ruled that while it is within the discretion of
the trial court to abstain from assuming jurisdiction on this ground, it should do so
only after vital facts are established, to determine whether special circumstances
require the courts desistance; and that the propriety of dismissing a case based on
this principle of forum non conveniens requires a factual determination, hence it is
more properly considered a matter of defense.22 (emphasis supplied)
In the present case, the factual circumstances cited by petitioners which would allegedly justify the
application of the doctrine of forum non conveniens are matters of defense, the merits of which
should properly be threshed out during trial.
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court
of Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.
FIRST DIVISION
DUMEZ
COMPANY
and
TRANS-ORIENT
ENGINEERS,
INC., petitioners,
vs. NATIONAL
LABOR
RELATIONS
COMMISSION and VERONICO EBILANE,respondents.
DECISION
HERMOSISIMA, JR., J.:
Before us is a petition for certiorari assailing the Decision[1] of the National Labor
Relations Commission (hereafter, NLRC) [2] in an illegal dismissal case [3] involving an
overseas contract worker who contracted a debilitating illness while rendering services
under a subsisting job contract in Riyadh, Saudi Arabia. The assailed Decision affirmed
the award[4] by the Workers' Assistance and Adjudication Office of the Philippine
Overseas Employment Administration (hereafter POEA) in favor of private respondent in
the amount of U.S.$1,110.00 or its peso equivalent as and for his medical compensation
benefits.
The facts of the case are not in dispute:
On May 21, 1982, petitioner Dumez Company, a French company, through
petitioner Trans-Orient Engineers, Inc., a corporation organized and existing under the
laws of the Philippines, engaged the services of private respondent Veronico Ebilane as
carpenter for one of its projects in the Middle East, with Riyadh, Saudi Arabia, as his
place of actual employment. The parties executed and signed a one-year overseas
employment agreement embodying the terms and conditions of private respondent's
employment.
x x x the same law x x x is equally explicit that the liability decreed therein devolves
at the General Organization's expense, and not on the employer of the private
respondent.[11]
Significantly, neither the private nor the public respondent has filed any pleading to
refute the aforementioned postulate of the Solicitor General.
Understandably, the sole error attributed to the NLRC and the POEA is that there is
no legal basis to require petitioners to pay private respondent medical compensation
benefits equal to 75% of his salaries for four (4) months.
Petitioners are correct.
The POEA Administrator, in finding petitioners liable to private respondent for
medical benefits accruing to the latter under the Social Insurance Law of Saudi Arabia,
took judicial notice of the said law. To this extent, the POEA Administrator's actuations
are legally defensible. We have earlier ruled in Norse Management Co. (PTE) vs.
National Seamen Board[12] that evidence is usually a matter of procedure of which a
mere quasi-judicial body is not strict about. Although in a long line of cases, we have
ruled that a foreign law, being a matter of evidence must be alleged and proved, in order
to be recognized and applied in a particular controversy involving conflicts of laws,
jurisprudence on this matter was not meant to apply to cases before administrative or
quasi-judicial bodies in the light of the well-settled rule that administrative and quasijudicial bodies are not bound strictly by technical rules. [13] Nonetheless, only to this
extent were the acts of the POEA Administrator amply supported by the law. Her actual
application thereof, however, is starkly erroneous.
Section 6(a) of the Overseas Employment Agreement entered into and signed by
the private parties herein, provides that "Workmen's Compensation insurance benefits
will be provided within the limits of the compensation law of the host country." [14] That
compensation for disability was to be provided in accordance with the law of the host
country, Saudi Arabia, is a necessary consequence of the compulsory coverage under
the General Organization for Social Insurance Law of Saudi Arabia (hereafter, GOSI
Law of Saudi Arabia), upon all workers, regardless of nationality, sex or age, who
render their services within the territory of Saudi Arabia by virtue of a labor contract.
Article 49 of the GOSI Law of Saudi Arabia provides that the General Organization
shall pay to the beneficiaries the insurance compensation, the employer being under no
obligation to pay any allowance to the insured or to his heirs unless the injury has been
intentionally caused by the employer or the injury has occurred by reason of the latter's
gross error or failure to abide by the GOSI Law or the rules relating to occupational
health and safety.[15]
Under the GOSI Law of Saudi Arabia as pleaded by petitioners clearly the obligation
to pay medical benefits as compensation for work-related injury or illness, devolves
upon the General Organization and not upon petitioners. Furthermore, after taking
judicial notice of the GOSI Law of Saudi Arabia, the POEA Administrator considered the
said law as one of a similar nature as that of our own compensation laws. Thus, in
awarding the medical benefits to private respondent, she rationalized the same by
quoting Article 166 of the Labor Code of the Philippines which provides that "the State
shall promote and develop a tax-exempt employees' compensation program whereby
employees x x x in the event of work-connected disability or death, may promptly secure
adequate income benefit and medical or related benefits." Indeed, we may postulate
further that the policies underlying our compensation laws and the GOSI Law of Saudi
Arabia being similar, the nature thereof could not be so dissimilar. Suffice it to say that
our own compensation program imposes on the employer nothing more than the
obligation to remit monthly premiums to the State Insurance Fund and it is the latter, not
the employer, on which is laid the burden of compensating the employee for any
disability; in fact, once the employer pays his share to the fund, all obligation on his part
to his employees is ended.[16] No showing at all has there been that petitioners had
failed to comply with its obligations as employer under the GOSI Law of Saudi Arabia.
WHEREFORE, the petition for certiorari is GRANTED. The decisions of the POEA
Administrator and of the NLRC are hereby ANNULLED and SET ASIDE. No
pronouncement as to costs.
SO ORDERED.
Padilla (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.
SECOND DIVISION
CRESCENT
PETROLEUM,
LTD.,
G.R.
No.
155014
Petitioner,
Present:
- versus -
Puno, J.,
Chairman,
Austria-Martinez,
Callejo, Sr.,
Tinga, and
*
Chico-Nazario, JJ.
DECISION
PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the (a) reversal of
the November 28, 2001 Decision of the Court of Appeals in CA-G.R. No. CV54920,[1] which dismissed for want of jurisdiction the instant case, and the
September 3, 2002 Resolution of the same appellate court,[2] which denied
petitioners motion for reconsideration, and (b) reinstatement of the July 25, 1996
Decision[3] of the Regional Trial Court (RTC) in Civil Case No. CEB-18679, which
held that respondents were solidarily liable to pay petitioner the sum prayed for in
the complaint.
The facts are as follows: Respondent M/V Lok Maheshwari (Vessel) is an
oceangoing vessel of Indian registry that is owned by respondent Shipping
Corporation of India (SCI), a corporation organized and existing under the laws of
India and principally owned by the Government of India. It was time-chartered by
respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South Korean
company. Halla, in turn, sub-chartered the Vessel through a time charter to
Transmar Shipping, Inc. (Transmar). Transmar further sub-chartered the Vessel to
Portserv Limited (Portserv). Both Transmar and Portserv are corporations
organized and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent
Petroleum, Ltd. (Crescent), a corporation organized and existing under the laws of
Canada that is engaged in the business of selling petroleum and oil products for the
use and operation of oceangoing vessels, to deliver marine fuel oils (bunker fuels)
to the Vessel. Petitioner Crescent granted and confirmed the request through an
advice via facsimile dated November 2, 1995. As security for the payment of the
bunker fuels and related services, petitioner Crescent received two (2) checks in
the amounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent
contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another
Canadian corporation, for the physical delivery of the bunker fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels
amounting to US$103,544 inclusive of barging and demurrage charges to the
Vessel at the port of Pioneer Grain, Vancouver, Canada. The Chief Engineer
Officer of the Vessel duly acknowledged and received the delivery receipt. Marine
Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00 worth of
the bunker fuels. Petitioner Crescent issued a check for the same amount in favor
of Marine Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice
dated November 21, 1995 to Portserv Limited, and/or the Master, and/or Owners,
and/or Operators, and/or Charterers of M/V Lok Maheshwari in the amount of
US$103,544.00 with instruction to remit the amount on or before December 1,
1995. The period lapsed and several demands were made but no payment was
received. Also, the checks issued to petitioner Crescent as security for the payment
of the bunker fuels were dishonored for insufficiency of funds. As a consequence,
On July 25, 1996, the trial court rendered its decision in favor of petitioner
Crescent, thus:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff [Crescent] and against the defendants
[Vessel, SCI, Portserv and/or Transmar].
Consequently, the latter are hereby ordered to pay plaintiff
jointly and solidarily, the following:
(a) the sum of US$103,544.00, representing the
outstanding obligation;
(b) interest of US$10,978.50 as of July 3, 1996, plus
additional interest at 18% per annum for the period
thereafter, until the principal account is fully paid;
(c) attorneys fees of P300,000.00; and
(d) P200,000.00 as litigation expenses.
SO ORDERED.
On August 19, 1996, respondents Vessel and SCI appealed to the Court of
Appeals. They attached copies of the charter parties between respondent SCI and
Halla, between Halla and Transmar, and between Transmar and Portserv. They
pointed out that Portserv was a time charterer and that there is a clause in the time
charters between respondent SCI and Halla, and between Halla and Transmar,
which states that the Charterers shall provide and pay for all the fuel except as
otherwise agreed. They submitted a copy of Part II of the Bunker Fuel
Agreement between petitioner Crescent and Portserv containing a stipulation that
New York law governs the construction, validity and performance of the
3.
4.
5.
6.
7.
8.
9.
The trial courts decision has factual and legal bases; and,
10.
the locational test wherein maritime and admiralty jurisdiction, with a few
exceptions, is exercised only on contracts made upon the sea and to be executed
thereon. This is totally rejected under the American rule where the criterion in
determining whether a contract is maritime depends on the nature and subject
matter of the contract, having reference to maritime service and transactions. [4]
In International Harvester Company of the Philippines v. Aragon,[5] we
adopted the American rule and held that (w)hether or not a contract is maritime
depends not on the place where the contract is made and is to be executed, making
the locality the test, but on the subject matter of the contract, making the true
criterion a maritime service or a maritime transaction.
A contract for furnishing supplies like the one involved in this case is
maritime and within the jurisdiction of admiralty.[6] It may be invoked before our
courts through an action in rem or quasi in rem or an action in personam. Thus: [7]
xxx
Articles 579 and 584 [of the Code of Commerce] provide a
method of collecting or enforcing not only the liens created under
Section 580 but also for the collection of any kind of lien
whatsoever.[8] In the Philippines, we have a complete legislation,
both substantive and adjective, under which to bring an action in
rem against a vessel for the purpose of enforcing liens. The
substantive law is found in Article 580 of the Code of Commerce.
The procedural law is to be found in Article 584 of the same Code.
The result is, therefore, that in the Philippines any vessel even
though it be a foreign vessel found in any port of this Archipelago
may be attached and sold under the substantive law which defines the
right, and the procedural law contained in the Code of Commerce by
which this right is to be enforced.[9] x x x. But where neither the law
nor the contract between the parties creates any lien or charge upon
the vessel, the only way in which it can be seized before judgment is
Crescent
bases
its
claim
of
maritime
lien
on Sections
21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also known as
the Ship Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for Necessaries; persons entitled to
such lien. - Any person furnishing repairs, supplies, towage, use of
dry dock or maritime railway, or other necessaries, to any vessel,
whether foreign or domestic, upon the order of the owner of such
vessel, or of a person authorized by the owner, shall have a maritime
lien on the vessel, which may be enforced by suit in rem, and it shall
be necessary to allege or prove that credit was given to the vessel.
Sec. 22. Persons Authorized to Procure Repairs, Supplies and
Necessaries. - The following persons shall be presumed to have
authority from the owner to procure repairs, supplies, towage, use of
dry dock or marine railway, and other necessaries for the vessel: The
managing owner, ships husband, master or any person to whom the
management of the vessel at the port of supply is entrusted. No
person tortuously or unlawfully in possession or charge of a vessel
shall have authority to bind the vessel.
Sec. 23. Notice to Person Furnishing Repairs, Supplies and
Necessaries. - The officers and agents of a vessel specified in Section
22 of this Decree shall be taken to include such officers and agents
when appointed by a charterer, by an owner pro hac vice, or by an
agreed purchaser in possession of the vessel; but nothing in this
Decree shall be construed to confer a lien when the furnisher knew,
or by exercise of reasonable diligence could have ascertained, that
because of the terms of a charter party, agreement for sale of the
vessel, or for any other reason, the person ordering the repairs,
supplies, or other necessaries was without authority to bind the vessel
therefor.
Petitioner Crescent submits that these provisions apply to both domestic and
foreign vessels, as well as domestic and foreign suppliers of necessaries. It
contends that the use of the term any person in Section 21 implies that the law is
not restricted to domestic suppliers but also includes all persons who supply
provisions and necessaries to a vessel, whether foreign or domestic. It points out
further that the law does not indicate that the supplies or necessaries must be
furnished in the Philippines in order to give petitioner the right to seek enforcement
of the lien with a Philippine court.[11]
Respondents Vessel and SCI, on the other hand, maintain that Section 21 of
the P.D. No. 1521 or the Ship Mortgage Decree of 1978 does not apply to a foreign
supplier like petitioner Crescent as the provision refers only to a situation where
the person furnishing the supplies is situated inside the territory of the Philippines
and not where the necessaries were furnished in a foreign jurisdiction like Canada.
[12]
Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are
identical to Subsections P, Q, and R, respectively, of the U.S. Ship Mortgage Act of
1920, which is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence
finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree
of 1978 applies in the present case.
The various tests used in the U.S. to determine whether a maritime lien
exists are the following:
One. In a suit to establish and enforce a maritime lien for supplies
furnished to a vessel in a foreign port, whether such lien exists, or whether the
court has or will exercise jurisdiction, depends on the law of the country where
the supplies were furnished, which must be pleaded and proved. [15] This
principle was laid down in the 1888 case of The Scotia,[16] reiterated in The Kaiser
Wilhelm II[17] (1916),
Atlanta[19] (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced
such single-factor methodologies as the law of the place of supply.[20]
In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in New
York, joined the crew of a ship of Danish flag and registry that is owned by a
Danish citizen. He signed the ships articles providing that the rights of the crew
members would be governed by Danish law and by the employers contract with
the Danish Seamens Union, of which he was a member. While in Havana and in
the course of his employment, he was negligently injured. He sued the shipowner
in a federal district court in New York for damages under the Jones Act. In holding
that Danish law and not the Jones Act was applicable, the Supreme Court adopted
a multiple-contact test to determine, in the absence of a specific Congressional
directive as to the statutes reach, which jurisdictions law should be applied. The
following factors were considered: (1) place of the wrongful act; (2) law of the
flag; (3) allegiance or domicile of the injured; (4) allegiance of the defendant
shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7)
law of the forum.
Several years after Lauritzen, the U.S. Supreme Court in the case of Romero
v. International Terminal Operating Co.[22] again considered a foreign seamans
personal injury claim under both the Jones Act and the general maritime law. The
Court held that the factors first announced in the case of Lauritzen were applicable
not only to personal injury claims arising under the Jones Act but to all
matters arising under maritime law in general.[23]
Hellenic Lines, Ltd. v. Rhoditis [24] was also a suit under the Jones Act by a
Greek seaman injured aboard a ship of Greek registry while in American waters.
The ship was operated by a Greek corporation which has its largest office in New
York and another office in New Orleans and whose stock is more than 95% owned
by a U.S. domiciliary who is also a Greek citizen. The ship was engaged in
regularly scheduled runs between various ports of the U.S. and the Middle East,
Pakistan, and India, with its entire income coming from either originating or
terminating in the U.S. The contract of employment provided that Greek law and a
Greek collective bargaining agreement would apply between the employer and the
seaman and that all claims arising out of the employment contract were to be
adjudicated by a Greek court. The U.S. Supreme Court observed thatof the seven
factors listed in the Lauritzen test, four were in favor of the shipowner and
against jurisdiction. In arriving at the conclusion that the Jones Act applies, it
ruled that the application of the Lauritzen test is not a mechanical one. It stated
thus: [t]he significance of one or more factors must be considered in light of the
national interest served by the assertion of Jones Act jurisdiction. (footnote
omitted) Moreover, the list of seven factors in Lauritzen was not intended to be
exhaustive. x x x [T]he shipowners base of operations is another factor of
importance in determining whether the Jones Act is applicable; and there well may
be others.
The principles enunciated in these maritime tort cases have been extended to
cases involving unpaid supplies and necessaries such as the cases of Forsythe
International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine Services
v. M/V El Centroamericano.[26]
Three. The factors provided in Restatement (Second) of Conflicts of
Law have also been applied, especially in resolving cases brought under the
Federal Maritime Lien Act. Their application suggests that in the absence of an
effective choice of law by the parties, the forum contacts to be considered include:
(a) the place of contracting; (b) the place of negotiation of the contract; (c) the
place of performance; (d) the location of the subject matter of the contract; and (e)
the domicile, residence, nationality, place of incorporation and place of business of
the parties.[27]
In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,
[28]
in the Lauritzen case. However, it observed that Lauritzen involved a torts claim
under the Jones Act while the present claim involves an alleged maritime lien
arising from unpaid supplies. It made a disclaimer that its conclusion is limited to
the unique circumstances surrounding a maritime lien as well as the statutory
directives found in the Maritime Lien Statute and that the initial choice of law
determination is significantly affected by the statutory policies surrounding a
maritime lien. It ruled that the facts in the case call for the application of the
Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance
to the congressional intent in enacting the Maritime Lien Statute to protect the
interests of American supplier of goods, services or necessaries by making
maritime liens available where traditional services are routinely rendered. It
concluded that the Maritime Lien Statute represents a relevant policy of the forum
that serves the needs of the international legal system as well as the basic policies
underlying maritime law. The court also gave equal importance to the predictability
of result and protection of justified expectations in a particular field of law. In the
maritime realm, it is expected that when necessaries are furnished to a vessel in an
American port by an American supplier, the American Lien Statute will apply to
protect that supplier regardless of the place where the contract was formed or the
nationality of the vessel.
The same principle was applied in the case of Swedish Telecom Radio v.
M/V Discovery I[29] where the American court refused to apply the Federal
Maritime Lien Act to create a maritime lien for goods and services supplied by
First. Out of the seven basic factors listed in the case of Lauritzen,
Philippine law only falls under one the law of the forum. All other elements are
foreign Canada is the place of the wrongful act, of the allegiance or domicile of
the injured and the place of contract; India is the law of the flag and the allegiance
of the defendant shipowner. Balancing these basic interests, it is inconceivable that
the Philippine court has any interest in the case that outweighs the interests of
Canada or India for that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable
following the factors under Restatement (Second) of Conflict of Laws. Like the
Federal Maritime Lien Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree
of 1978 was enacted primarily to protect Filipino suppliers and was not intended to
create a lien from a contract for supplies between foreign entities delivered in a
foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and
rule that a maritime lien exists would not promote the public policy behind the
enactment of the law to develop the domestic shipping industry. Opening up our
courts to foreign suppliers by granting them a maritime lien under our laws even if
they are not entitled to a maritime lien under their laws will encourage forum
shopping.
Finally. The submission of petitioner is not in keeping with the reasonable
expectation of the parties to the contract. Indeed, when the parties entered into a
contract for supplies in Canada, they could not have intended the laws of a remote
country like the Philippines to determine the creation of a lien by the mere accident
of the Vessels being in Philippine territory.
III.
But under which law should petitioner Crescent prove the existence of its
maritime lien?
In light of the interests of the various foreign elements involved, it is clear
that Canada has the most significant interest in this dispute. The injured party is a
Canadian corporation, the sub-charterer which placed the orders for the supplies is
also Canadian, the entity which physically delivered the bunker fuels is in Canada,
the place of contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
The arbitration clause contained in the Bunker Fuel Agreement which states
that New York law governs the construction, validity and performance of the
contract is only a factor that may be considered in the choice-of-law analysis but is
not conclusive. As in the cases of Gulf Trading and Swedish Telecom, the lien
that is the subject matter of this case arose by operation of law and not by contract
because the shipowner was not a party to the contract under which the goods were
supplied.
It is worthy to note that petitioner Crescent never alleged and proved
Canadian law as basis for the existence of a maritime lien. To the end, it insisted
on its theory that Philippine law applies. Petitioner contends that even if foreign
law applies, since the same was not properly pleaded and proved, such foreign law
must be presumed to be the same as Philippine law pursuant to the doctrine of
processual presumption.
Thus, we are left with two choices: (1) dismiss the case for petitioners
failure to establish a cause of action[31] or (2) presume that Canadian law is the
same as Philippine law. In either case, the case has to be dismissed.
It is well-settled that a party whose cause of action or defense depends upon
a foreign law has the burden of proving the foreign law. Such foreign law is
treated as a question of fact to be properly pleaded and proved.[32] Petitioner
Crescents insistence on enforcing a maritime lien before our courts depended on
the existence of a maritime lien under the proper law. By erroneously claiming a
maritime lien under Philippine law instead of proving that a maritime lien exists
under Canadian law, petitioner Crescent failed to establish a cause of action.[33]
Even if we apply the doctrine of processual presumption, the result will still
be the same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the
following are the requisites for maritime liens on necessaries to exist: (1) the
necessaries must have been furnished to and for the benefit of the vessel; (2) the
necessaries must have been necessary for the continuation of the voyage of the
vessel; (3) the credit must have been extended to the vessel; (4) there must be
necessity for the extension of the credit; and (5) the necessaries must be ordered by
persons authorized to contract on behalf of the vessel. [34] These do not avail in the
instant case.
First. It was not established that benefit was extended to the vessel. While
this is presumed when the master of the ship is the one who placed the order, it is
not disputed that in this case it was the sub-charterer Portserv which placed the
orders to petitioner Crescent.[35] Hence, the presumption does not arise and it is
incumbent upon petitioner Crescent to prove that benefit was extended to the
vessel. Petitioner did not.
Second. Petitioner Crescent did not show any proof that the marine
products were necessary for the continuation of the vessel.
Third. It was not established that credit was extended to the vessel. It is
presumed that in the absence of fraud or collusion, where advances are made to a
captain in a foreign port, upon his request, to pay for necessary repairs or supplies
to enable his vessel to prosecute her voyage, or to pay harbor dues, or for pilotage,
towage and like services rendered to the vessel, that they are made upon the credit
of the vessel as well as upon that of her owners. [36] In this case, it was the subcharterer Portserv which requested for the delivery of the bunker fuels. The
issuance of two checks amounting to US$300,000 in favor of petitioner Crescent
prior to the delivery of the bunkers as security for the payment of the obligation
weakens petitioner Crescents contention that credit was extended to the Vessel.
We also note that when copies of the charter parties were submitted by
respondents in the Court of Appeals, the time charters between respondent SCI and
Halla and between Halla and Transmar were shown to contain a clause which
states that the Charterers shall provide and pay for all the fuel except as otherwise
agreed. This militates against petitioner Crescents position that Portserv is
authorized by the shipowner to contract for supplies upon the credit of the vessel.
Fourth. There was no proof of necessity of credit. A necessity of credit
will be presumed where it appears that the repairs and supplies were necessary for
the ship and that they were ordered by the master. This presumption does not arise
in this case since the fuels were not ordered by the master and there was no proof
of necessity for the supplies.
Finally. The necessaries were not ordered by persons authorized to contract
in behalf of the vessel as provided under Section 22 of P.D. No. 1521 or the Ship
Mortgage Decree of 1978 - the managing owner, the ships husband, master or any
person with whom the management of the vessel at the port of supply is entrusted.
Clearly, Portserv, a sub-charterer under a time charter, is not someone to whom the
management of the vessel has been entrusted. A time charter is a contract for the
use of a vessel for a specified period of time or for the duration of one or more
specified voyages wherein the owner of the time-chartered vessel retains
possession and control through the master and crew who remain his employees. [37]
Not enjoying the presumption of authority, petitioner Crescent should have proved
that Portserv was authorized by the shipowner to contract for supplies. Petitioner
failed.
A discussion on the principle of forum non conveniens is unnecessary.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R.
No. CV 54920, dated November 28, 2001, and its subsequent Resolution of
September 3, 2002 are AFFIRMED. The instant petition for review on certiorari is
DENIED for lack of merit. Cost against petitioner.
SO ORDERED.
REYNATO S. PUNO
Associate Justice
BRION, J.:
Before the Court is a direct appeal from the decision1 of the Regional Trial Court (RTC) of Laoag
City, Branch 11, elevated via a petition for review on certiorari2 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 Gerberts 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 fiance in the Philippines, Gerbert went to the Pasig City Civil Registry
Office and registered the Canadian divorce decree on his and Daisylyns 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 Gerberts 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 Gerberts.
In its October 30, 2008 decision,7 the RTC denied Gerberts 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
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 Gerberts petition before the RTC. In other words, the unavailability of the
second paragraph of Article 26 of the Family Code to aliens does not necessarily strip Gerbert of
legal interest to petition the RTC for the recognition of his foreign divorce decree. The foreign divorce
decree itself, after its authenticity and conformity with the aliens national law have been duly proven
according to our rules of evidence, serves as a presumptive evidence of right in favor of Gerbert,
pursuant to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign
judgments. This Section states:
SEC. 48. Effect of foreign judgments or final orders.The effect of a judgment or final order of a
tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment or final order is
conclusive upon the title of the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order is
presumptive evidence of a right as between the parties and their successors in interest by a
subsequent title.
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want
of notice to the party, collusion, fraud, or clear mistake of law or fact.
To our mind, direct involvement or being the subject of the foreign judgment is sufficient to clothe a
party with the requisite interest to institute an action before our courts for the recognition of the
foreign judgment. In a divorce situation, we have declared, no less, that the divorce obtained by an
alien abroad may be recognized in the Philippines, provided the divorce is valid according to his or
her national law.27
The starting point in any recognition of a foreign divorce judgment is the acknowledgment that our
courts do not take judicial notice of foreign judgments and laws. Justice Herrera explained that, as a
rule, "no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of
another country."28 This means that the foreign judgment and its authenticity must be proven as facts
under our rules on evidence, together with the aliens applicable national law to show the effect of
the judgment on the alien himself or herself.29 The recognition may be made in an action instituted
specifically for the purpose or in another action where a party invokes the foreign decree as an
integral aspect of his claim or defense.
In Gerberts case, since both the foreign divorce decree and the national law of the alien,
recognizing his or her capacity to obtain a divorce, purport to be official acts of a sovereign authority,
Section 24, Rule 132 of the Rules of Court comes into play. This Section requires proof, either by (1)
official publications or (2) copies attested by the officer having legal custody of the documents. If the
copies of official records are not kept in the Philippines, these must be (a) accompanied by a
certificate issued by the proper diplomatic or consular officer in the Philippine foreign service
stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his
office.
The records show that Gerbert attached to his petition a copy of the divorce decree, as well as the
required certificates proving its authenticity,30 but failed to include a copy of the Canadian law on
divorce.31 Under this situation, we can, at this point, simply dismiss the petition for insufficiency of
supporting evidence, unless we deem it more appropriate to remand the case to the RTC to
determine whether the divorce decree is consistent with the Canadian divorce law.
We deem it more appropriate to take this latter course of action, given the Article 26 interests that will
be served and the Filipina wifes (Daisylyns) obvious conformity with the petition. A remand, at the
same time, will allow other interested parties to oppose the foreign judgment and overcome a
petitioners presumptive evidence of a right by proving want of jurisdiction, want of notice to a party,
collusion, fraud, or clear mistake of law or fact. Needless to state, every precaution must be taken to
ensure conformity with our laws before a recognition is made, as the foreign judgment, once
recognized, shall have the effect of res judicata32 between the parties, as provided in Section 48,
Rule 39 of the Rules of Court.33
In fact, more than the principle of comity that is served by the practice of reciprocal recognition of
foreign judgments between nations, the res judicata effect of the foreign judgments of divorce serves
as the deeper basis for extending judicial recognition and for considering the alien spouse bound by
its terms. This same effect, as discussed above, will not obtain for the Filipino spouse were it not for
the substantive rule that the second paragraph of Article 26 of the Family Code provides.
Considerations beyond the recognition of the foreign divorce decree
As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has already
recorded the divorce decree on Gerbert and Daisylyns marriage certificate based on the mere
presentation of the decree.34We consider the recording to be legally improper; hence, the need to
draw attention of the bench and the bar to what had been done.
Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the civil
status of persons shall be recorded in the civil register." The law requires the entry in the civil registry
of judicial decrees that produce legal consequences touching upon a persons legal capacity and
status, i.e., those affecting "all his personal qualities and relations, more or less permanent in nature,
not ordinarily terminable at his own will, such as his being legitimate or illegitimate, or his being
married or not."35
A judgment of divorce is a judicial decree, although a foreign one, affecting a persons legal capacity
and status that must be 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:
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;38 that the civil registrar and all persons who have or claim any interest must be made parties
to the proceedings;39 and that the time and place for hearing must be published in a newspaper of
general circulation.40 As these basic jurisdictional requirements have not been met in the present
case, we cannot consider the petition Gerbert filed with the RTC as one filed under Rule 108 of the
Rules of Court.
We hasten to point out, however, that this ruling should not be construed as requiring two separate
proceedings for the registration of a foreign divorce decree in the civil registry one for recognition
of the foreign decree and another specifically for cancellation of the entry under Rule 108 of the
Rules of Court. The recognition of the foreign divorce decree may be made in a Rule 108 proceeding
itself, as the object of special proceedings (such as that in Rule 108 of the Rules of Court) is
precisely to establish the status or right of a party or a particular fact. Moreover, Rule 108 of the
Rules of Court can serve as the appropriate adversarial 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.
Claiming that the Agreement was null and void since it was entered into by Joselyn without his
(Benjamins) consent, Benjamin instituted an action for Declaration of Nullity of Agreement of Lease
with Damages11 against Joselyn and the petitioner. Benjamin claimed that his funds were used in the
acquisition and improvement of the Boracay property, and coupled with the fact that he was
Joselyns husband, any transaction involving said property required his consent.
No Answer was filed, hence, the RTC declared Joselyn and the petitioner in defeault. On March 14,
1994, the RTC rendered judgment by default declaring the Agreement null and void. 12 The decision
was, however, set aside by the CA in CA-G.R. SP No. 34054. 13 The CA also ordered the RTC to
allow the petitioner to file his Answer, and to conduct further proceedings.
In his Answer,14 petitioner claimed good faith in transacting with Joselyn. Since Joselyn appeared to
be the owner of the Boracay property, he found it unnecessary to obtain the consent of Benjamin.
Moreover, as appearing in the Agreement, Benjamin signed as a witness to the contract, indicating
his knowledge of the transaction and, impliedly, his conformity to the agreement entered into by his
wife. Benjamin was, therefore, estopped from questioning the validity of the Agreement.
There being no amicable settlement during the pre-trial, trial on the merits ensued.
On June 30, 1997, the RTC disposed of the case in this manner:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants as follows:
1. The Agreement of Lease dated July 20, 1992 consisting of eight (8) pages (Exhibits "T",
"T-1", "T-2", "T-3", "T-4", "T-5", "T-6" and "T-7") entered into by and between Joselyn C.
Taylor and Philip Matthews before Notary Public Lenito T. Serrano under Doc. No. 390, Page
79, Book I, Series of 1992 is hereby declared NULL and VOID;
2. Defendants are hereby ordered, jointly and severally, to pay plaintiff the sum of SIXTEEN
THOUSAND (P16,000.00) PESOS as damages representing unrealized income for the
residential building and cottages computed monthly from July 1992 up to the time the
property in question is restored to plaintiff; and
3. Defendants are hereby ordered, jointly and severally, to pay plaintiff the sum of TWENTY
THOUSAND (P20,000.00) PESOS, Philippine Currency, for attorneys fees and other
incidental expenses.
SO ORDERED.15
The RTC considered the Boracay property as community property of Benjamin and Joselyn; thus,
the consent of the spouses was necessary to validate any contract involving the property. Benjamins
right over the Boracay property was bolstered by the courts findings that the property was
purchased and improved through funds provided by Benjamin. Although the Agreement was
evidenced by a public document, the trial court refused to consider the alleged participation of
Benjamin in the questioned transaction primarily because his signature appeared only on the last
page of the document and not on every page thereof.
On appeal to the CA, petitioner still failed to obtain a favorable decision. In its December 19, 2003
Decision,16 the CA affirmed the conclusions made by the RTC. The appellate court was of the view
that if, indeed, Benjamin was a willing participant in the questioned transaction, the parties to the
Agreement should have used the phrase "with my consent" instead of "signed in the presence of."
The CA noted that Joselyn already prepared an SPA in favor of Benjamin involving the Boracay
property; it was therefore unnecessary for Joselyn to participate in the execution of the Agreement.
Taken together, these circumstances yielded the inevitable conclusion that the contract was null and
void having been entered into by Joselyn without the consent of Benjamin.
Aggrieved, petitioner now comes before this Court in this petition for review on certiorari based on
the following grounds:
4.1. THE MARITAL CONSENT OF RESPONDENT BENJAMIN TAYLOR IS NOT REQUIRED
IN THE AGREEMENT OF LEASE DATED 20 JULY 1992. GRANTING ARGUENDO THAT
HIS CONSENT IS REQUIRED, BENJAMIN TAYLOR IS DEEMED TO HAVE GIVEN HIS
CONSENT WHEN HE AFFIXED HIS SIGNATURE IN THE AGREEMENT OF LEASE AS
WITNESS IN THE LIGHT OF THE RULING OF THE SUPREME COURT IN THE CASE OF
SPOUSES PELAYO VS. MELKI PEREZ, G.R. NO. 141323, JUNE 8, 2005.
4.2. THE PARCEL OF LAND SUBJECT OF THE AGREEMENT OF LEASE IS THE
EXCLUSIVE PROPERTY OF JOCELYN C. TAYLOR, A FILIPINO CITIZEN, IN THE LIGHT
OF CHEESMAN VS. IAC, G.R. NO. 74833, JANUARY 21, 1991.
4.3. THE COURTS A QUO ERRONEOUSLY APPLIED ARTICLE 96 OF THE FAMILY CODE
OF THE PHILIPPINES WHICH IS A PROVISION REFERRING TO THE ABSOLUTE
COMMUNITY OF PROPERTY. THE PROPERTY REGIME GOVERNING THE PROPERTY
RELATIONS OF BENJAMIN TAYLOR AND JOSELYN TAYLOR IS THE CONJUGAL
PARTNERSHIP OF GAINS BECAUSE THEY WERE MARRIED ON 30 JUNE 1988 WHICH
IS PRIOR TO THE EFFECTIVITY OF THE FAMILY CODE. ARTICLE 96 OF THE FAMILY
CODE OF THE PHILIPPINES FINDS NO APPLICATION IN THIS CASE.
4.4. THE HONORABLE COURT OF APPEALS IGNORED THE PRESUMPTION OF
REGULARITY IN THE EXECUTION OF NOTARIAL DOCUMENTS.
4.5. THE HONORABLE COURT OF APPEALS FAILED TO PASS UPON THE
COUNTERCLAIM OF PETITIONER DESPITE THE FACT THAT IT WAS NOT CONTESTED
AND DESPITE THE PRESENTATION OF EVIDENCE ESTABLISHING SAID CLAIM. 17
The petition is impressed with merit.
In fine, we are called upon to determine the validity of an Agreement of Lease of a parcel of land
entered into by a Filipino wife without the consent of her British husband. In addressing the matter
before us, we are confronted not only with civil law or conflicts of law issues, but more importantly,
with a constitutional question.
It is undisputed that Joselyn acquired the Boracay property in 1989. Said acquisition was evidenced
by a Deed of Sale with Joselyn as the vendee. The property was also declared for taxation purposes
under her name. When Joselyn leased the property to petitioner, Benjamin sought the nullification of
the contract on two grounds: first, that he was the actual owner of the property since he provided the
funds used in purchasing the same; and second, that Joselyn could not enter into a valid contract
involving the subject property without his consent.
The trial and appellate courts both focused on the property relations of petitioner and respondent in
light of the Civil Code and Family Code provisions. They, however, failed to observe the applicable
constitutional principles, which, in fact, are the more decisive.
Section 7, Article XII of the 1987 Constitution states:18
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold lands of the public
domain.
1avvphi1
Aliens, whether individuals or corporations, have been disqualified from acquiring lands of the public
domain. Hence, by virtue of the aforecited constitutional provision, they are also disqualified from
acquiring private lands.19 The primary purpose of this constitutional provision is the conservation of
the national patrimony.20 Our fundamental law cannot be any clearer. The right to acquire lands of the
public domain is reserved only to Filipino citizens or corporations at least sixty percent of the capital
of which is owned by Filipinos.21
In Krivenko v. Register of Deeds,22 cited in Muller v. Muller,23 we had the occasion to explain the
constitutional prohibition:
Under Section 1 of Article XIII of the Constitution, "natural resources, with the exception of public
agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation
is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the
hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may
alienate their agricultural lands in favor of aliens. It is partly to prevent this result that Section 5 is
included in Article XIII, and it reads as follows:
"Section 5. Save in cases of hereditary succession, no private agricultural land will be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain in the Philippines."
This constitutional provision closes the only remaining avenue through which agricultural resources
may leak into aliens hands. It would certainly be futile to prohibit the alienation of public agricultural
lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural
lands in the hands of Filipino citizens. x x x
xxxx
If the term "private agricultural lands" is to be construed as not including residential lots or lands not
strictly agricultural, the result would be that "aliens may freely acquire and possess not only
residential lots and houses for themselves but entire subdivisions, and whole towns and cities," and
that "they may validly buy and hold in their names lands of any area for building homes, factories,
industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses,
playgrounds, airfields, and a host of other uses and purposes that are not, in appellants words,
strictly agricultural." (Solicitor Generals Brief, p. 6) That this is obnoxious to the conservative spirit of
the Constitution is beyond question.24
The rule is clear and inflexible: aliens are absolutely not allowed to acquire public or private lands in
the Philippines, save only in constitutionally recognized exceptions. 25 There is no rule more settled
than this constitutional prohibition, as more and more aliens attempt to circumvent the provision by
trying to own lands through another. In a long line of cases, we have settled issues that directly or
indirectly involve the above constitutional provision. We had cases where aliens wanted that a
particular property be declared as part of their fathers estate;26 that they be reimbursed the funds
used in purchasing a property titled in the name of another; 27that an implied trust be declared in their
(aliens) favor;28 and that a contract of sale be nullified for their lack of consent. 29
In Ting Ho, Jr. v. Teng Gui,30 Felix Ting Ho, a Chinese citizen, acquired a parcel of land, together with
the improvements thereon. Upon his death, his heirs (the petitioners therein) claimed the properties
as part of the estate of their deceased father, and sought the partition of said properties among
themselves. We, however, excluded the land and improvements thereon from the estate of Felix Ting
Ho, precisely because he never became the owner thereof in light of the above-mentioned
constitutional prohibition.
In Muller v. Muller,31 petitioner Elena Buenaventura Muller and respondent Helmut Muller were
married in Germany. During the subsistence of their marriage, respondent purchased a parcel of
land in Antipolo City and constructed a house thereon. The Antipolo property was registered in the
name of the petitioner. They eventually separated, prompting the respondent to file a petition for
separation of property. Specifically, respondent prayed for reimbursement of the funds he paid for
the acquisition of said property. In deciding the case in favor of the petitioner, the Court held that
respondent was aware that as an alien, he was prohibited from owning a parcel of land situated in
the Philippines. He had, in fact, declared that when the spouses acquired the Antipolo property, he
had it titled in the name of the petitioner because of said prohibition. Hence, we denied his attempt at
subsequently asserting a right to the said property in the form of a claim for reimbursement. Neither
did the Court declare that an implied trust was created by operation of law in view of petitioners
marriage to respondent. We said that to rule otherwise would permit circumvention of the
constitutional prohibition.
In Frenzel v. Catito,32 petitioner, an Australian citizen, was married to Teresita Santos; while
respondent, a Filipina, was married to Klaus Muller. Petitioner and respondent met and later
cohabited in a common-law relationship, during which petitioner acquired real properties; and since
he was disqualified from owning lands in the Philippines, respondents name appeared as the
vendee in the deeds of sale. When their relationship turned sour, petitioner filed an action for the
recovery of the real properties registered in the name of respondent, claiming that he was the real
owner. Again, as in the other cases, the Court refused to declare petitioner as the owner mainly
because of the constitutional prohibition. The Court added that being a party to an illegal contract, he
could not come to court and ask to have his illegal objective carried out. One who loses his money or
property by knowingly engaging in an illegal contract may not maintain an action for his losses.
Finally, in Cheesman v. Intermediate Appellate Court,33 petitioner (an American citizen) and Criselda
Cheesman acquired a parcel of land that was later registered in the latters name. Criselda
subsequently sold the land to a third person without the knowledge of the petitioner. The petitioner
then sought the nullification of the sale as he did not give his consent thereto. The Court held that
assuming that it was his (petitioners) intention that the lot in question be purchased by him and his
wife, he acquired no right whatever over the property by virtue of that purchase; and in attempting to
acquire a right or interest in land, vicariously and clandestinely, he knowingly violated the
Constitution; thus, the sale as to him was null and void.
In light of the foregoing jurisprudence, we find and so hold that Benjamin has no right to nullify the
Agreement of Lease between Joselyn and petitioner. Benjamin, being an alien, is absolutely
prohibited from acquiring private and public lands in the Philippines. Considering that Joselyn
appeared to be the designated "vendee" in the Deed of Sale of said property, she acquired sole
ownership thereto. This is true even if we sustain Benjamins claim that he provided the funds for
such acquisition. By entering into such contract knowing that it was illegal, no implied trust was
created in his favor; no reimbursement for his expenses can be allowed; and no declaration can be
made that the subject property was part of the conjugal/community property of the spouses. In any
event, he had and has no capacity or personality to question the subsequent lease of the Boracay
property by his wife on the theory that in so doing, he was merely exercising the prerogative of a
husband in respect of conjugal property. To sustain such a theory would countenance indirect
controversion of the constitutional prohibition. If the property were to be declared conjugal, this
would accord the alien husband a substantial interest and right over the land, as he would then have
a decisive vote as to its transfer or disposition. This is a right that the Constitution does not permit
him to have.34
In fine, the Agreement of Lease entered into between Joselyn and petitioner cannot be nullified on
the grounds advanced by Benjamin. Thus, we uphold its validity.
With the foregoing disquisition, we find it unnecessary to address the other issues raised by the
petitioner.
WHEREFORE, premises considered, the December 19, 2003 Decision and July 14, 2004
Resolution of the Court of Appeals in CA-G.R. CV No. 59573, are REVERSED and SET ASIDE and
a new one is entered DISMISSING the complaint against petitioner Philip Matthews.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MINITA V. CHICO-NAZARIO
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
SECOND DIVISION
[ G.R. No. 172342, July 13, 2009 ]
Petitioner LWV Construction Corporation appeals the Decision [1] dated December 6, 2005 of the Court of
Appeals in CA-G.R. SP No. 76843 and its Resolution[2] dated April 12, 2006, denying the motion for
reconsideration. The Court of Appeals had ruled that under Article 87 of the Saudi Labor and Workmen
Law (Saudi Labor Law), respondent Marcelo Dupo is entitled to a service award or longevity
pay amounting to US$12,640.33.
The antecedent facts are as follows:
Petitioner, a domestic corporation which recruits Filipino workers, hired respondent as Civil Structural
Superintendent to work in Saudi Arabia for its principal, Mohammad Al-Mojil Group/Establishment (MMG).
On February 26, 1992, respondent signed his first overseas employment contract, renewable after one
year. It was renewed five times on the following dates: May 10, 1993, November 16, 1994, January 22,
1996, April 14, 1997, and March 26, 1998. All were fixed-period contracts for one year. The sixth and last
contract stated that respondent's employment starts upon reporting to work and ends when he leaves the
work site. Respondent left Saudi Arabia on April 30, 1999 and arrived in the Philippines on May 1, 1999.
On May 28, 1999, respondent informed MMG, through the petitioner, that he needs to extend his vacation
because his son was hospitalized. He also sought a promotion with salary adjustment. [3]In reply, MMG
informed respondent that his promotion is subject to management's review; that his services are still
needed; that he was issued a plane ticket for his return flight to Saudi Arabia on May 31, 1999; and that
his decision regarding his employment must be made within seven days, otherwise, MMG "will be
compelled to cancel [his] slot."[4]
On July 6, 1999, respondent resigned. In his letter to MMG, he also stated:
xxxx
I am aware that I still have to do a final settlement with the company and hope that during my more than
seven (7) [years] services, as the Saudi Law stated, I am entitled for a long service award.[5] (Emphasis
supplied.)
xxxx
According to respondent, when he followed up his claim for long service award on December 7, 2000,
petitioner informed him that MMG did not respond. [6]
On December 11, 2000, respondent filed a complaint[7] for payment of service award against petitioner
before the National Labor Relations Commission (NLRC), Regional Arbitration Branch, Cordillera
Administrative Region, Baguio City. In support of his claim, respondent averred in his position paper that:
xxxx
Under the Law of Saudi Arabia, an employee who rendered at least five (5) years in a company within the
jurisdiction of Saudi Arabia, is entitled to the so-called long service award which is known to others as
longevity pay of at least one half month pay for every year of service. In excess of five years an employee
is entitled to one month pay for every year of service. In both cases inclusive of all benefits and
allowances.
This benefit was offered to complainant before he went on vacation, hence, this was engrained in his
mind. He reconstructed the computation of his long service award or longevity pay and he arrived at the
following computation exactly the same with the amount he was previously offered [which is
US$12,640.33].[8] (Emphasis supplied.)
xxxx
Respondent said that he did not grab the offer for he intended to return after his vacation.
For its part, petitioner offered payment and prescription as defenses. Petitioner maintained that MMG
"pays its workers their Service Award or Severance Pay every conclusion of their Labor Contracts
pursuant to Article 87 of the [Saudi Labor Law]." Under Article 87, "payment of the award is at the end or
termination of the Labor Contract concluded for a specific period." Based on the payroll, [9] respondent was
already paid his service award or severance pay for his latest (sixth) employment contract.
Petitioner added that under Article 13[10] of the Saudi Labor Law, the action to enforce payment of
the service award must be filed within one year from the termination of a labor contract for a specific
period. Respondent's six contracts ended when he left Saudi Arabia on the following dates: April 15,
1993, June 8, 1994, December 18, 1995, March 21, 1997, March 16, 1998 and April 30, 1999. Petitioner
concluded that the one-year prescriptive period had lapsed because respondent filed his complaint on
December 11, 2000 or one year and seven months after his sixth contract ended. [11]
In his June 18, 2001 Decision,[12] the Labor Arbiter ordered petitioner to pay respondent longevity pay of
US$12,640.33 or P648,562.69 and attorney's fees of P64,856.27 or a total of P713,418.96. [13]
The Labor Arbiter ruled that respondent's seven-year employment with MMG had sufficiently oriented him
on the benefits given to workers; that petitioner was unable to convincingly refute respondent's claim that
MMG offered him longevity pay before he went on vacation on May 1, 1999; and that respondent's claim
was not barred by prescription since his claim on July 6, 1999, made a month after his cause of action
accrued, interrupted the prescriptive period under the Saudi Labor Law until his claim was categorically
denied.
Petitioner appealed. However, the NLRC dismissed the appeal and affirmed the Labor Arbiter's decision.
[14]
The NLRC ruled that respondent is entitled to longevity pay which is different from severance pay.
Aggrieved, petitioner brought the case to the Court of Appeals through a petition for certiorari under Rule
65 of the Rules of Court. The Court of Appeals denied the petition and affirmed the NLRC. The Court of
Appeals ruled that service award is the same as longevity pay, and that theseverance pay received by
respondent cannot be equated with service award. The dispositive portion of the Court of Appeals
decision reads:
WHEREFORE, finding no grave abuse of discretion amounting to lack or in (sic) excess of jurisdiction on
the part of public respondent NLRC, the petition is denied. The NLRC decision dated November 29, 2002
as well as and (sic) its January 31, 2003 Resolution are hereby AFFIRMED in toto.
SO ORDERED.[15]
After its motion for reconsideration was denied, petitioner filed the instant petition raising the following
issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING NO GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART OF PUBLIC
RESPONDENT NATIONAL LABOR RELATIONS COMMISSION.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE
SERVICE AWARD OF THE RESPONDENT [HAS] NOT PRESCRIBED WHEN HIS COMPLAINT WAS
FILED ON DECEMBER 11, 2000.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING IN THE CASE AT
BAR [ARTICLE 1155 OF THE CIVIL CODE].
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING ARTICLE NO. 7
OF THE SAUDI LABOR AND WORKMEN LAW TO SUPPORT ITS FINDING THAT THE BASIS OF THE
SERVICE AWARD IS LONGEVITY [PAY] OR LENGTH OF SERVICE RENDERED BY AN EMPLOYEE. [16]
Essentially, the issue is whether the Court of Appeals erred in ruling that respondent is entitled to
a service award or longevity pay of US$12,640.33 under the provisions of the Saudi Labor Law. Related
to this issue are petitioner's defenses of payment and prescription.
Petitioner points out that the Labor Arbiter awarded longevity pay although the Saudi Labor Law grants no
such benefit, and the NLRC confused longevity pay and service award. Petitioner maintains that the
benefit granted by Article 87 of the Saudi Labor Law is service award which was already paid by MMG
Respondent, however, has called the benefit other names such as long service award andlongevity pay.
On the other hand, petitioner claimed that the service award is the same asseverance pay. Notably, the
Labor Arbiter was unable to specify any law to support his award oflongevity pay.[18] He anchored the
award on his finding that respondent's allegations were more credible because his seven-year
employment at MMG had sufficiently oriented him on the benefits given to workers. To the NLRC,
respondent is entitled to service award or longevity pay under Article 87 and that longevity pay is different
from severance pay. The Court of Appeals agreed.
Considering that Article 87 expressly grants a service award, why is it correct to agree with respondent
that service award is the same as longevity pay, and wrong to agree with petitioner that service award is
the same as severance pay? And why would it be correct to say that service award is severance pay, and
wrong to call service award as longevity pay?
We found the answer in the pleadings and evidence presented. Respondent's position paper mentioned
how his long service award or longevity pay is computed: half-month's pay per year of service and onemonth's pay per year after five years of service. Article 87 has the same formula to compute the service
award.
The payroll submitted by petitioner showed that respondent received severance pay of SR2,786 for his
sixth employment contract covering the period April 21, 1998 to April 29, 1999. [19] The computation below
shows that respondent's severance pay of SR2,786 was his service awardunder Article 87.
Service Award = (SR5,438)[20] + (9 days/365 days)[21] x (SR5,438)
Service Award = SR2,786.04
Respondent's service award for the sixth contract is equivalent only to half-month's pay plus the
proportionate amount for the additional nine days of service he rendered after one year. Respondent's
employment contracts expressly stated that his employment ended upon his departure from work. Each
year he departed from work and successively new contracts were executed before he reported for work
anew. His service was not cumulative. Pertinently, in Brent School, Inc. v. Zamora,[22] we said that "a fixed
term is an essential and natural appurtenance" of overseas employment contracts, [23] as in this case. We
also said in that case that under American law, "[w]here a contract specifies the period of its duration, it
terminates on the expiration of such period. A contract of employment for a definite period terminates by
its own terms at the end of such period." [24] As it is, Article 72 of the Saudi Labor Law is also of similar
import. It reads:
A labor contract concluded for a specified period shall terminate upon the expiry of its term. If both parties
continue to enforce the contract, thereafter, it shall be considered renewed for an unspecified period. [25]
Regarding respondent's claim that he was offered US$12,640.33 as longevity pay before he returned to
the Philippines on May 1, 1999, we find that he was not candid on this particular point. His categorical
assertion about the offer being "engrained in his mind" such that he "reconstructed the computation ...
and arrived at the ... computation exactly the same with the amount he was previously offered" is not only
beyond belief. Such assertion is also a stark departure from his July 6, 1999 letter to MMG where he
could only express his hope that he was entitled to a long service award and where he never mentioned
the supposed previous offer. Moreover, respondent's claim that his monthly compensation is
SR10,248.92[26] is belied by the payroll which shows that he receives SR5,438 per month.
We therefore emphasize that such payroll should have prompted the lower tribunals to examine closely
respondent's computation of his supposed longevity pay before adopting that computation as their own.
On the matter of prescription, however, we cannot agree with petitioner that respondent's action has
prescribed under Article 13 of the Saudi Labor Law. What applies is Article 291 of our Labor Code which
reads:
ART. 291. Money claims. -- All money claims arising from employer-employee relations accruing during
the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued;
otherwise they shall be forever barred.
xxxx