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G.R. No.

102223 August 22, 1996


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

TORRES, JR., J.:p


Business Corporations, according to Lord Coke, "have no
souls." They do business peddling goods, wares or even
services across national boundaries in "souless forms" in
quest for profits albeit at times, unwelcomed in these
strange lands venturing into uncertain markets and, the risk
of dealing with wily competitors.

On August 14, 1987, ITEC entered into a contract with


petitioner
ASPAC
referred
to
as
"Representative
1
Agreement". Pursuant to the contract, ITEC engaged ASPAC
as its "exclusive representative" in the Philippines for the
sale of ITEC's products, in consideration of which, ASPAC
was paid a stipulated commission. The agreement was
signed by G.A. Clark and Francisco S. Aguirre, presidents of
ITEC and ASPAC respectively, for and in behalf of their
companies. 2 The said agreement was initially for a term of
twenty-four months. After the lapse of the agreed period,
the agreement was renewed for another twenty-four
months.
Through a "License Agreement" 3 entered into by the same
parties on November 10, 1988, ASPAC was able to
incorporate and use the name "ITEC" in its own name. Thus ,
ASPAC Multi-Trade, Inc. became legally and publicly known
as ASPAC-ITEC (Philippines).

This is one of the issues in the case at bar.

By virtue of said contracts, ASPAC sold electronic products,


exported by ITEC, to their sole customer, the Philippine Long
Distance Telephone Company, (PLDT, for brevity).

Contested in this petition for review on Certiorari is the


Decision of the Court of Appeals on June 7, 1991, sustaining
the RTC Order dated February 22, 1991, denying the
petitioners' Motion to Dismiss, and directing the issuance of
a writ of preliminary injunction, and its companion
Resolution of October 9, 1991, denying the petitioners'
Motion for Reconsideration.

To facilitate their transactions, ASPAC, dealing under its new


appellation, and PLDT executed a document entitled "PLDTASPAC/ITEC PROTOCOL" 4 which defined the project details
for the supply of ITEC's Interface Equipment in connection
with the Fifth Expansion Program of PLDT.

Petitioners COMMUNICATION MATERIALS AND DESIGN, INC.,


(CMDI, for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for
brevity) are both domestic corporations, while petitioner
Francisco S. Aguirre is their President and majority
stockholder. Private Respondents ITEC, INC. and/or ITEC,
INTERNATIONAL, INC. (ITEC, for brevity) are corporations
duly organized and existing under the laws of the State of
Alabama, United States of America. There is no dispute that
ITEC is a foreign corporation not licensed to do business in
the Philippines.

One year into the second term of the parties' Representative


Agreement, ITEC decided to terminate the same, because
petitioner ASPAC allegedly violated its contractual
commitment as stipulated in their agreements. 5
ITEC charges the petitioners and another Philippine
Corporation,
DIGITAL
BASE
COMMUNICATIONS,
INC.
(DIGITAL, for brevity), the President of which is likewise
petitioner Aguirre, of using knowledge and information of
ITEC's products specifications to develop their own line of
equipment and product support, which are similar, if not

Page | 1

identical to ITEC's own, and offering them to ITEC's former


customer.
On January 31, 1991, the complaint 6 in Civil Case No. 91294, was filed with the Regional Trial Court of Makati, Branch
134 by ITEC, INC. Plaintiff sought to enjoin, first,
preliminarily and then, after trial, permanently; (1)
defendants DIGITAL, CMDI, and Francisco Aguirre and their
agents and business associates, to cease and desist from
selling or attempting to sell to PLDT and to any other party,
products which have been copied or manufactured "in like
manner, similar or identical to the products, wares and
equipment of plaintiff," and (2) defendant ASPAC, to cease
and desist from using in its corporate name, letter heads,
envelopes, sign boards and business dealings, plaintiff's
trademark, internationally known as ITEC; and the recovery
from defendants in solidum, damages of at least
P500,000.00, attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss 7 the
complaint on the following grounds:
(1) That plaintiff has no legal capacity to sue as it is a
foreign corporation doing business in the Philippines without
the required BOI authority and SEC license, and (2) that
plaintiff is simply engaged in forum shopping which justifies
the application against it of the principle of "forum non
conveniens".
On February 8, 1991, the complaint was amended by virtue
of which ITEC INTERNATIONAL, INC. was substituted as
plaintiff instead of ITEC, INC. 8
In their Supplemental Motion to Dismiss, 9 defendants took
note of the amendment of the complaint and asked the
court to consider in toto their motion to dismiss and their
supplemental motion as their answer to the amended
complaint.
After conducting hearings on the prayer for preliminary
injunction, the court a quo on February 22, 1991, issued its

Order: 10 (1) denying the motion to dismiss for being devoid


of legal merit with a rejection of both grounds relied upon by
the defendants in their motion to dismiss, and (2) directing
the issuance of a writ of preliminary injunction on the same
day.
From the foregoing order, petitioners elevated the case to
the respondent Court of Appeals on a Petition
forCertiorari and Prohibition 11 under Rule 65 of the Revised
Rules of Court, assailing and seeking the nullification and
the setting aside of the Order and the Writ of Preliminary
Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the facts of
record, to disagree with the (lower court's) ruling. We
therefore are unable to find in respondent Judge's
issuance of said writ the grave abuse of discretion
ascribed thereto by the petitioners.
In fine, We find that the petition prima facie does not
show that Certiorari lies in the present case and
therefore, the petition does not deserve to be given
due course.
WHEREFORE, the present petition should be, as it is
hereby, denied due course and accordingly, is hereby
dismissed. Costs against the petitioners.
SO ORDERED. 12
Petitioners filed a motion for reconsideration 13 on June 7,
1991, which was likewise denied by the respondent court.
WHEREFORE, the present motion for reconsideration
should be, as it is hereby, denied for lack of merit.
For the same reason, the motion to have the motion
for reconsideration set for oral argument likewise
should be and is hereby denied.

Page | 2

SO ORDERED. 14
Petitioners are now before us via Petition for Review
on Certiorari 15 under Rule 45 of the Revised Rules of Court.

found in the License Agreement of the parties in the TopWeld case which were considered as "highly restrictive" by
this Court. The provisions in point are:
2.0 Terms and Conditions of Sales.

It is the petitioners' submission that private respondents are


foreign corporations actually doing business in the
Philippines without the requisite authority and license from
the Board of Investments and the Securities and Exchange
Commission, and thus, disqualified from instituting the
present action in our courts. It is their contention that the
provisions of the Representative Agreement, petitioner
ASPAC executed with private respondent ITEC, are similarly
"highly restrictive" in nature as those found in the
agreements which confronted the Court in the case of TopWeld Manufacturing, Inc. vs. ECED S.A. et al., 16 as to reduce
petitioner ASPAC to a mere conduit or extension of private
respondents in the Philippines.
In that case, we ruled that respondent foreign corporations
are doing business in the Philippines because when the
respondents entered into the disputed contracts with the
petitioner, they were carrying out the purposes for which
they were created, i.e., to manufacture and market welding
products and equipment. The terms and conditions of the
contracts as well as the respondents' conduct indicate that
they established within our country a continuous business,
and not merely one of a temporary character. The
respondents could be exempted from the requirements of
Republic Act 5455 if the petitioner is an independent entity
which buys and distributes products not only of the
petitioner, but also of other manufacturers or transacts
business in its name and for its account and not in the name
or for the account of the foreign principal. A reading of the
agreements between the petitioner and the respondents
shows that they are highly restrictive in nature, thus making
the petitioner a mere conduit or extension of the
respondents.
It is alleged that certain provisions of the "Representative
Agreement" executed by the parties are similar to those

2.1 Sale of ITEC products shall be at the purchase


price set by ITEC from time to time. Unless otherwise
expressly agreed to in writing by ITEC the purchase
price is net to ITEC and does not include any
transportation charges, import charges or taxes into
or within the Territory. All orders from customers are
subject to formal acceptance by ITEC at its
Huntsville, Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the
Territory any product which competes with an
existing ITEC product or any product which ITEC has
under active development.
3.1.2. Actively solicit all potential customers within
the Territory in a systematic and business like
manner.
3.1.3. Inform ITEC of all request for proposals,
requests for bids, invitations to bid and the like within
the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory
established by ITEC. The Sales Goals for the first 24
months is set forth on Attachment two (2) hereto.
The Sales Goal for additional twelve month periods, if
any, shall be sent to the Sales Agent by ITEC at the
beginning of each period. These Sales Goals shall be

Page | 3

incorporated into this Agreement and made a part


hereof.

Contract No. 1 is, as its very title indicates, in the


names jointly of the petitioner ASPAC and private
respondents;

xxx xxx xxx


6.0. Representative as Independent Contractor
xxx xxx xxx
6.2.
When
acting
under
this
Agreement
REPRESENTATIVE is authorized to solicit sales within
the Territory on ITEC's behalf but is authorized to
bind ITEC only in its capacity as Representative and
no other, and then only to specific customers and on
terms and conditions expressly authorized by ITEC in
writing. 17
Aside from the abovestated provisions, petitioners point out
the following matters of record, which allegedly bear witness
to the respondents' activities within the Philippines in
pursuit of their business dealings:
a. While petitioner ASPAC was the authorized
exclusive representative for three (3) years, it
solicited from and closed several sales for and on
behalf of private respondents as to their products
only and no other, to PLDT, worth no less than US $
15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which
covered these sales and identified by private
respondents' sole witness, Mr. Clarence Long, is not
in the name of petitioner ASPAC as such
representative, but in the name of private
respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC
PROTOCOL (Annex C of the original and amended
complaints) which defined the responsibilities of the
parties thereto as to the supply, installation and
maintenance of the ITEC equipment sold under said

d. To evidence receipt of the purchase price of US $


15 Million, private respondent ITEC, Inc. issued in its
letter head, a Confirmation of payment dated
November 13, 1989 and its Invoice dated November
22, 1989 (Annexes 1 and 2 of the Motion to Dismiss
and marked as Exhibits 2 and 3 for the petitioners),
both of which were identified by private respondent's
sole witness, Mr. Clarence Long (pp. 25-27, tsn, Feb.
18, 1991). 18
Petitioners contend that the above acts or activities belie
the supposed independence of petitioner ASPAC from
private respondents. "The unrebutted evidence on record
below for the petitioners likewise reveal the continuous
character of doing business in the Philippines by private
respondents based on the standards laid down by this Court
in Wang Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et
al. 19 and again in TOP-WELD. (supra)" It thus appears that
as the respondent Court of Appeals and the trial court's
failure to give credence on the grounds relied upon in
support of their Motion to Dismiss that petitioners ascribe
grave abuse of discretion amounting to an excess of
jurisdiction of said courts.
Petitioners likewise argue that since private respondents
have no capacity to bring suit here, the Philippines is not the
"most convenient forum" because the trial court is devoid of
any power to enforce its orders issued or decisions rendered
in a case that could not have been commenced to begin
with, such that in insisting to assume and exercise
jurisdiction over the case below, the trial court had gravely
abused its discretion and even actually exceeded its
jurisdiction.
As against petitioner's insistence that private respondent is "doing
business" in the Philippines, the latter maintains that it is not.

Page | 4

We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of
the Rules and Regulations Implementing the Omnibus Investments
Code of 1987, the following:

ascribing to
Agreement.

provision

No.

of

the

Representative

6.0 Representative as Independent Contractor


(1) A foreign firm is deemed not engaged in business
in the Philippines if it transacts business through
middlemen, acting in their own names, such as
indebtors,
commercial
bookers
commercial
merchants.
(2) A foreign corporation is deemed not "doing
business" if its representative domiciled in the
Philippines has an independent status in that it
transacts business in its name and for its account. 20

6.1. When performing any of its duties under this


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

Private respondent argues that a scrutiny of its


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

Although it admits that the Representative Agreement


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

3.1.7.1. In the event that REPRESENTATIVE imports


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

The issues before us now are whether or not private


respondent ITEC is an unlicensed corporation doing business
in the Philippines, and if it is, whether or not this fact bars it
from invoking the injunctive authority of our courts.

4.1. As complete consideration and payment for


acting as representative under this Agreement,
REPRESENTATIVE shall receive a sales commission
equivalent to a per centum of the FOB value of all
ITEC equipment sold to customers within the territory
as a direct result of REPRESENTATIVE's sales
efforts. 21

Considering the above, it is necessary to state what is


meant by "doing business" in the Philippines. Section 133 of
the Corporation Code, provides that "No foreign corporation,
transacting business in the Philippines without a license, or
its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such
corporation may be sued or proceeded against before
Philippine Courts or administrative tribunals on any valid
cause of action recognized under Philippine laws." 24

More importantly, private respondent charges ASPAC of


admitting its independence from ITEC by entering and

Generally, a "foreign corporation" has no legal existence


within the state in which it is foreign. This proceeds from the

xxx xxx xxx

Page | 5

principle that juridical existence of a corporation is confined


within the territory of the state under whose laws it was
incorporated and organized, and it has no legal status
beyond such territory. Such foreign corporation may be
excluded by any other state from doing business within its
limits, or conditions may be imposed on the exercise of such
privileges. 25 Before a foreign corporation can transact
business in this country, it must first obtain a license to
transact business in the Philippines, and a certificate from
the appropriate government agency. If it transacts business
in the Philippines without such a license, it shall not be
permitted to maintain or intervene in any action, suit, or
proceeding in any court or administrative agency of the
Philippines, but it may be sued on any valid cause of action
recognized under Philippine laws. 26
In a long line of decisions, this Court has not altogether
prohibited foreign corporation not licensed to do business in
the Philippines from suing or maintaining an action in
Philippine Courts. What it seeks to prevent is a foreign
corporation doing business in the Philippines without a
licensed from gaining access to Philippine Courts. 27
The purpose of the law in requiring that foreign corporations
doing business in the Philippines be licensed to do so and
that they appoint an agent for service of process is to
subject the foreign corporation doing business in the
Philippines to the jurisdiction of its courts. The object is not
to prevent the foreign corporation from performing single
acts, but to prevent it from acquiring a domicile for the
purpose of business without taking steps necessary to
render it amenable to suit in the local courts. 28 The
implication of the law is that it was never the purpose of the
legislature to exclude a foreign corporation which happens
to obtain an isolated order for business from the Philippines,
and thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations. 29
There is no exact rule or governing principle as to what
constitutes "doing" or "engaging" or "transacting" business.
Indeed, such case must be judged in the light of its peculiar
circumstances, upon its peculiar facts and upon the

language of the statute applicable. The true test, however,


seems to be whether the foreign corporation is continuing
the body or substance of the business or enterprise for
which it was organized. 30
Article 44 of the Omnibus Investments Code of 1987 defines
the phrase to include:
soliciting orders, purchases, service contracts,
opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors
who are domiciled in the Philippines or who in any
calendar year stay in the Philippines for a period or
periods totalling one hundred eighty (180) days or
more; participating in the management, supervision
or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or
acts that imply a continuity or commercial dealings
or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of
some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the
purpose and object of the business organization.
Thus, a foreign corporation with a settling agent in the
Philippines which issued twelve marine policies covering
different shipments to the Philippines 31 and a foreign
corporation which had been collecting premiums on
outstanding policies 32 were regarded as doing business
here.
The same rule was observed relating to a foreign
corporation with an "exclusive distributing agent" in the
Philippines, and which has been selling its products here
since 1929, 33 and a foreign corporation engaged in the
business of manufacturing and selling computers worldwide,
and had installed at least 26 different products in several
corporations in the Philippines, and allowed its registered
logo and trademark to be used and made it known that
there exists a designated distributor in the Philippines. 34

Page | 6

In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it was held


that the uninterrupted performance by a foreign corporation
of acts pursuant to its primary purposes and functions as a
regional area headquarters for its home office, qualifies such
corporation as one doing business in the country.

arrangements, with these entities indicate convincingly


ITEC's purpose to bring about the situation among its
customers and the general public that they are dealing
directly with ITEC, and that ITEC is actively engaging in
business in the country.

These foregoing instances should be distinguished from a


single or isolated transaction or occasional, incidental, or
casual transactions, which do not come within the meaning
of the law, 36 for in such case, the foreign corporation is
deemed not engaged in business in the Philippines.

In its Master Service Agreement 39 with TESSI, private


respondent required its local technical representative to
provide the employees of the technical and service center
with ITEC identification cards and business cards, and to
correspond only on ITEC, Inc., letterhead. TESSI personnel
are instructed to answer the telephone with "ITEC Technical
Assistance Center.", such telephone being listed in the
telephone book under the heading of ITEC Technical
Assistance Center, and all calls being recorded and
forwarded to ITEC on a weekly basis.

Where a single act or transaction, however, is not merely


incidental or casual but indicates the foreign corporation's
intention to do other business in the Philippines, said single
act or transaction constitutes "doing" or "engaging in" or
"transacting" business in the Philippines. 37
In determining whether a corporation does business in the
Philippines or not, aside from their activities within the
forum, reference may be made to the contractual
agreements entered into by it with other entities in the
country. Thus, in the Top-Weld case (supra), the foreign
corporation's LICENSE AND TECHNICAL AGREEMENT and
DISTRIBUTOR AGREEMENT with their local contacts were
made the basis of their being regarded by this Tribunal as
corporations doing business in the country. Likewise,
in Merill Lynch Futures, Inc. vs. Court of Appeals, etc. 38 the
FUTURES CONTRACT entered into by the petitioner foreign
corporation weighed heavily in the court's ruling.
With the abovestated precedents in mind, we are persuaded
to conclude that private respondent had been "engaged in"
or "doing business" in the Philippines for some time now.
This is the inevitable result after a scrutiny of the different
contracts and agreements entered into by ITEC with its
various business contacts in the country, particularly ASPAC
and Telephone Equipment Sales and Services, Inc. (TESSI,
for brevity). The latter is a local electronics firm engaged by
ITEC to be its local technical representative, and to create a
service center for ITEC products sold locally. Its

What is more, TESSI was obliged to provide ITEC with a


monthly report detailing the failure and repair of ITEC
products, and to requisition monthly the materials and
components needed to replace stock consumed in the
warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and
the respondents shows that there are provisions which are
highly restrictive in nature, such as to reduce petitioner
ASPAC to a mere extension or instrument of the private
respondent.
The "No Competing Product" provision of the Representative
Agreement between ITEC and ASPAC provides: "The
Representative shall not represent or offer for sale within
the Territory any product which competes with an existing
ITEC product or any product which ITEC has under active
development." Likewise pertinent is the following provision:
"When acting under this Agreement, REPRESENTATIVE is
authorized to solicit sales within the Territory on ITEC's
behalf but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific
customers and on terms and conditions expressly authorized
by ITEC in writing."

Page | 7

When ITEC entered into the disputed contracts with ASPAC


and TESSI, they were carrying out the purposes for which it
was created, i.e., to market electronics and communications
products. The terms and conditions of the contracts as well
as ITEC's conduct indicate that they established within our
country a continuous business, and not merely one of a
temporary character. 40
Notwithstanding such finding that ITEC is doing business in
the country, petitioner is nonetheless estopped from raising
this fact to bar ITEC from instituting this injunction case
against it.
A foreign corporation doing business in the Philippines may
sue in Philippine Courts although not authorized to do
business here against a Philippine citizen or entity who had
contracted with and benefited by said corporation. 41 To put
it in another way, a party is estopped to challenge the
personality of a corporation after having acknowledged the
same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as
well as to domestic corporations. 42 One who has dealt with
a corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity: The
principle will be applied to prevent a person contracting with
a foreign corporation from later taking advantage of its
noncompliance with the statutes chiefly in cases where such
person has received the benefits of the contract. 43
The rule is deeply rooted in the time-honored axiom
of Commodum ex injuria sua non habere debet no person
ought to derive any advantage of his own wrong. This is as it
should be for as mandated by law, "every person must in
the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe
honesty and good faith." 44
Concededly, corporations act through agents, like directors
and officers. Corporate dealings must be characterized by
utmost good faith and fairness. Corporations cannot just
feign ignorance of the legal rules as in most cases, they are

manned by sophisticated officers with tried management


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

Page | 8

repudiate their obligations simply because the latter are not


licensed to do business in this country. 45
In Antam Consolidated Inc. vs. Court of Appeals, et al. 46 we
expressed our chagrin over this commonly used scheme of
defaulting local companies which are being sued by
unlicensed foreign companies not engaged in business in
the Philippines to invoke the lack of capacity to sue of such
foreign companies. Obviously, the same ploy is resorted to
by ASPAC to prevent the injunctive action filed by ITEC to
enjoin petitioner from using knowledge possibly acquired in
violation of fiduciary arrangements between the parties.
By entering into the "Representative Agreement" with ITEC,
Petitioner is charged with knowledge that ITEC was not
licensed to engage in business activities in the country, and
is thus estopped from raising in defense such incapacity of
ITEC, having chosen to ignore or even presumptively take
advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be
exempted from the license requirement in order to institute
an action in our courts if its representative in the country
maintained an independent status during the existence of
the disputed contract. Petitioner is deemed to have acceded
to such independent character when it entered into the
Representative Agreement with ITEC, particularly, provision
6.2 (supra).
Petitioner's insistence on the dismissal of this action due to
the application, or non application, of the private
international law rule of forum non conveniens defies wellsettled rules of fair play. According to petitioner, the
Philippine Court has no venue to apply its discretion whether
to give cognizance or not to the present action, because it
has not acquired jurisdiction over the person of the plaintiff
in the case, the latter allegedly having no personality to sue
before Philippine Courts. This argument is misplaced
because the court has already acquired jurisdiction over the
plaintiff in the suit, by virtue of his filing the original
complaint. And as we have already observed, petitioner is

not at liberty to question plaintiff's standing to sue, having


already acceded to the same by virtue of its entry into the
Representative Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine
Court, based on the facts of the case, whether to give due
course to the suit or dismiss it, on the principle of forum non
convenience. 47 Hence, the Philippine Court may refuse to
assume jurisdiction in spite of its having acquired
jurisdiction. Conversely, the court may assume jurisdiction
over the case if it chooses to do so; provided, that the
following requisites are met: 1) That the Philippine Court is
one to which the parties may conveniently resort to; 2) That
the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and, 3) That the
Philippine Court has or is likely to have power to enforce its
decision. 48
The aforesaid requirements having been met, and in view of
the court's disposition to give due course to the questioned
action, the matter of the present forum not being the "most
convenient" as a ground for the suit's dismissal, deserves
scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition
is hereby DISMISSED. The decision of the Court of Appeals
dated June 7, 1991, upholding the RTC Order dated February
22, 1991, denying the petitioners' Motion to Dismiss, and
ordering the issuance of the Writ of Preliminary Injunction, is
hereby affirmed in toto.
SO ORDERED.

Page | 9

G.R. No. 103493 June 19, 1997


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

MENDOZA, J.:
This case presents for determination the conclusiveness of a
foreign judgment upon the rights of the parties under the same
cause of action asserted in a case in our local court. Petitioners
brought this case in the Regional Trial Court of Makati, Branch 56,
which, in view of the pendency at the time of the foreign action,
dismissed Civil Case No. 16563 on the ground of litis pendentia, in
addition to forum non conveniens. On appeal, the Court of Appeals
affirmed. Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained
separate loans from petitioners Ayala International Finance Limited
(hereafter called AYALA) 1 and Philsec Investment Corporation
(hereafter called PHILSEC) in the sum of US$2,500,000.00, secured
by shares of stock owned by Ducat with a market value of
P14,088,995.00. In order to facilitate the payment of the loans,
private respondent 1488, Inc., through its president, private
respondent Drago Daic, assumed Ducat's obligation under an
Agreement, dated January 27, 1983, whereby 1488, Inc. executed a
Warranty Deed with Vendor's Lien by which it sold to petitioner
Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in
Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC
and AYALA extended a loan to ATHONA in the amount of
US$2,500,000.00 as initial payment of the purchase price. The
balance of US$307,209.02 was to be paid by means of a promissory
note executed by ATHONA in favor of 1488, Inc. Subsequently,

upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC


and AYALA released Ducat from his indebtedness and delivered to
1488, Inc. all the shares of stock in their possession belonging to
Ducat.
As ATHONA failed to pay the interest on the balance of
US$307,209.02, the entire amount covered by the note became
due and demandable. Accordingly, on October 17, 1985, private
respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and
ATHONA in the United States for payment of the balance of
US$307,209.02 and for damages for breach of contract and for
fraud allegedly perpetrated by petitioners in misrepresenting the
marketability of the shares of stock delivered to 1488, Inc. under
the Agreement. Originally instituted in the United States District
Court of Texas, 165th Judicial District, where it was docketed as
Case No. 85-57746, the venue of the action was later transferred to
the United States District Court for the Southern District of Texas,
where 1488, Inc. filed an amended complaint, reiterating its
allegations in the original complaint. ATHONA filed an answer with
counterclaim,
impleading
private
respondents
herein
as
counterdefendants, for allegedly conspiring in selling the property
at a price over its market value. Private respondent Perlas, who had
allegedly appraised the property, was later dropped as
counterdefendant. ATHONA sought the recovery of damages and
excess payment allegedly made to 1488, Inc. and, in the
alternative, the rescission of sale of the property. For their part,
PHILSEC and AYALA filed a motion to dismiss on the ground of lack
of jurisdiction over their person, but, as their motion was denied,
they later filed a joint answer with counterclaim against private
respondents and Edgardo V. Guevarra, PHILSEC's own former
president, for the rescission of the sale on the ground that the
property had been overvalued. On March 13, 1990, the United
States District Court for the Southern District of Texas dismissed the
counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and
embarrass him." For this reason, the U.S. court imposed so-called
Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay
damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the
United States, petitioners filed a complaint "For Sum of Money with

Page | 10

Damages and Writ of Preliminary Attachment" against private


respondents in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 16563. The complaint reiterated the
allegation of petitioners in their respective counterclaims in Civil
Action No. H-86-440 of the United States District Court of Southern
Texas that private respondents committed fraud by selling the
property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private
respondents' fraudulent misrepresentations, ATHONA, PHILSEC, and
AYALA were induced to enter into the Agreement and to purchase
the Houston property. Petitioners prayed that private respondents
be ordered to return to ATHONA the excess payment of
US$1,700,000.00 and to pay damages. On April 20, 1987, the trial
court issued a writ of preliminary attachment against the real and
personal properties of private respondents. 2

motion to dismiss filed by 1488, Inc. and Daic on the ground of litis
pendentia considering that

Private respondent Ducat moved to dismiss Civil Case No. 16563 on


the grounds of (1) litis pendentia, vis-a-visCivil Action No. H-86-440
filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens,
and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of
action. Ducat contended that the alleged overpricing of the
property prejudiced only petitioner ATHONA, as buyer, but not
PHILSEC and BPI-IFL which were not parties to the sale and whose
only participation was to extend financial accommodation to
ATHONA under a separate loan agreement. On the other hand,
private respondents 1488, Inc. and its president Daic filed a joint
"Special Appearance and Qualified Motion to Dismiss," contending
that the action being in personam, extraterritorial service of
summons by publication was ineffectual and did not vest the court
with jurisdiction over 1488, Inc., which is a non-resident foreign
corporation, and Daic, who is a non-resident alien.

The trial court also held itself without jurisdiction over 1488,
Inc. and Daic because they were non-residents and the
action was not an action in rem or quasi in rem, so that
extraterritorial service of summons was ineffective. The trial
court subsequently lifted the writ of attachment it had
earlier issued against the shares of stocks of 1488, Inc. and
Daic.

On January 26, 1988, the trial court granted Ducat's motion to


dismiss, stating that "the evidentiary requirements of the
controversy may be more suitably tried before the forum of the litis
pendentia in the U.S., under the principle in private international
law of forum non conveniens," even as it noted that Ducat was not
a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daic's
motion to dismiss. On March 9, 1988, the trial court 3 granted the

the "main factual element" of the cause of action in


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

Petitioners appealed to the Court of Appeals, arguing that the trial


court erred in applying the principle of litis pendentia and forum
non conveniens and in ruling that it had no jurisdiction over the
defendants, despite the previous attachment of shares of stocks
belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of
Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the
ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or
Drago Daic, while the defendants are Philsec, the
Ayala International Finance Ltd. (BPI-IFL's former
name) and the Athona Holdings, NV. The case at bar
involves the same parties. The transaction sued upon
by the parties, in both cases is the Warranty Deed
executed by and between Athona Holdings and 1488

Page | 11

Inc. In the U.S. case, breach of contract and the


promissory note are sued upon by 1488 Inc., which
likewise alleges fraud employed by herein appellants,
on the marketability of Ducat's securities given in
exchange for the Texas property. The recovery of a
sum of money and damages, for fraud purportedly
committed by appellees, in overpricing the Texas
land, constitute the action before the Philippine
court, which likewise stems from the same Warranty
Deed.
The Court of Appeals also held that Civil Case No. 16563
was an action in personam for the recovery of a sum of
money for alleged tortious acts, so that service of summons
by publication did not vest the trial court with jurisdiction
over 1488, Inc. and Drago Daic. The dismissal of Civil Case
No. 16563 on the ground offorum non conveniens was
likewise affirmed by the Court of Appeals on the ground that
the case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only
one main transaction, and involve foreign elements,
to wit: 1) the property subject matter of the sale is
situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a
non-resident foreign corporation; 3) although the
buyer, Athona Holdings, a foreign corporation which
does not claim to be doing business in the
Philippines, is wholly owned by Philsec, a domestic
corporation, Athona Holdings is also owned by BPIIFL, also a foreign corporation; 4) the Warranty Deed
was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER
ACTION BETWEEN THE SAME PARTIES FOR THE SAME
CAUSE (LITIS PENDENTIA) RELIED UPON BY THE
COURT OF APPEALS IN AFFIRMING THE TRIAL
COURT'S DISMISSAL OF THE CIVIL ACTION IS NOT
APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO


RELIED UPON BY THE COURT OF APPEALS IN
AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS,
THE COURT OF APPEALS ERRED IN NOT HOLDING
THAT PHILIPPINE PUBLIC POLICY REQUIRED THE
ASSUMPTION, NOT THE RELINQUISHMENT, BY THE
TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE
CIVIL ACTION FOR THERE IS EVERY REASON TO
PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT
PRIVATE RESPONDENTS (WHO ARE MOSTLY NONRESIDENT ALIENS) INFLICTED UPON THEM HERE IN
THE PHILIPPINES.
We will deal with these contentions in the order in which they are
made.
First. It is important to note in connection with the first point that
while the present case was pending in the Court of Appeals, the
United States District Court for the Southern District of Texas
rendered judgment 5 in the case before it. The judgment, which was
in favor of private respondents, was affirmed on appeal by the
Circuit Court of Appeals.6 Thus, the principal issue to be resolved in
this case is whether Civil Case No. 16536 is barred by the judgment
of the U.S. court.
Private respondents contend that for a foreign judgment to be
pleaded as res judicata, a judgment admitting the foreign decision
is not necessary. On the other hand, petitioners argue that the
foreign judgment cannot be given the effect of res judicata without
giving them an opportunity to impeach it on grounds stated in Rule
39, 50 of the Rules of Court, to wit: "want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact."
Petitioners' contention is meritorious. While this Court has given the
effect of res judicata to foreign judgments in several cases, 7 it was
after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law. 8 It is

Page | 12

not necessary for this purpose to initiate a separate action or


proceeding for enforcement of the foreign judgment. What is
essential is that there is opportunity to challenge the foreign
judgment, in order for the court to properly determine its efficacy.
This is because in this jurisdiction, with respect to actions in
personam, as distinguished from actions in rem, a foreign judgment
merely
constitutes prima
facie evidence
of
the justness of the claim of a party and, as such, is subject to proof
to the contrary. 9 Rule 39, 50 provides:
Sec. 50. Effect of foreign judgments. The effect of
a judgment of a tribunal of a foreign country, having
jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the
judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the
judgment is presumptive evidence of a right as
between the parties and their successors in interest
by a subsequent title; but the judgment may be
repelled by evidence of a want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake
of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union
Insurance Society of Canton, Ltd., 10 which private respondents
invoke for claiming conclusive effect for the foreign judgment in
their favor, the foreign judgment was considered res judicata
because this Court found "from the evidence as well as from
appellant's own pleadings" 11 that the foreign court did not make a
"clear mistake of law or fact" or that its judgment was void for want
of jurisdiction or because of fraud or collusion by the defendants.
Trial had been previously held in the lower court and only afterward
was a decision rendered, declaring the judgment of the Supreme
Court of the State of Washington to have the effect of res judicata
in the case before the lower court. In the same vein, in Philippines
International Shipping Corp. v. Court of Appeals, 12 this Court held
that the foreign judgment was valid and enforceable in the
Philippines there being no showing that it was vitiated by want of

notice to the party, collusion, fraud or clear mistake of law or fact.


The prima facie presumption under the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for
declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary.
Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence
presented thereat, to assure a proper determination of whether the
issues then being litigated in the U.S. court were exactly the issues
raised in this case such that the judgment that might be rendered
would constitute res judicata. As the trial court stated in its
disputed order dated March 9, 1988.
On the plaintiff's claim in its Opposition that the
causes of action of this case and the pending case in
the United States are not identical, precisely the
Order of January 26, 1988 never found that the
causes of action of this case and the case pending
before the USA Court, were identical. (emphasis
added)
It was error therefore for the Court of Appeals to summarily
rule that petitioners' action is barred by the principle of res
judicata. Petitioners in fact questioned the jurisdiction of the
U.S. court over their persons, but their claim was brushed
aside by both the trial court and the Court of Appeals. 13
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and
Daic filed a petition for the enforcement of judgment in the
Regional Trial Court of Makati, where it was docketed as Civil Case
No. 92-1070 and assigned to Branch 134, although the proceedings
were suspended because of the pendency of this case. To sustain
the appellate court's ruling that the foreign judgment constitutes
res judicata and is a bar to the claim of petitioners would effectively
preclude petitioners from repelling the judgment in the case for
enforcement. An absurdity could then arise: a foreign judgment is
not subject to challenge by the plaintiff against whom it is invoked,
if it is pleaded to resist a claim as in this case, but it may be
opposed by the defendant if the foreign judgment is sought to be

Page | 13

enforced against him in a separate proceeding. This is plainly


untenable. It has been held therefore that:

transaction under litigation. The trial court arbitrarily dismissed the


case even after finding that Ducat was not a party in the U.S. case.

[A] foreign judgment may not be enforced if it is not


recognized in the jurisdiction where affirmative relief
is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the
recognition of the Hongkong judgment under Section
50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present
evidence of lack of jurisdiction, notice, collusion,
fraud or clear mistake of fact and law, if applicable. 14

Third. It was error we think for the Court of Appeals and the trial
court to hold that jurisdiction over 1488, Inc. and Daic could not be
obtained because this is an action in personam and summons were
served by extraterritorial service. Rule 14, 17 on extraterritorial
service provides that service of summons on a non-resident
defendant may be effected out of the Philippines by leave of Court
where, among others, "the property of the defendant has been
attached within the Philippines." 18 It is not disputed that the
properties, real and personal, of the private respondents had been
attached prior to service of summons under the Order of the trial
court dated April 20, 1987. 19

Accordingly, to insure the orderly administration of justice, this case


and Civil Case No. 92-1070 should be consolidated. 15 After all, the
two have been filed in the Regional Trial Court of Makati, albeit in
different salas, this case being assigned to Branch 56 (Judge
Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in
Branch 134 of Judge Ignacio Capulong. In such proceedings,
petitioners should have the burden of impeaching the foreign
judgment and only in the event they succeed in doing so may they
proceed with their action against private respondents.
Second. Nor is the trial court's refusal to take cognizance of the
case justifiable under the principle of forum non conveniens. First, a
motion to dismiss is limited to the grounds under Rule 16, 1, which
does not include forum non conveniens. 16 The propriety of
dismissing a case based on this principle requires a factual
determination, hence, it is more properly considered a matter of
defense. Second, while it is within the discretion of the trial court to
abstain from assuming jurisdiction on this ground, it should do so
only after "vital facts are established, to determine whether special
circumstances" require the court's desistance. 17

Fourth. As for the temporary restraining order issued by the Court


on June 29, 1994, to suspend the proceedings in Civil Case No. 921445 filed by Edgardo V. Guevarra to enforce so-called Rule 11
sanctions imposed on the petitioners by the U.S. court, the Court
finds that the judgment sought to be enforced is severable from the
main judgment under consideration in Civil Case No. 16563. The
separability of Guevara's claim is not only admitted by
petitioners, 20 it appears from the pleadings that petitioners only
belatedly impleaded Guevarra as defendant in Civil Case No.
16563. 21 Hence, the TRO should be lifted and Civil Case No. 921445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and
Civil Case No. 16563 is REMANDED to the Regional Trial Court of
Makati for consolidation with Civil Case No. 92-1070 and for further
proceedings in accordance with this decision. The temporary
restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.

In this case, the trial court abstained from taking jurisdiction solely
on the basis of the pleadings filed by private respondents in
connection with the motion to dismiss. It failed to consider that one
of the plaintiffs (PHILSEC) is a domestic corporation and one of the
defendants (Ventura Ducat) is a Filipino, and that it was the
extinguishment of the latter's debt which was the object of the

Regalado, Romero, Puno and Torres, Jr., JJ., concur.

Page | 14

G.R. No. 120077

October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.


LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER
CEFERINA
J.
DIOSANA
AND
MARCELO
G.
SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari 1 to annul the
following orders of the National Labor Relations Commission
(hereinafter referred to as "NLRC") for having been issued without
or with excess jurisdiction and with grave abuse of discretion: 2
(1) Order of May 31, 1993.3 Reversing and setting aside its
earlier resolution of August 28, 1992.4 The questioned order
declared that the NLRC, not the Philippine Overseas
Employment Administration (hereinafter referred to as
"POEA"), had jurisdiction over private respondent's
complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to
jointly and severally pay private respondent twelve
thousand and six hundred dollars (US$ 12,600.00)
representing salaries for the unexpired portion of his
contract; three thousand six hundred dollars (US$3,600.00)
as extra four months salary for the two (2) year period of his
contract, three thousand six hundred dollars (US$3,600.00)
as "14th month pay" or a total of nineteen thousand and
eight hundred dollars (US$19,800.00) or its peso equivalent
and attorney's fees amounting to ten percent (10%) of the
total award; and
(3) Order of March 30, 1995.6 Denying the motion for
reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter
referred to as "Santos") was an overseas worker employed as a
printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Palace
Hotel, Beijing, People's Republic of China and later terminated due
to retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to


as "MHC") and the Manila Hotel International Company, Limited
(hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a governmentowned and controlled corporation duly organized and existing
under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws
of Hong Kong.7 MHC is an "incorporator" of MHICL, owning 50% of
its capital stock.8
By virtue of a "management agreement" 9 with the Palace Hotel
(Wang Fu Company Limited), MHICL10 trained the personnel and
staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the
Sultanate of Oman, respondent Santos received a letter dated May
2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace
Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that
he was recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer,
but with a higher monthly salary and increased benefits. The
position was slated to open on October 1, 1988.11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and
signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk
mailed a ready to sign employment contract to respondent Santos.
Mr. Henk advised respondent Santos that if the contract was
acceptable, to return the same to Mr. Henk in Manila, together with
his passport and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon
Printing Press, effective June 30, 1988, under the pretext that he
was needed at home to help with the family's piggery and poultry
business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and
acknowledged Mr. Henk's letter. Respondent Santos enclosed four

Page | 15

(4) signed copies of the employment contract (dated June 4, 1988)


and notified them that he was going to arrive in Manila during the
first week of July 1988.

"We sincerely regret that a decision like this has to be made,


but rest assured this does in no way reflect your past
performance which we found up to our expectations."

The employment contract of June 4, 1988 stated that his


employment would commence September 1, 1988 for a period of
two years.12 It provided for a monthly salary of nine hundred dollars
(US$900.00) net of taxes, payable fourteen (14) times a year. 13

"Should a turnaround in the business happen, we will


contact you directly and give you priority on future
assignment."

On June 30, 1988, respondent Santos was deemed resigned from


the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He
started to work at the Palace Hotel.14
Subsequently, respondent Santos signed an amended "employment
agreement" with the Palace Hotel, effective November 5, 1988. In
the contract, Mr. Shmidt represented the Palace Hotel. The Vice
President (Operations and Development) of petitioner MHICL Miguel
D. Cergueda signed the employment agreement under the word
"noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines
on vacation leave. He returned to China and reassumed his post on
July 17, 1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna
suggested in a handwritten note that respondent Santos be given
one (1) month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos
by letter signed by Mr. Shmidt that his employment at the Palace
Hotel print shop would be terminated due to business reverses
brought about by the political upheaval in China. 15 We quote the
letter:16
"After the unfortunate happenings in China and especially
Beijing (referring to Tiannamen Square incidents), our
business has been severely affected. To reduce expenses,
we will not open/operate printshop for the time being.

On September 5, 1989, the Palace Hotel terminated the


employment of respondent Santos and paid all benefits due him,
including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the
Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty.
Ednave wrote Mr. Shmidt, demanding full compensation pursuant to
the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
His service with the Palace Hotel, Beijing was not abruptly
terminated but we followed the one-month notice clause
and Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is
still not operational and with a low business outlook,
retrenchment in various departments of the hotel is going
on which is a normal management practice to control costs.
"When going through the latest performance ratings, please
also be advised that his performance was below average
and a Chinese National who is doing his job now shows a
better approach.
"In closing, when Mr. Santos received the letter of notice, he
hardly showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his
departure."
On February 20, 1990, respondent Santos filed a complaint for
illegal dismissal with the Arbitration Branch, National Capital
Region, National Labor Relations Commission (NLRC). He prayed for
an award of nineteen thousand nine hundred and twenty three

Page | 16

dollars (US$19,923.00) as actual damages, forty thousand pesos


(P40,000.00) as exemplary damages and attorney's fees equivalent
to 20% of the damages prayed for. The complaint named MHC,
MHICL, the Palace Hotel and Mr. Shmidt as respondents.

On May 31, 1993, the NLRC granted the motion and reversed itself.
The NLRC directed Labor Arbiter Emerson Tumanon to hear the
case on the question of whether private respondent was retrenched
or dismissed.22

The Palace Hotel and Mr. Shmidt were not served with summons
and neither participated in the proceedings before the Labor
Arbiter.18

On January 13, 1994, Labor Arbiter Tumanon completed the


proceedings based on the testimonial and documentary evidence
presented to and heard by him.23

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the


case against petitioners, thus:19

Subsequently, Labor Arbiter Tumanon was re-assigned as trial


Arbiter of the National Capital Region, Arbitration Branch, and the
case was transferred to Labor Arbiter Jose G. de Vera.24

"WHEREFORE, judgment is hereby rendered:


"1. directing all the respondents to pay complainant jointly
and severally;
"a) $20,820 US dollars or its equivalent in Philippine
currency as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's
fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing that
the POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating: 20
"WHEREFORE, let the appealed Decision be, as it is hereby,
declared null and void for want of jurisdiction. Complainant
is hereby enjoined to file his complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for
reconsideration of the afore-quoted resolution. He argued that the
case was not cognizable by the POEA as he was not an "overseas
contract worker."21

On November 25, 1994, Labor Arbiter de Vera submitted his


report.25 He found that respondent Santos was illegally dismissed
from employment and recommended that he be paid actual
damages equivalent to his salaries for the unexpired portion of his
contract.26
On December 15, 1994, the NLRC ruled in favor of private
respondent, to wit:27
"WHEREFORE, finding that the report and recommendations
of Arbiter de Vera are supported by substantial evidence,
judgment is hereby rendered, directing the respondents to
jointly and severally pay complainant the following
computed contractual benefits: (1) US$12,600.00 as salaries
for the unexpired portion of the parties' contract; (2)
US$3,600.00 as extra four (4) months salary for the two (2)
years period (sic) of the parties' contract; (3) US$3,600.00
as "14th month pay" for the aforesaid two (2) years contract
stipulated by the parties or a total of US$19,800.00 or its
peso equivalent, plus (4) attorney's fees of 10% of
complainant's total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration
arguing that Labor Arbiter de Vera's recommendation had no basis
in law and in fact.28
On March 30, 1995,
reconsideration.29

the

NLRC

denied

the

motion

for

Page | 17

Hence, this petition.30


On October 9, 1995, petitioners filed with this Court an urgent
motion for the issuance of a temporary restraining order and/or writ
of preliminary injunction and a motion for the annulment of the
entry of judgment of the NLRC dated July 31, 1995.31
On November 20, 1995, the Court denied petitioner's urgent
motion. The Court required respondents to file their respective
comments, without giving due course to the petition.32
On March 8, 1996, the Solicitor General filed a manifestation
stating that after going over the petition and its annexes, they can
not defend and sustain the position taken by the NLRC in its
assailed decision and orders. The Solicitor General prayed that he
be excused from filing a comment on behalf of the NLRC33
On April 30,1996, private respondent Santos filed his comment. 34
On June 26, 1996, the Court granted the manifestation of the
Solicitor General and required the NLRC to file its own comment to
the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign
jurisdictions and the case involves purely foreign elements. The
only link that the Philippines has with the case is that respondent
Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign
corporations. Not all cases involving our citizens can be tried here.
The employment contract. Respondent Santos was hired directly
by the Palace Hotel, a foreign employer, through correspondence
sent to the Sultanate of Oman, where respondent Santos was then
employed. He was hired without the intervention of the POEA or
any authorized recruitment agency of the government. 36

Under the rule of forum non conveniens, a Philippine court or


agency may assume jurisdiction over the case if it chooses to do
so provided: (1) that the Philippine court is one to which the parties
may conveniently resort to; (2) that the Philippine court is in a
position to make an intelligent decision as to the law and the facts;
and (3) that the Philippine court has or is likely to have power to
enforce its decision.37 The conditions are unavailing in the case at
bar.
Not Convenient. We fail to see how the NLRC is a convenient
forum given that all the incidents of the case from the time of
recruitment, to employment to dismissal occurred outside the
Philippines. The inconvenience is compounded by the fact that the
proper defendants, the Palace Hotel and MHICL are not nationals of
the Philippines. Neither .are they "doing business in the
Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk
are non-residents of the Philippines.
No power to determine applicable law. Neither can an intelligent
decision be made as to the law governing the employment contract
as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the
place where the contract was made).38
The employment contract was not perfected in the Philippines.
Respondent Santos signified his acceptance by writing a letter
while he was in the Republic of Oman. This letter was sent to the
Palace Hotel in the People's Republic of China.
No power to determine the facts. Neither can the NLRC
determine the facts surrounding the alleged illegal dismissal as all
acts complained of took place in Beijing, People's Republic of China.
The NLRC was not in a position to determine whether the
Tiannamen Square incident truly adversely affected operations of
the Palace Hotel as to justify respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision. Even
assuming that a proper decision could be reached by the NLRC,
such would not have any binding effect against the employer, the
Palace Hotel. The Palace Hotel is a corporation incorporated under
the laws of China and was not even served with summons.
Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power
to solve controversies involving foreign employers. Neither are we

Page | 18

saying that we do not have power over an employment contract


executed in a foreign country. If Santos were an "overseas contract
worker", a Philippine forum, specifically the POEA, not the NLRC,
would protect him.39 He is not an "overseas contract worker" a fact
which he admits with conviction.40

entity to which it may be related.44 Clear and convincing evidence


is needed to pierce the veil of corporate fiction. 45 In this case, we
find no evidence to show that MHICL and MHC are one and the
same entity.
III. MHICL not Liable

Even assuming that the NLRC was the proper forum, even on the
merits, the NLRC's decision cannot be sustained.
II. MHC Not Liable

Respondent Santos predicates MHICL's liability on the fact that


MHICL "signed" his employment contract with the Palace Hotel. This
fact fails to persuade us.

Even if we assume two things: (1) that the NLRC had jurisdiction
over the case, and (2) that MHICL was liable for Santos'
retrenchment, still MHC, as a separate and distinct juridical entity
cannot be held liable.

First, we note that the Vice President (Operations and


Development) of MHICL, Miguel D. Cergueda signed the
employment contract as a mere witness. He merely signed under
the word "noted".

True, MHC is an incorporator of MHICL and owns fifty percent (50%)


of its capital stock. However, this is not enough to pierce the veil of
corporate fiction between MHICL and MHC.

When one "notes" a contract, one is not expressing his agreement


or approval, as a party would. 46 In Sichangco v. Board of
Commissioners of Immigration,47 the Court recognized that the
term "noted" means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without
exercising a judicious deliberation or rendering a decision on the
matter.

Piercing the veil of corporate entity is an equitable remedy. It is


resorted to when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend a crime. 41 It is
done only when a corporation is a mere alter ego or business
conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere
ownership by a single stockholder or by another corporation of all
or nearly all of the capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate corporate
personalities."
The tests in determining whether the corporate veil may be pierced
are: First, the defendant must have control or complete domination
of the other corporation's finances, policy and business practices
with regard to the transaction attacked. There must be proof that
the other corporation had no separate mind, will or existence with
respect the act complained of. Second, control must be used by the
defendant to commit fraud or wrong. Third, the aforesaid control or
breach of duty must be the proximate cause of the injury or loss
complained of. The absence of any of the elements prevents the
piercing of the corporate veil.43
It is basic that a corporation has a personality separate and distinct
from those composing it as well as from that of any other legal

Mr. Cergueda merely signed the "witnessing part" of the document.


The "witnessing part" of the document is that which, "in a deed or
other formal instrument is that part which comes after the recitals,
or where there are no recitals, after the parties (emphasis
ours)."48 As opposed to a party to a contract, a witness is simply
one who, "being present, personally sees or perceives a thing; a
beholder, a spectator, or eyewitness."49 One who "notes" something
just makes a "brief written statement" 50 a memorandum or
observation.
Second, and more importantly, there was no existing employeremployee relationship between Santos and MHICL. In determining
the existence of an employer-employee relationship, the following
elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and

Page | 19

"(4) the power to control employee's conduct."


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

"4. Claims for actual, moral, exemplary and other forms of


damages arising from employer-employee relations;
"5. Cases arising from any violation of Article 264 of this
Code, including questions involving legality of strikes and
lockouts; and
"6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement."
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of
the Labor Code is limited to disputes arising from an employeremployee relationship which can be resolved by reference to the
Labor Code, or other labor statutes, or their collective bargaining
agreements.54

IV. Grave Abuse of Discretion


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

"To determine which body has jurisdiction over the present


controversy, we rely on the sound judicial principle that jurisdiction
over the subject matter is conferred by law and is determined by
the allegations of the complaint irrespective of whether the plaintiff
is entitled to all or some of the claims asserted therein." 55
The lack of jurisdiction of the Labor Arbiter was obvious from the
allegations of the complaint. His failure to dismiss the case
amounts to grave abuse of discretion.56

"1. Unfair labor practice cases;

V. The Fallo

"2. Termination disputes;

WHEREFORE, the Court hereby GRANTS the petition for certiorari


and ANNULS the orders and resolutions of the National Labor
Relations Commission dated May 31, 1993, December 15, 1994 and
March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case
No. 00-02-01058-90).

"3. If accompanied with a claim for reinstatement, those


cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;

No costs.

Page | 20

SO ORDERED.
Davide, Jr., C .J ., Puno, Kapunan, Pardo and Ynares-Santiago,
JJ ., concur.

Page | 21

G.R. No. 141536. February 26, 2001


GIL
MIGUEL
vs.
RON ZABARTE, respondent.

T.

Costa, U.S.A. On 18 March 1994, [petitioner] filed his Answer with


the following special and affirmative defenses:
PUYAT, petitioner,
xxx

xxx

xxx

PANGANIBAN, J.:

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.

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.

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.

The Case

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.

DECISION

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

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.

Page | 22

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) Venue has been improperly laid in this case.

Exhibit B - x x x Certificate of Authentication of the [O]rder


signed by the Hon. Ellen James, issued by the Consulate
General of the Republic of the Philippines.
Exhibit C - [R]eturn of the [W]rit of [E]xecution (writ
unsatisfied) issued by the sheriff/marshall, County of Santa
Clara, State of California.

(Record, pp. 42-44)


Exhibit D - [W]rit of [E]xecution
On 1 August 1994, [respondent] filed a [M]otion for
[S]ummary [J]udgment under Rule 34 of the Rules of Court
alleging that the [A]nswer filed by [petitioner] failed to
tender any genuine issue as to the material facts. In his
[O]pposition to [respondents] motion, [petitioner] demurred
as follows:
2) [Petitioner] begs to disagree[;] in support hereof, [he]
wishes to mention that in his Answer with Special and
Affirmative Defenses dated March 16, 1994 [petitioner] has
interposed that the Judgment on Stipulations for Entry in
Judgment is null and void, fraudulent, illegal and
unenforceable, the same having been obtained by means of
fraud, collusion, undue influence and/or clear mistake of fact
and law. In addition, [he] has maintained that said
Judgment on Stipulations for Entry in Judgment was
obtained without the assistance of counsel for [petitioner]
and without sufficient notice to him and therefore, was
rendered in violation of his constitutional rights to
substantial and procedural due process.
The [M]otion for [S]ummary [J]udgment was set for hearing
on 12 August 1994 during which [respondent] marked and
submitted in evidence the following:
Exhibit A - x x x Judgment on Stipulation For Entry In
Judgment of the Supreme Court of the State of California[,]
County of Contra Costa[,] signed by Hon. Ellen James, Judge
of the Superior Court.

Exhibit 'E' [P]roof of [S]ervice of copies of [W]rit of


[E]xecution,
[N]otice
of [L]evy,
[M]emorandum of
[G]arnishee,
[E]xemptions
from
[E]nforcement
of
[J]udgment.
Exhibit F - Certification issued by the Secretary of State,
State of California that Stephen Weir is the duly elected,
qualified and acting [c]ounty [c]lerk of the County of Contra
Costa of the State of California.
Exhibit G - Certificate of [A]uthentication of the [W]rit of
[E]xecution.
On 6 April 1995, the court a quo issued an [O]rder granting
[respondents] [M]otion for [S]ummary [J]udgment [and] likewise
granting [petitioner] ten (10) days to submit opposing affidavits,
after which the case would be deemed submitted for resolution
(Record, pp. 152-153). [Petitioner] filed a [M]otion for
[R]econsideration of the aforesaid [O]rder and [respondent] filed
[C]omment. On 30 June 1995, [petitioner] filed a [M]otion to
[D]ismiss on the ground of lack of jurisdiction over the subject
matter of the case and forum-non-conveniens (Record, pp. 166170). In his [O]pposition to the [M]otion (Record, pp. 181-182)
[respondent] contended that [petitioner could] no longer question
the jurisdiction of the lower court on the ground that [the latters]
Answer had failed to raise the issue of jurisdiction. [Petitioner]
countered by asserting in his Reply that jurisdiction [could] not be
fixed by agreement of the parties. The lower court dismissed [his]
[M]otion for [R]econsideration and [M]otion [to] [D]ismiss (Record,
pp. 196-198), x x x.

Page | 23

The
RTC 5 eventually
rendered
its
Decision, 6 which disposed as follows:

February

21,

1997

WHEREFORE, judgment is hereby rendered, ordering [petitioner]


to pay [respondent] the following amounts:
1. The amount of U.S. dollars $241,991.33, with the interest of
legal rate from October 18, 1991, or its peso equivalent, pursuant
to the [J]udgment of [S]tipulation for [E]ntry in [J]udgment dated
December 19, 1991;

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:

2. The amount of P30,000.00 as attorneys fees;

(a) the jurisdiction of a foreign court over the subject matter

3. To pay the costs of suit.

(b) the validity of the foreign judgment

The claim for moral damages, not having been substantiated, it is


hereby denied. 7

(c) the judgments conformity to Philippine laws, public policy,


canons of morality, and norms against unjust enrichment

Ruling of the Court of Appeals

2. That the principle of forum non conveniens was inapplicable to


the instant case.

Affirming the trial court, the Court of Appeals held that petitioner
was estopped from assailing the judgment that had become final
and had, in fact, been partially executed. The CA also ruled that
summary judgment was proper, because petitioner had failed to
tender 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:

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

Page | 24

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

Page | 25

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, 21prior 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

Page | 26

represent the other defendants; hence, he cannot now be allowed


to impugn a decision based on this ground.

nonetheless refuse to entertain a case for any of the following


practical reasons:

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.

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;

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

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 nonresidents 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. 28Since 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. 1wphi1.nt
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

Page | 27

between the parties


subsequent title. 29

and

their

successors-in-interest

by

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 the assailed
Decision
and
Resolution AFFIRMED. Double
costs
against
petitioner.
SO ORDERED.
Melo, J. (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez,
JJ., concur.

Page | 28

G.R. No. 120135

March 31, 2003

BANK OF AMERICA NT & SA, BANK OF AMERICA


INTERNATIONAL,
LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO
LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the November 29, 1994 decision of the Court of
Appeals1 and the April 28, 1995 resolution denying petitioners'
motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua
(Litonjuas, for brevity) filed a Complaint 2 before the Regional Trial
Court of Pasig against the Bank of America NT&SA and Bank of
America International, Ltd. (defendant banks for brevity) alleging
that: they were engaged in the shipping business; they owned two
vessels: Don Aurelio and El Champion, through their wholly-owned
corporations; they deposited their revenues from said business
together with other funds with the branches of said banks in the
United Kingdom and Hongkong up to 1979; with their business
doing well, the defendant banks induced them to increase the
number of their ships in operation, offering them easy loans to
acquire said vessels;3 thereafter, the defendant banks acquired,
through their (Litonjuas') corporations as the borrowers: (a) El
Carrier4; (b) El General5; (c) El Challenger6; and (d) El Conqueror 7;
the vessels were registered in the names of their corporations; the
operation and the funds derived therefrom were placed under the
complete and exclusive control and disposition of the
petitioners;8 and the possession the vessels was also placed by
defendant banks in the hands of persons selected and designated
by them (defendant banks).9
The Litonjuas claimed that defendant banks as trustees did not fully
render an account of all the income derived from the operation of

the vessels as well as of the proceeds of the subsequent


foreclosure sale;10 because of the breach of their fiduciary duties
and/or negligence of the petitioners and/or the persons designated
by them in the operation of private respondents' six vessels, the
revenues derived from the operation of all the vessels declined
drastically; the loans acquired for the purchase of the four
additional vessels then matured and remained unpaid, prompting
defendant banks to have all the six vessels, including the two
vessels originally owned by the private respondents, foreclosed and
sold at public auction to answer for the obligations incurred for and
in behalf of the operation of the vessels; they (Litonjuas) lost
sizeable amounts of their own personal funds equivalent to ten
percent (10%) of the acquisition cost of the four vessels and were
left with the unpaid balance of their loans with defendant
banks.11 The Litonjuas prayed for the accounting of the revenues
derived in the operation of the six vessels and of the proceeds of
the sale thereof at the foreclosure proceedings instituted by
petitioners; damages for breach of trust; exemplary damages and
attorney's fees.12
Defendant banks filed a Motion to Dismiss on grounds of forum non
conveniens and lack of cause of action against them.13
On December 3, 1993, the trial court issued an Order denying the
Motion to Dismiss, thus:
"WHEREFORE, and in view of the foregoing consideration,
the Motion to Dismiss is hereby DENIED. The defendant is
therefore, given a period of ten (10) days to file its Answer
to the complaint.
"SO ORDERED."14
Instead of filing an answer the defendant banks went to the Court
of Appeals on a "Petition for Review on Certiorari" 15 which was aptly
treated by the appellate court as a petition for certiorari. They
assailed the above-quoted order as well as the subsequent denial
of their Motion for Reconsideration. 16 The appellate court dismissed
the petition and denied petitioners' Motion for Reconsideration.17

Page | 29

Hence, herein petition anchored on the following grounds:


"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER
THE FACT THAT THE SEPARATE PERSONALITIES OF THE
PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE
FOREIGN CORPORATIONS (THE REAL BORROWERS) CLEARLY
SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT
THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO
SUE.
"2. THE RESPONDENT COURT OF APPEALS FAILED TO
REALIZE THAT WHILE THE PRINCIPLE OFFORUM NON
CONVENIENS IS NOT MANDATORY, THERE ARE, HOWEVER,
SOME GUIDELINES TO FOLLOW IN DETERMINING WHETHER
THE CHOICE OF FORUM SHOULD BE DISTURBED. UNDER
THE CIRCUMSTANCES SURROUNDING THE INSTANT CASE,
DISMISSAL OF THE COMPLAINT ON THE GROUND OF FORUM
NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.
"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO
FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE
PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL BASIS
FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE
PRIVATE RESPONDENT. COROLLARY TO THIS, THE
RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE
FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF FORUM
SHOPPING." 18
As to the first assigned error: Petitioners argue that the borrowers
and the registered owners of the vessels are the foreign
corporations and not private respondents Litonjuas who are mere
stockholders; and that the revenues derived from the operations of
all the vessels are deposited in the accounts of the corporations.
Hence, petitioners maintain that these foreign corporations are the
legal entities that have the personalities to sue and not herein
private respondents; that private respondents, being mere
shareholders, have no claim on the vessels as owners since they
merely have an inchoate right to whatever may remain upon the
dissolution of the said foreign corporations and after all creditors
have been fully paid and satisfied; 19 and that while private
respondents may have allegedly spent amounts equal to 10% of

the acquisition costs of the vessels in question, their 10% however


represents their investments as stockholders in the foreign
corporations.20
Anent the second assigned error, petitioners posit that while the
application of the principle of forum non conveniens is discretionary
on the part of the Court, said discretion is limited by the guidelines
pertaining to the private as well as public interest factors in
determining whether plaintiffs' choice of forum should be disturbed,
as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper Aircraft Co. vs.
Reyno,22 to wit:
"Private interest factors include: (a) the relative ease of
access to sources of proof; (b) the availability of compulsory
process for the attendance of unwilling witnesses; (c) the
cost of obtaining attendance of willing witnesses; or (d) all
other practical problems that make trial of a case easy,
expeditious and inexpensive. Public interest factors include:
(a) the administrative difficulties flowing from court
congestion; (b) the local interest in having localized
controversies decided at home; (c) the avoidance of
unnecessary problems in conflict of laws or in the
application of foreign law; or (d) the unfairness of burdening
citizens in an unrelated forum with jury duty." 23
In support of their claim that the local court is not the proper forum,
petitioners allege the following:
"i) The Bank of America Branches involved, as clearly
mentioned in the Complaint, are based in Hongkong and
England. As such, the evidence and the witnesses are not
readily available in the Philippines;
"ii) The loan transactions were obtained, perfected,
performed, consummated and partially paid outside the
Philippines;
"iii) The monies were advanced outside the Philippines.
Furthermore, the mortgaged vessels were part ofan offshore
fleet, not based in the Philippines;

Page | 30

"iv) All the loans involved were granted to the Private


Respondents' foreign CORPORATIONS;
"v) The Restructuring Agreements were ALL governed by the
laws of England;
"vi) The subsequent sales of the mortgaged vessels and
the application of
the
sales
proceeds occurred
and
transpired outside the Philippines, and the deliveries of the
sold mortgaged vessels were likewise made outside the
Philippines;
"vii) The revenues of the vessels and the proceeds of the
sales of these vessels were ALL deposited to the Accounts of
the foreign CORPORATIONS abroad; and
"viii) Bank of America International Ltd. is not licensed nor
engaged in trade or business in the Philippines."24
Petitioners argue further that the loan agreements, security
documentation and all subsequent restructuring agreements
uniformly, unconditionally and expressly provided that they will be
governed by the laws of England; 25 that Philippine Courts would
then have to apply English law in resolving whatever issues may be
presented to it in the event it recognizes and accepts herein case;
that it would then be imposing a significant and unnecessary
expense and burden not only upon the parties to the transaction
but also to the local court. Petitioners insist that the inconvenience
and difficulty of applying English law with respect to a wholly
foreign transaction in a case pending in the Philippines may be
avoided by its dismissal on the ground of forum non conveniens. 26
Finally, petitioners claim that private respondents have already
waived their alleged causes of action in the case at bar for their
refusal to contest the foreign civil cases earlier filed by the
petitioners against them in Hongkong and England, to wit:
"1.) Civil action in England in its High Court of Justice,
Queen's Bench Division Commercial Court (1992-Folio No.
2098) against (a) LIBERIAN TRANSPORT NAVIGATION. SA.;
(b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA;

(d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS


CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K.
LITONJUA & (h) AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of Justice,
Queen's Bench Division, Commercial Court (1992-Folio No.
2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA
SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA
and (d) AURELIO KATIPUNAN LITONJUA.
"3.) Civil action in the Supreme Court of Hongkong High
Court (Action No. 4039 of 1992), against (a) ESHLEY
COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c)
ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f)
LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO
KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN
LITONJUA.
"4.) A civil action in the Supreme Court of Hong Kong High
Court (Action No. 4040 of 1992), against (a) ESHLEY
COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c)
ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f)
LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO
KATIPUNAN LITONJUA, RJ., and (h) EDUARDO KATIPUNAN
LITONJUA."
and that private respondents' alleged cause of action is already
barred by the pendency of another action or bylitis pendentia as
shown above.27
On the other hand, private respondents contend that certain
material facts and pleadings are omitted and/or misrepresented in
the present petition for certiorari; that the prefatory statement
failed to state that part of the security of the foreign loans were
mortgages on a 39-hectare piece of real estate located in the
Philippines;28 that while the complaint was filed only by the
stockholders of the corporate borrowers, the latter are whollyowned by the private respondents who are Filipinos and therefore
under Philippine laws, aside from the said corporate borrowers

Page | 31

being but their alter-egos, they have interests of their own in the
vessels.29 Private respondents also argue that the dismissal by the
Court of Appeals of the petition for certiorari was justified because
there was neither allegation nor any showing whatsoever by the
petitioners that they had no appeal, nor any plain, speedy, and
adequate remedy in the ordinary course of law from the Order of
the trial judge denying their Motion to Dismiss; that the remedy
available to the petitioners after their Motion to Dismiss was denied
was to file an Answer to the complaint; 30 that as upheld by the
Court of Appeals, the decision of the trial court in not applying the
principle of forum non conveniens is in the lawful exercise of its
discretion.31 Finally, private respondents aver that the statement of
petitioners that the doctrine of res judicata also applies to foreign
judgment is merely an opinion advanced by them and not based on
a categorical ruling of this Court; 32 and that herein private
respondents did not actually participate in the proceedings in the
foreign courts.33
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss
cannot be the subject of petition for certiorari. Petitioners should
have filed an answer to the complaint, proceed to trial and await
judgment before making an appeal. As repeatedly held by this
Court:
"An order denying a motion to dismiss is interlocutory and
cannot be the subject of the extraordinary petition
for certiorari or mandamus. The remedy of the aggrieved
party is to file an answer and to interpose as defenses the
objections raised in his motion to dismiss, proceed to trial,
and in case of an adverse decision, to elevate the entire
case by appeal in due course. xxx Under certain situations,
recourse
tocertiorari
or
mandamus is
considered
appropriate, i.e., (a) when the trial court issued the order
without or in excess of jurisdiction; (b) where there is patent
grave abuse of discretion by the trial court; or (c) appeal
would not prove to be a speedy and adequate remedy as
when an appeal would not promptly relieve a defendant
from the injurious effects of the patently mistaken order
maintaining the plaintiff's baseless action and compelling

the defendant needlessly to go through a protracted trial


and clogging the court dockets by another futile case."34
Records show that the trial court acted within its jurisdiction when it
issued the assailed Order denying petitioners' motion to dismiss.
Does the denial of the motion to dismiss constitute a patent grave
abuse of discretion? Would appeal, under the circumstances, not
prove to be a speedy and adequate remedy? We will resolve said
questions in conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in
refusing to dismiss the complaint on the ground that plaintiffs have
no cause of action against defendants since plaintiffs are merely
stockholders of the corporations which are the registered owners of
the vessels and the borrowers of petitioners?
No. Petitioners' argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities to
sue, and therefore, the complaint should be dismissed, is
untenable. A case is dismissible for lack of personality to sue upon
proof that the plaintiff is not the real party-in-interest. Lack of
personality to sue can be used as a ground for a Motion to Dismiss
based on the fact that the complaint, on the face thereof, evidently
states no cause of action. 35 In San Lorenzo Village Association, Inc.
vs. Court of Appeals,36 this Court clarified that a complaint states a
cause of action where it contains three essential elements of a
cause of action, namely: (1) the legal right of the plaintiff, (2) the
correlative obligation of the defendant, and (3) the act or omission
of the defendant in violation of said legal right. If these elements
are absent, the complaint becomes vulnerable to a motion to
dismiss on the ground of failure to state a cause of action. 37 To
emphasize, it is not the lack or absence of cause of action that is a
ground for dismissal of the complaint but rather the fact that the
complaint states no cause of action. 38 "Failure to state a cause of
action" refers to the insufficiency of allegation in the pleading,
unlike "lack of cause of action" which refers to the insufficiency of
factual basis for the action. "Failure to state a cause of action" may
be raised at the earliest stages of an action through a motion to
dismiss the complaint, while "lack of cause of action" may be raised
any time after the questions of fact have been resolved on the
basis of stipulations, admissions or evidence presented.39

Page | 32

In the case at bar, the complaint contains the three elements of a


cause of action. It alleges that: (1) plaintiffs, herein private
respondents, have the right to demand for an accounting from
defendants (herein petitioners), as trustees by reason of the
fiduciary relationship that was created between the parties
involving the vessels in question; (2) petitioners have the
obligation, as trustees, to render such an accounting; and (3)
petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that
the corporate entities have juridical personalities separate and
distinct from those of the private respondents. Private respondents
maintain that the corporations are wholly owned by them and prior
to the incorporation of such entities, they were clients of petitioners
which induced them to acquire loans from said petitioners to invest
on the additional ships.
We agree with private respondents. As held in the San Lorenzo
case,40
"xxx assuming that the allegation of facts constituting
plaintiffs' cause of action is not as clear and categorical as
would otherwise be desired, any uncertainty thereby arising
should be so resolved as to enable a full inquiry into the
merits of the action."

deter the practice of global forum shopping, 42 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.43
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. 44 In the
case of Communication Materials and Design, Inc. vs. Court of
Appeals,45 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." 46 Evidently, all these requisites
are present in the instant case.

As this Court has explained in the San Lorenzo case, such a course,
would preclude multiplicity of suits which the law abhors, and
conduce to the definitive determination and termination of the
dispute. To do otherwise, that is, to abort the action on account of
the alleged fatal flaws of the complaint would obviously be
indecisive and would not end the controversy, since the institution
of another action upon a revised complaint would not be
foreclosed.41

Moreover, this Court enunciated in Philsec. Investment Corporation


vs. Court of Appeals,47 that the doctrine offorum 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 court's 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.48

Second Issue. Should the complaint be dismissed on the ground


of forum non-conveniens?

Third issue. Are private respondents guilty of forum shopping


because of the pendency of foreign action?

No. The doctrine of forum non-conveniens, literally meaning 'the


forum is inconvenient', emerged in private international law to

No. Forum shopping exists where the elements of litis


pendentia are present and where a final judgment in one case will

Page | 33

amount to res judicata in the other.49 Parenthetically, for litis


pendentia to be a ground for the dismissal of an action there must
be: (a) identity of the parties or at least such as to represent the
same interest in both actions; (b) identity of rights asserted and
relief prayed for, the relief being founded on the same acts; and (c)
the identity in the two cases should be such that the judgment
which may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other.50

WHEREFORE, the petition is DENIED for lack of merit.


Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Callejo, Sr.,
JJ., concur.

In case at bar, not all the requirements for litis pendentia are
present. While there may be identity of parties, notwithstanding the
presence of other respondents,51 as well as the reversal in positions
of plaintiffs and defendants52, still the other requirements
necessary for litis pendentia were not shown by petitioner. It merely
mentioned that civil cases were filed in Hongkong and England
without however showing the identity of rights asserted and the
reliefs sought for as well as the presence of the elements of res
judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:
"xxx [T]he petitioners, by simply enumerating the civil
actions instituted abroad involving the parties herein xxx,
failed to provide this Court with relevant and clear
specifications that would show the presence of the abovequoted elements or requisites for res judicata. While it is
true that the petitioners in their motion for reconsideration
(CA Rollo, p. 72), after enumerating the various civil actions
instituted abroad, did aver that "Copies of the foreign
judgments are hereto attached and made integral parts
hereof as Annexes 'B', 'C', 'D' and 'E'", they failed, wittingly
or inadvertently, to include a single foreign judgment in
their pleadings submitted to this Court as annexes to their
petition. How then could We have been expected to rule on
this issue even if We were to hold that foreign judgments
could be the basis for the application of the aforementioned
principle of res judicata?"53
Consequently, both courts correctly denied the dismissal of herein
subject complaint.

Page | 34

G.R. No. 149177

November 23, 2007

KAZUHIRO
HASEGAWA
and
CONSULTANTS
CO.,
vs.
MINORU KITAMURA, Respondent.

NIPPON

ENGINEERING
LTD., Petitioners,

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 Resolution2denying 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 company's
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 contract's Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's
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 ICA's 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
respondent's 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 Nippon's
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 CA-G.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 insufficient verification and
certification against forum shopping.19 An Entry of Judgment was
later issued by the appellate court on September 20, 2000. 20

Page | 35

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 court's 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 court's 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 petition's defective certification of non-forum
shopping, it was a dismissal without prejudice. 27 The same holds
true in the CA's 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 refile 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

Page | 36

not constitute
case, is not a
nullification of
sought to be
present.34

res judicata and litis pendentia, as in the present


fatal defect. It will not warrant the dismissal and
the entire proceedings, considering that the evils
prevented by the said certificate are no longer

The Court also finds no merit in respondent's 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 Authorization35 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 scope
its 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 Nippon's president and
chief executive officer, not by the company's 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.40Considering 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 court's 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

Page | 37

The Court notes that petitioners adopted an additional but different


theory when they elevated the case to the appellate court. In the
Motion to Dismiss48 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 respondent's 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
issue
jurisdiction.1wphi1 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
court's 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
celebrationisand 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

Page | 38

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 state's 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
on certiorari is DENIED.

considered,

the

petition

for

review

SO ORDERED.
ANTONIO
Associate Justice

EDUARDO

B.

NACHURA

WE CONCUR:

Page | 39

G.R. No. 162894

February 26, 2008

RAYTHEON
INTERNATIONAL,
vs.
STOCKTON W. ROUZIE, JR., respondent.

dismissed in a Resolution dated 26 November 1997. The Resolution


became final and executory on 09 November 1998.
INC., petitioner,

DECISION
TINGA, J.:
Before this Court is a petition for review on certiorari under Rule 45
of the 1997 Rules of Civil Procedure which seeks the reversal of the
Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No.
67001 and the dismissal of the civil case filed by respondent
against petitioner with the trial court.
As culled from the records of the case, the following antecedents
appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a
corporation duly organized and existing under the laws of the State
of Connecticut, United States of America, and respondent Stockton
W. Rouzie, Jr., an American citizen, entered into a contract whereby
BMSI hired respondent as its representative to negotiate the sale of
services in several government projects in the Philippines for an
agreed remuneration of 10% of the gross receipts. On 11 March
1992, respondent secured a service contract with the Republic of
the Philippines on behalf of BMSI for the dredging of rivers affected
by the Mt. Pinatubo eruption and mudflows.3
On 16 July 1994, respondent filed before the Arbitration Branch of
the National Labor Relations Commission (NLRC) a suit against
BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and
Walter G. Browning for alleged nonpayment of commissions, illegal
termination and breach of employment contract. 4 On 28 September
1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment
ordering BMSI and RUST to pay 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

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

Page | 40

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

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.

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

Incidentally, respondent failed to file a comment despite repeated


notices. The Ceferino Padua Law Office, counsel on record for
respondent, manifested that the lawyer handling the case, Atty.
Rogelio Karagdag, had severed relations with the law firm even
before the filing of the instant petition and that it could no longer
find the whereabouts of Atty. Karagdag or of respondent despite
diligent efforts. In a Resolution 25 dated 20 November 2006, the
Court resolved to dispense with the filing of a comment.

On 28 August 2003, the Court of Appeals rendered the assailed


Decision21 denying the petition for certiorari for lack of merit. It also
denied petitioners motion for reconsideration in the assailed
Resolution issued on 10 March 2004.22
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 ON THE GROUND
OF FORUM NON CONVENIENS.24

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-oflaws 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

Page | 41

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-oflaws 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. 1192BG failed to state a cause of action against petitioner. Failure to
state a cause of action refers to the insufficiency of allegation in the
pleading.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

Page | 42

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.

Page | 43

G.R. No. 198587, January 14, 2015


SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J.
BETIA, Petitioners, v. MA.
JOPETTE
M.
REBESENCIO,
MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL
AND LORAINE S. SCHNEIDER-CRUZ, Respondents.
DECISION
LEONEN, J.:
All Filipinos are entitled to the protection of the rights guaranteed in
the
Constitution.

respondents became Permanent Flight Attendants. They then


entered into Cabin Attendant contracts with Saudia: Ma. Jopette M.
Rebesencio (Ma. Jopette) on May 16, 1990; 6Montassah B. SacarAdiong (Montassah) and Rouen Ruth A. Cristobal (Rouen Ruth) on
May 22, 1993;7and Loraine Schneider-Cruz (Loraine) on August 27,
1995.8
Respondents continued their employment with Saudia until they
were separated from service on various dates in 2006. 9
Respondents contended that the termination of their employment
was illegal. They alleged that the termination was made solely
because
they
were
pregnant.10

This is a Petition for Review on Certiorari with application for the


issuance of a temporary restraining order and/or writ of preliminary
injunction under Rule 45 of the 1997 Rules of Civil Procedure
praying that judgment be rendered reversing and setting aside the
June 16, 2011 Decision1 and September 13, 2011 Resolution2 of the
Court
of
Appeals
in
CA-G.R.
SP.
No.
113006.

As respondents alleged, they had informed Saudia of their


respective pregnancies and had gone through the necessary
procedures to process their maternity leaves. Initially, Saudia had
given its approval but later on informed respondents that its
management in Jeddah, Saudi Arabia had disapproved their
maternity leaves. In addition, it required respondents to file their
resignation
letters.11

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation


established and existing under the laws of Jeddah, Kingdom of
Saudi Arabia. It has a Philippine office located at 4/F, Metro House
Building, Sen. Gil J. Puyat Avenue, Makati City. 3 In its Petition filed
with
this
court,
Saudia
identified
itself
as
follows:chanroblesvirtuallawlibrary

Respondents were told that if they did not resign, Saudia would
terminate them all the same. The threat of termination entailed the
loss of benefits, such as separation pay and ticket discount
entitlements.12

1. Petitioner SAUDIA is a foreign corporation established and


existing under the Royal Decree No. M/24 of 18.07.1385H
(10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its
Philippine Office is located at 4/F Metro House Building, Sen, Gil J.
Puyat Avenue, Makati City (Philippine Office). It may be served with
orders of this Honorable Court through undersigned counsel at
4th and 6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas,
Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were
recruited and hired by Saudia as Temporary Flight Attendants with
the accreditation and approval of the Philippine Overseas
Employment Administration.5 After undergoing seminars required
by the Philippine Overseas Employment Administration for
deployment overseas, as well as training modules offered by
Saudia (e.g., initial flight attendant/training course and transition
training), and after working as Temporary Flight Attendants,

Specifically, Ma. Jopette received a call on October 16, 2006 from


Saudia's
Base
Manager,
Abdulmalik
Saddik
(Abdulmalik).13 Montassah was informed personally by Abdulmalik
and a certain Faisal Hussein on October 20, 2006 after being
required to report to the office one (1) month into her maternity
leave.14 Rouen Ruth was also personally informed by Abdulmalik on
October 17, 2006 after being required to report to the office by her
Group Supervisor.15 Loraine received a call on October 12, 2006
from
her
Group
Supervisor,
Dakila
Salvador. 16
Saudia anchored its disapproval of respondents' maternity leaves
and demand for their resignation on its "Unified Employment
Contract for Female Cabin Attendants" (Unified Contract). 17 Under
the Unified Contract, the employment of a Flight Attendant who
becomes
pregnant
is
rendered
void.
It
provides:chanroblesvirtuallawlibrary

Page | 44

(H) Due to the essential nature of the Air Hostess functions to be


physically fit on board to provide various services required in
normal or emergency cases on both domestic/international flights
beside her role in maintaining continuous safety and security of
passengers, and since she will not be able to maintain the required
medical fitness while at work in case of pregnancy, accordingly, if
the Air Hostess becomes pregnant at any time during the
term of this contract, this shall render her employment
contract as void and she will be terminated due to lack of
medical fitness.18 (Emphasis supplied)
In their Comment on the present Petition, 19 respondents
emphasized that the Unified Contract took effect on September 23,
2006 (the first day of Ramadan),20 well after they had filed and had
their maternity leaves approved. Ma. Jopette filed her maternity
leave application on September 5, 2006. 21Montassah filed her
maternity leave application on August 29, 2006, and its approval
was already indicated in Saudia's computer system by August 30,
2006.22 Rouen Ruth filed her maternity leave application on
September 13, 2006,23 and Loraine filed her maternity leave
application
on
August
22,
2006.24
Rather than comply and tender resignation letters, respondents
filed separate appeal letters that were all rejected. 25
Despite these initial rejections, respondents each received calls on
the morning of November 6, 2006 from Saudia's office secretary
informing them that their maternity leaves had been approved.
Saudia, however, was quick to renege on its approval. On the
evening of November 6, 2006, respondents again received calls
informing them that it had received notification from Jeddah, Saudi
Arabia that their maternity leaves had been disapproved. 26
Faced with the dilemma of resigning or totally losing their benefits,
respondents executed handwritten resignation letters. In
Montassah's and Rouen Ruth's cases, their resignations were
executed on Saudia's blank letterheads that Saudia had provided.
These letterheads already had the word "RESIGNATION" typed on
the subject portions of their headings when these were handed to
respondents.27
On November 8, 2007, respondents filed a Complaint against
Saudia and its officers for illegal dismissal and for underpayment of
salary, overtime pay, premium pay for holiday, rest day, premium,
service incentive leave pay, 13th month pay, separation pay, night

shift differentials, medical expense reimbursements, retirement


benefits, illegal deduction, lay-over expense and allowances, moral
and exemplary damages, and attorney's fees.28 The case was
initially assigned to Labor Arbiter Hermino V. Suelo and docketed as
NLRC
NCR
Case
No.
00-11-12342-07.
Saudia assailed the jurisdiction of the Labor Arbiter. 29 It claimed
that all the determining points of contact referred to foreign law
and insisted that the Complaint ought to be dismissed on the
ground offorum non conveniens.30 It added that respondents had no
cause
of
action
as
they
resigned
voluntarily. 31
On December 12, 2008, Executive Labor Arbiter Fatima JambaroFranco rendered the Decision32dismissing respondents' Complaint.
The
dispositive
portion
of
this
Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, premises'
considered,
judgment
is
hereby
rendered DISMISSING the
instant
complaint
for
lack
of
jurisdiction/merit.33cralawlawlibrary
On respondents' appeal, the National Labor Relations Commission's
Sixth Division reversed the ruling of Executive Labor Arbiter
Jambaro-Franco. It explained that "[considering that complainantsappellants are OFWs, the Labor Arbiters and the NLRC has [sic]
jurisdiction to hear and decide their complaint for illegal
termination."34 On the matter of forum non conveniens, it noted
that there were no special circumstances that warranted its
abstention from exercising jurisdiction.35 On the issue of whether
respondents were validly dismissed, it held that there was nothing
on record to support Saudia's claim that respondents resigned
voluntarily.
The dispositive portion of the November 19, 2009 National Labor
Relations Commission Decision36reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered
finding the appeal impressed with merit. The respondentsappellees are hereby directed to pay complainants-appellants the
aggregate amount of SR614,001.24 corresponding to their
backwages and separation pay plus ten (10%) percent thereof as
attorney's fees. The decision of the Labor Arbiter dated December
12, 2008 is hereby VACATED and SET ASIDE. Attached is the
computation prepared by this Commission and made an integral
part of this Decision.37cralawlawlibrary

Page | 45

In the Resolution dated February 11, 2010,38 the National Labor


Relations
Commission
denied
petitioners'
Motion
for
Reconsideration.
In the June 16, 2011 Decision, 39 the Court of Appeals denied
petitioners' Rule 65 Petition and modified the Decision of the
National Labor Relations Commission with respect to the award of
separation
pay
and
backwages.
The dispositive portion of the
reads:chanroblesvirtuallawlibrary

Court

of

Appeals

Decision

WHEREFORE, the instant petition is hereby DENIED. The Decision


dated November 19, 2009 issued by public respondent, Sixth
Division of the National Labor Relations Commission - National
Capital Region is MODIFIED only insofar as the computation of the
award of separation pay and backwages. For greater clarity,
petitioners are ordered to pay private respondents separation pay
which shall be computed from private respondents' first day of
employment up to the finality of this decision, at the rate of one
month per year of service and backwages which shall be computed
from the date the private respondents were illegally terminated
until finality of this decision. Consequently, the ten percent (10%)
attorney's fees shall be based on the total amount of the award.
The assailed Decision is affirmed in all other respects.
The labor arbiter is hereby DIRECTED to make a recomputation
based on the foregoing.40cralawlawlibrary
In the Resolution dated September 13, 2011, 41 the Court of Appeals
denied
petitioners'
Motion
for
Reconsideration.

I
Summons were validly served on Saudia and jurisdiction over it
validly
acquired.
There is no doubt that the pleadings and summons were served on
Saudia through its counsel.42Saudia, however, claims that the Labor
Arbiter and the National Labor Relations Commission had no
jurisdiction over it because summons were never served on it but
on "Saudia Manila."43 Referring to itself as "Saudia Jeddah," it claims
that "Saudia Jeddah" and not "Saudia Manila" was the employer of
respondents
because:
First, "Saudia Manila" was never a party to the Cabin Attendant
contracts
entered
into
by
respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for
respondents'
salaries
and
benefits;
and
Lastly, it was with "Saudia Jeddah" that respondents filed their
resignations.44
Saudia posits that respondents' Complaint was brought against the
wrong party because "Saudia Manila," upon which summons was
served,
was
never
the
employer
of
respondents. 45
Saudia is vainly splitting hairs in its effort to absolve itself of
liability. Other than its bare allegation, there is no basis for
concluding that "Saudia Jeddah" is distinct from "Saudia Manila."

First, whether the Labor Arbiter and the National Labor Relations
Commission may exercise jurisdiction over Saudi Arabian Airlines
and apply Philippine law in adjudicating the present dispute;

What is clear is Saudia's statement in its own Petition that what it


has is a "Philippine Office . . . located at 4/F Metro House Building,
Sen. Gil J. Puyat Avenue, Makati City." 46 Even in the position paper
that Saudia submitted to the Labor Arbiter, 47 what Saudia now
refers to as "Saudia Jeddah" was then only referred to as "Saudia
Head Office at Jeddah, KSA," 48 while what Saudia now refers to as
"Saudia Manila" was then only referred to as "Saudia's office in
Manila."49

Second, whether respondents' voluntarily resigned or were illegally


terminated;
and

By its own admission, Saudia, while a foreign corporation, has a


Philippine
office.

Lastly, whether Brenda J. Betia may be held personally liable along


with Saudi Arabian Airlines.chanRoblesvirtualLawlibrary

Section 3(d) of Republic Act No.. 7042, otherwise known as the

Hence,
The

this
issues

for

Appeal
resolution

was
are

the

filed.
following:

Page | 46

Foreign
Investments
Act
of
following:chanroblesvirtuallawlibrary

1991,

provides

the

The phrase "doing business" shall include . . . opening


offices, whether called "liaison" offices or branches; . . . and
any other act or acts that imply a continuity of commercial dealings
or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of commercial gain or of
the purpose and object of the business organization. (Emphasis
supplied)
A plain application of Section 3(d) of the Foreign Investments Act
leads to no other conclusion than that Saudia is a foreign
corporation doing business in the Philippines. As such, Saudia may
be sued in the Philippines and is subject to the jurisdiction of
Philippine
tribunals.
Moreover, since there is no real distinction between "Saudia
Jeddah" and "Saudia Manila" the latter being nothing more than
Saudia's local office service of summons to Saudia's office in
Manila sufficed to vest jurisdiction over Saudia's person in
Philippine tribunals.chanRoblesvirtualLawlibrary
II
Saudia asserts that Philippine courts and/or tribunals are not in a
position to make an intelligent decision as to the law and the facts.
This is because respondents' Cabin Attendant contracts require the
application of the laws of Saudi Arabia, rather than those of the
Philippines.50 It claims that the difficulty of ascertaining foreign law
calls into operation the principle of forum non conveniens, thereby
rendering improper the exercise of jurisdiction by Philippine
tribunals.51
A choice of law governing the validity of contracts or the
interpretation of its provisions dees not necessarily imply forum
non conveniens. Choice of law and forum non conveniens are
entirely
different
matters.
Choice of law provisions are an offshoot of the fundamental
principle of autonomy of contracts. Article 1306 of the Civil Code
firmly ensconces this:chanroblesvirtuallawlibrary

Article 1306. The contracting parties may establish such


stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule
against forum shopping. It is designed to frustrate illicit means for
securing advantages and vexing litigants that would otherwise be
possible if the venue of litigation (or dispute resolution) were left
entirely
to
the
whim
of
either
party.
Contractual choice of law provisions factor into transnational
litigation and dispute resolution in one of or in a combination of
four ways: (1) procedures for settling disputes, e.g., arbitration; (2)
forum, i.e., venue; (3) governing law; and (4) basis for
interpretation. Forum non conveniens relates to, but is not
subsumed
by,
the
second
of
these.
Likewise, contractual choice of law is not determinative of
jurisdiction. Stipulating on the laws of a given jurisdiction as the
governing law of a contract does not preclude the exercise of
jurisdiction by tribunals elsewhere. The reverse is equally true: The
assumption of jurisdiction by tribunals does notipso facto mean
that it cannot apply and rule on the basis of the parties' stipulation.
In Hasegawa v. Kitamura:52ChanRoblesVirtualawlibrary
Analytically, 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 V'hich 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. 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.53cralawlawlibrary
As various dealings, commercial or otherwise, are facilitated by the
progressive ease of communication and travel, persons from
various jurisdictions find themselves transacting with each other.
Contracts involving foreign elements are, however, nothing new.
Conflict of laws situations precipitated by disputes and litigation
anchored
on
these
contracts
are
not
totally
novel.

Page | 47

Transnational transactions entail differing laws on the requirements


Q for the validity of the formalities and substantive provisions of
contracts and their interpretation. These transactions inevitably
lend themselves to the possibility of various fora for litigation and
dispute resolution. As observed by an eminent expert on
transnational law:chanroblesvirtuallawlibrary
The more jurisdictions having an interest in, or merely even a point
of contact with, a transaction or relationship, the greater the
number of potential fora for the resolution of disputes arising out of
or related to that transaction or relationship. In a world of increased
mobility, where business and personal transactions transcend
national boundaries, the jurisdiction of a number of different fora
may easily be invoked in a single or a set of related
disputes.54cralawlawlibrary
Philippine law is definite as to what governs the formal or extrinsic
validity of contracts. The first paragraph of Article 17 of the Civil
Code provides that "[t]he forms and solemnities of contracts . . .
shall be governed by the laws of the country in which they are
executed"55 (i.e., lex
loci
celebrationis).
In contrast, there is no statutorily established mode of settling
conflict of laws situations on matters pertaining to substantive
content of contracts. It has been noted that three (3) modes have
emerged: (1) lex loci contractus or the law of the place of the
making; (2) lex loci solutionis or the law of the place of
performance; and (3) lex loci intentionis or the law intended by the
parties.56
Given Saudia's assertions, of particular relevance to resolving the
present
dispute
is lex
loci
intentionis.
An author observed that Spanish jurists and commentators
"favor lex loci intentionis."57 These jurists and commentators
proceed from the Civil Code of Spain, which, like our Civil Code, is
silent on what governs the intrinsic validity of contracts, and the
same civil law traditions from which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan
Guarantee v. V.P. Eusebio Construction, Inc.,58 manifested
preference for allowing the parties to select the law applicable to
their contract":chanroblesvirtuallawlibrary

No conflicts rule on essential validity of contracts is expressly


provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be
governed by the lex contractus or "proper law of the contract." This
is the law voluntarily agreed upon by the parties (the lex loci
voluntatis) or the law intended by them either expressly or
implicitly (the lex loci intentionis). The law selected may be implied
from such factors as substantial connection with the transaction, or
the nationality or domicile of the parties. Philippine courts would do
well to adopt the first and most basic rule in most legal systems,
namely, to allow the parties to select the law applicable to their
contract, subject to the limitation that it is not against the law,
morals, or public policy of the forum and that the chosen law must
bear a substantive relationship to the transaction.59 (Emphasis in
the original)
Saudia asserts that stipulations set in the Cabin Attendant
contracts require the application of the laws of Saudi Arabia. It
insists that the need to comply with these stipulations calls into
operation the doctrine of forum non conveniens and, in turn, makes
it necessary for Philippine tribunals to refrain from exercising
jurisdiction.
As mentioned, contractual choice of laws factors into transnational
litigation in any or a combination of four (4) ways. Moreover, forum
non conveniens relates to one of these: choosing between multiple
possible
fora.
Nevertheless, the possibility of parallel litigation in multiple fora
along with the host of difficulties it poses is not unique to
transnational litigation. It is a difficulty that similarly arises in
disputes well within the bounds of a singe jurisdiction.
When parallel litigation arises strictly within the context of a single
jurisdiction, such rules as those on forum shopping, litis pendentia,
and res judicata come into operation. Thus, in the Philippines, the
1997 Rules on Civil Procedure provide for willful and deliberate
forum shopping as a ground not only for summary dismissal with
prejudice but also for citing parties and counsels in direct
contempt, as well as for the imposition of administrative
sanctions.60 Likewise, the same rules expressly provide that a party
may seek the dismissal of a Complaint or another pleading
asserting a claim on the ground "[t]hat there is another action
pending between the same parties for the same cause," i.e., litis
pendentia, or "[t]hat the cause of action is barred by a prior

Page | 48

judgment,"61 i.e., res

judicata.

Forum non conveniens, like the rules of forum shopping, litis


pendentia, and res judicata, is a means of addressing the problem
of parallel litigation. While the rules of forum shopping, litis
pendentia, andres judicata are designed to address the problem of
parallel litigation within a single jurisdiction, forum non
conveniens is a means devised to address parallel litigation arising
in
multiple
jurisdictions.
Forum non conveniens literally translates to "the forum is
inconvenient."62 It is a concept in private international law and was
devised to combat the "less than honorable" reasons and excuses
that litigants use to secure procedural advantages, annoy and
harass defendants, avoid overcrowded dockets, and select a
"friendlier"
venue.63 Thus,
the
doctrine
of forum
non
conveniens addresses the same rationale that the rule against
forum shopping does, albeit on a multijurisdictional scale.
Forum non conveniens, like res judicata,64 is a concept originating
in common law.65 However, unlike the rule on res judicata, as well
as those on litis pendentia and forum shopping, forum non
conveniensfinds no textual anchor, whether in statute or in
procedural rules, in our civil law system. Nevertheless,
jurisprudence has applied forum non conveniens as basis for a
court
to
decline
its
exercise
of
jurisdiction. 66

jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is
as much a matter of efficiency and economy as it is a matter of
international courtesy. A court would effectively be neutering itself
if it insists on adjudicating a controversy when it knows full well
that it is in no position to enforce its judgment. Doing so is not only
an exercise in futility; it is an act of frivolity. It clogs the dockets of
a.tribunal and leaves it to waste its efforts on affairs, which, given
transnational exigencies, will be reduced to mere academic, if not
trivial,
exercises.
Accordingly, under the doctrine of forum non conveniens, "a court,
in conflicts of law cases, mayrefuse impositions on its jurisdiction
where it is not the most 'convenient' or available forum and the
parties
are
not
precluded
from
seeking
remedies
elsewhere."67 In Puyat v. Zabarte,68 this court recognized the
following situations as among those that may warrant a court's
desistance from exercising jurisdiction:chanroblesvirtuallawlibrary
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;

Forum non conveniens is soundly applied not only to address


parallel litigation and undermine a litigant's capacity to vex and
secure undue advantages by engaging in forum shopping on an
international scale. It is also grounded on principles of comity and
judicial
efficiency.

2) The belief that the non-resident plaintiff sought the forum[,] a


practice known asforum shopping[,] merely to secure
procedural advantages or to convey or harass the defendant;

Consistent with the principle of comity, a tribunal's desistance in


exercising jurisdiction on account offorum non conveniens is a
deferential gesture to the tribunals of another sovereign. It is a
measure that prevents the former's having to interfere in affairs
which are better and more competently addressed by the latter.
Further, forum non conveniens entails a recognition not only that
tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals arebetter positioned to
enforce judgments and, ultimately, to dispense justice. Forum non
conveniensprevents the embarrassment of an awkward situation
where a tribunal is rendered incompetent in the face of the greater
capability both analytical and practical of a tribunal in another

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

Page | 49

5) The difficulty of ascertaining foreign law.69


In Bank of America, NT&SA, Bank of America International, Ltd. v.
Court of Appeals,70 this court underscored that a Philippine court
may properly assume jurisdiction over a case if it chooses to do so
to the extent: "(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."71
The use of the word "may" (i.e., "may refuse impositions on its
jurisdiction"72) in the decisions shows that the matter of jurisdiction
rests on the sound discretion of a court. Neither the mere
invocation offorum non conveniens nor the averment of foreign
elements operates to automatically divest a court of jurisdiction.
Rather, a court should renounce jurisdiction only "after 'vital facts
are established, to determine whether special circumstances'
require the court's desistance."73 As the propriety of applying forum
non conveniens is contingent on a factual determination, it is,
therefore,
a
matter
of
defense.74
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil
Procedure is exclusive in its recital of the grounds for dismissal that
are exempt from the omnibus motion rule: (1) lack of jurisdiction
over the subject matter; (2) litis pendentia; (3) res judicata; and (4)
prescription. Moreover, dismissal on account offorum non
conveniens is a fundamentally discretionary matter. It is, therefore,
not a matter for a defendant to foist upon the court at his or her
own convenience; rather, it must be pleaded at the earliest
possible
opportunity.
On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a
ground for dismissal; it must be pleaded as such at the earliest
possible opportunity. Otherwise, it shall be deemed waived.

matter, it is imperative that it proceed from & factually established


basis. It would be improper to dismiss an action pursuant toforum
non conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show
that a prior suit has, in fact, been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered
by duplicitous litigation, the embarrassment of intruding into the
affairs of another sovereign, and the squandering of judicial efforts
in resolving a dispute already lodged and better resolved
elsewhere. As has been noted:chanroblesvirtuallawlibrary
A case will not be stayed o dismissed on [forum] non
conveniens grounds unless the plaintiff is shown to have an
available alternative forum elsewhere. On this, the moving party
bears
the
burden
of
proof.
A number of factors affect the assessment of an alternative forum's
adequacy. The statute of limitations abroad may have run, of the
foreign court may lack either subject matter or personal jurisdiction
over the defendant. . . . Occasionally, doubts will be raised as to the
integrity or impartiality of the foreign court (based, for example, on
suspicions of corruption or bias in favor of local nationals), as to the
fairness of its judicial procedures, or as to is operational efficiency
(due, for example, to lack of resources, congestion and delay, or
interfering circumstances such as a civil unrest). In one noted case,
[it was found] that delays of 'up to a quarter of a century' rendered
the
foreign
forum...
inadequate
for
these
purposes.77cralawlawlibrary
We deem it more appropriate and in the greater interest of
prudence that a defendant not only allege supposed dangerous
tendencies in litigating in this jurisdiction; the defendant must also
show that such danger is real and present in that litigation or
dispute resolution has commenced in another jurisdiction and that
a foreign tribunal has chosen to exercise jurisdiction.

This court notes that in Hasegawa,76 this court stated that forum
non conveniens is not a ground for a motion to dismiss. The factual
ambience of this case however does not squarely raise the viability
of this doctrine. Until the opportunity comes to review the use of
motions to dismiss for parallel litigation,Hasegawa remains existing
doctrine.

III

Consistent with forum non conveniens as fundamentally a factual

Saudia invokes forum non conveniens to supposedly effectuate the

Forum non conveniens finds no application and does not operate to


divest Philippine tribunals of jurisdiction and to require the
application
of
foreign
law.

Page | 50

stipulations of the Cabin Attendant contracts that require the


application
of
the
laws
of
Saudi
Arabia.
Forum non conveniens relates to forum, not to the choice of
governing law. Thai forum non conveniensmay ultimately result in
the application of foreign law is merely an incident of its
application. In this strict sense, forum non conveniens is not
applicable. It is not the primarily pivotal consideration in this case.
In any case, even a further consideration of the applicability
of forum non conveniens on the incidental matter of the law
governing respondents' relation with Saudia leads to the conclusion
that it is improper for Philippine tribunals to divest themselves of
jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a
forum and'its incidents must grapple with two (2) considerations:
first, the availability and adequacy of recourse to a foreign tribunal;
and second, the question of where, as between the forum court
and a foreign court, the balance of interests inhering in a dispute
weighs
more
heavily.
The first is a pragmatic matter. It relates to the viability of ceding
jurisdiction to a foreign tribunal and can be resolved by juxtaposing
the competencies and practical circumstances of the tribunals in
alternative fora. Exigencies, like the statute of limitations, capacity
to enforce orders and judgments, access to records, requirements
for the acquisition of jurisdiction, and even questions relating to the
integrity of foreign courts, may render undesirable or even totally
unfeasible recourse to a foreign court. As mentioned, we consider it
in the greater interest of prudence that a defendant show, in
pleading forum non conveniens, that litigation has commenced in
another jurisdiction and that a foieign tribunal has, in fact, chosen
to
exercise
jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of
interests inhering in a dispute: first, the vinculum which the parties
and their relation have to a given jurisdiction; and second, the
public interest that must animate a tribunal, in its capacity as an
agent of the sovereign, in choosing to assume or decline
jurisdiction. The first is more concerned with the parties, their
personal circumstances, and private interests; the second concerns
itself
with
the
state
and
the
greater
social
order.
In

considering

the

vinculum,

court

must

look

into

the

preponderance of linkages which the parties and their transaction


may have to either jurisdiction. In this respect, factors, such as the
parties' respective nationalities and places of negotiation,
execution, performance, engagement or deployment, come into
play.
In considering public interest, a court proceeds with a
consciousness that it is an organ of the state. It must, thus,
determine if the interests of the sovereign (which acts through it)
are outweighed by those of the alternative jurisdiction. In this
respect, the court delves into a consideration of public policy.
Should it find that public interest weighs more heavily in favor of its
assumption of jurisdiction, it should proceed in adjudicating the
dispute, any doubt or .contrary view arising from the
preponderance
of
linkages
notwithstanding.
Our law on contracts recognizes the validity of contractual choice of
law provisions. Where such provisions exist, Philippine tribunals,
acting as the forum court, generally defer to the parties' articulated
choice.
This is consistent with the fundamental principle of autonomy of
contracts. Article 1306 of the Civ:l Code expressly provides that
"[t]he contracting parties may establish 'such stipulations, clauses,
terms
and
conditions
as
they
may
deem
convenient."78 Nevertheless, while a Philippine tribunal (acting as
the forum court) is called upon to respect the parties' choice of
governing law, such respect must not be so permissive as to lose
sight of considerations of law, morals, good customs, public order,
or public policy that underlie the contract central to the
controversy.
Specifically with respect to public policy, in Pakistan International
Airlines
Corporation
v.
Ople,79 this
court
explained
that:chanroblesvirtuallawlibrary
counter-balancing the principle of autonomy of contracting parties
is the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public policy,
are deemed written inta the contract. Put a little differently, the
governing principle is that parties may not contract away
applicable provisions of law especially peremptory provisions
dealing
with
matters
heavily
impressed
with
public
interest.80 (Emphasis supplied)

Page | 51

Article II, Section 14 of the 1987 Constitution provides that "[t]he


State ... shall ensure the fundamental equality before the law of
women and men." Contrasted with Article II, Section 1 of the 1987
Constitution's statement that "[n]o person shall ... be denied the
equal protection of the laws," Article II, Section 14 exhorts the State
to "ensure." This does not only mean that the Philippines shall not
countenance nor lend legal recognition and approbation to
measures that discriminate on the basis of one's being male or
female. It imposes an obligation to actively engage in securing the
fundamental
equality
of
men
and
women.
The Convention on the Elimination of all Forms of Discrimination
against Women (CEDAW), signed and ratified by the Philippines on
July 15, 1980, and on August 5, 1981, respectively, 81 is part of the
law of the land. In view of the widespread signing and ratification
of, as well as adherence (in practice) to it by states, it may even be
said that many provisions of the CEDAW may have become
customary international law. The CEDAW gives effect to the
Constitution's policy statement in Article II, Section 14. Article I of
the
CEDAW
defines
"discrimination
against
women"
as:chanroblesvirtuallawlibrary
any distinction, exclusion or restriction made on the basis of sex
which has the effect or purpose of impairing or nullifying the
recognition, enjoyment or exercise by women, irrespective of their
marital status, on a basis of equality of men and women, of human
rights and fundamental freedoms in the political, economic, social,
cultural, civil or any other field.82cralawlawlibrary
The constitutional exhortation to ensure fundamental equality, as
illumined by its enabling law, the CEDAW, must inform and animate
all the actions of all personalities acting on behalf of the State. It is,
therefore, the bounden duty of this court, in rendering judgment on
the disputes brought before it, to ensure that no discrimination is
heaped upon women on the mere basis of their being women. This
is a point so basic and central that all our discussions and
pronouncements regardless of whatever averments there may
be of foreign law must proceed from this premise.
So informed and animated, we emphasize the glaringly
discriminatory nature of Saudia's policy. As argued by respondents,
Saudia's policy entails the termination of employment of flight
attendants who become pregnant. At the risk of stating the
obvious, pregnancy is an occurrence that pertains specifically to
women. Saudia's policy excludes from and restricts employment on

the

basis

of

no

other

consideration

but

sex.

We do not lose sight of the reality that pregnancy does present


physical limitations that may render difficult the performance of
functions associated with being a flight attendant. Nevertheless, it
would be the height of iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the termination of
one's employment. It is clear to us that any individual, regardless of
gender, may be subject to exigencies that limit the performance of
functions. However, we fail to appreciate how pregnancy could be
such an impairing occurrence that it leaves no other recourse but
the complete termination of the means through which a woman
earns
a
living.
Apart from the constitutional policy on the fundamental equality
before the law of men and women, it is settled that contracts
relating to labor and employment are impressed with public
interest. Article 1700 of the Civil Code provides that "[t]he relation
between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the
common
good."
Consistent with this, this court's pronouncements in Pakistan
International
Airlines
Corporation83 are
clear
and
unmistakable:chanroblesvirtuallawlibrary
Petitioner PIA cannot take refuge in paragraph 10 of its
employment agreement which specifies, firstly, the law of Pakistan
as the applicable law of the agreement, and, secondly, lays the
venue for settlement of any dispute arising out of or in connection
with the agreement "only [in] courts of Karachi, Pakistan". The first
clause of paragraph 10 cannot be invoked to prevent the
application of Philippine labor laws and'regulations to the subject
matter of this case, i.e., the employer-employee relationship
between petitioner PIA and private respondents. We have already
pointed out that the relationship is much affected with public
interest and that the otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the parties agreeing
upon some other law to govern their relationship. . . . Under these
circumstances, paragraph 10 of the employment agreement cannot
be given effect so as to oust Philippine agencies and courts of the
jurisdiction vested upon them by Philippine law.84 (Emphasis
supplied)

Page | 52

As the present dispute relates to (what the respondents allege to


be) the illegal termination of respondents' employment, this case is
immutably a matter of public interest and public policy. Consistent
with clear pronouncements in law and jurisprudence, Philippine
laws properly find application in and govern this case. 'Moreover, as
this premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals
may properly assume jurisdiction over the present controversy.
Philippine jurisprudence provides ample illustrations of when a
court's renunciation of jurisdiction on account of forum non
conveniens is
proper
or
improper.'
In Philsec Investment Corporation v. Court of Appeals,85 this court
noted that the trial court failed to consider that one of the plaintiffs
was a domestic corporation, that one of the defendants was a
Filipino, and that it was the extinguishment of the latter's debt that
was the object of the transaction subject of the litigation. Thus, this
court held, among others, that the trial court's refusal to assume
jurisdiction was not justified by forum non conveniens and
remanded
the
case
to
the
trial
court.
In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained
the trial court's assumption of jurisdiction considering that the trial
court could properly enforce judgment on the petitioner which was
a foreign corporation licensed to do business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no
reason to disturb the trial court's assumption of jurisdiction over a
case in which, as noted by the trial court, "it is more convenient to
hear and decide the case in the Philippines because Todaro [the
plaintiff] resides in the Philippines and the contract allegedly
breached
involve[d]
employment
in
the
Philippines." 88
In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this
court held that the fact that the complainant in an illegal dismissal
case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor
Code does not include forum non conveniens as a ground for the
dismissal of a complaint for illegal dismissal; (2) the propriety of
dismissing a case based on forum non conveniens requires a
factual determination; and (3) the requisites for assumption of
jurisdiction as laid out in Bank of America, NT&SA90 were all
satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National

Labor Relations Commission91 that the National Labor Relations Q


Commission was a seriously inconvenient forum. In that case,
private respondent Marcelo G. Santos was working in the Sultanate
of Oman when he received a letter from Palace Hotel recruiting him
for employment in Beijing, China. Santos accepted the offer.
Subsequently, however, he was released from employment
supposedly due to business reverses arising from political
upheavals in China (i.e., the Tiananmen Square incidents of 1989).
Santos later filed a Complaint for illegal dismissal impleading
Palace Hotel's General Manager, Mr. Gerhard Schmidt, the Manila
Hotel International Company Ltd. (which was, responsible for
training Palace Hotel's personnel and staff), and the Manila Hotel
Corporation (which owned 50% of Manila Hotel International
Company
Ltd.'s
capital
stock).
In ruling against the National Labor Relations Commission's
exercise of jurisdiction, this court noted that the main aspects of
the case transpired in two (2) foreign jurisdictions, Oman and
China, and that the case involved purely foreign elements.
Specifically, Santos was directly hired by a foreign employer
through correspondence sent to Oman. Also, the proper defendants
were neither Philippine nationals nor engaged in business in the
Philippines, while the main witnesses were not residents of the
Philippines. Likewise, this court noted that the National Labor
Relations Commission was in no position to conduct the following:
first, determine the law governing the employment contract, as it
was entered into in foreign soil; second, determine the facts, as
Santos' employment was terminated in Beijing; and third, enforce
its judgment, since Santos' employer, Palace Hotel, was
incorporated under the laws of China and was not even served with
summons.
Contrary to Manila Hotel, the case now before us does not entail a
preponderance of linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not
approximate the circumstances enumerated in Puyat,92 which this
court recognized as possibly justifying the desistance of Philippine
tribunals
from
exercising
jurisdiction.
First, there is no basis for concluding that the case can be more
conveniently tried elsewhere. As established earlier, Saudia is doing
business in the Philippines. For their part, all four (4) respondents
are Filipino citizens maintaining residence in the Philippines and,
apart from their previous employment with Saudia, have no other

Page | 53

connection to the Kingdom of Saudi Arabia. It would even be to


respondents' inconvenience if this case were to be tried elsewhere.
Second, the records are bereft of any indication that respondents
filed their Complaint in an effort to engage in forum shopping or to
vex
and
inconvenience
Saudia.
Third, there is no indication of "unwillingness to extend local judicial
facilities to non-residents or aliens." 93 That Saudia has managed to
bring the present controversy all the way to this court proves this.
Fourth, it cannot be said that the local judicial machinery is
inadequate for effectuating the right sought to be maintained.
Summons was properly served on Saudia and jurisdiction over its
person
was
validly
acquired.
Lastly, there is not even room for considering foreign law. Philippine
law
properly
governs
the
present
dispute.
As the question of applicable law has been settled, the supposed
difficulty of ascertaining foreign law (which requires the application
of forum
non
conveniens)
provides
no
insurmountable
inconvenience or special circumstance that will justify depriving
Philippine
tribunals
of
jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the
laws of Saudi Arabia which should apply, it does not follow that
Philippine tribunals should refrain from exercising jurisdiction. To.
recall our pronouncements in Puyat, 94 as well as in Bank of
America, NT&SA,95 it is not so much the mere applicability of
foreign law which calls into operation forum non conveniens.
Rather, what justifies a court's desistance from exercising
jurisdiction is "[t]he difficulty of ascertaining foreign law"96 or the
inability of a "Philippine Court to make an intelligent decision as to
the
law[.]"97
Consistent with lex loci intentionis, to the extent that it is proper
and practicable (i.e., "to make an intelligent decision" 98), Philippine
tribunals may apply the foreign law selected by the parties. In fact,
(albeit without meaning to make a pronouncement on the accuracy
and reliability of respondents' citation) in this case, respondents
themselves have made averments as to the laws of Saudi Arabia. In
their Comment, respondents write:chanroblesvirtuallawlibrary

Under the Labor Laws of Saudi Arabia and the Philippines[,] it is


illegal and unlawful to terminate the employment of any woman by
virtue of pregnancy. The law in Saudi Arabia is even more harsh
and strict [sic] in that no employer can terminate the employment
of a female worker or give her a warning of the same while on
Maternity Leave, the specific provision of Saudi Labor Laws on the
matter is hereto quoted as follows:chanroblesvirtuallawlibrary
"An employer may not terminate the employment of a female
worker or give her a warning of the same while on maternity
leave." (Article 155, Labor Law of the Kingdom of Saudi Arabia,
Royal Decree No. M/51.)99cralawlawlibrary
All told, the considerations for assumption of jurisdiction by
Philippine tribunals as outlined in Bank of America, NT&SA100 have
been satisfied. First, all the parties are based in the Philippines and
all the material incidents transpired in this jurisdiction. Thus, the
parties may conveniently seek relief from Philippine tribunals.
Second, Philippine tribunals are in a position to make an intelligent
decision as to the law and the facts. Third, Philippine tribunals are
in a position to enforce their decisions. There is no compelling basis
for ceding jurisdiction to a foreign tribunal. Quite the contrary, the
immense public policy considerations attendant to this case
behoove Philippine tribunals to not shy away from their duty to rule
on the case.chanRoblesvirtualLawlibrary
IV
Respondents

were

illegally

terminated.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary


resignation as "the voluntary act of an employee who is in a
situation where one believes that personal reasons cannot be
sacrificed in favor of the exigency of the service, and one has no
other choice but to dissociate oneself from employment. It is a
formal pronouncement or relinquishment of an office, with the
intention of relinquishing the office accompanied by the act of
relinquishment."102 Thus, essential to the act of resignation is
voluntariness. It must be the result of an employee's exercise of his
or
her
own
will.
In the same case of Bilbao, this court advanced a means for
determining
whether
an
employee
resigned
voluntarily:chanroblesvirtuallawlibrary

Page | 54

As the intent to relinquish must concur with the overt act of


relinquishment, the acts of the employee before and after the
alleged resignation must be considered in determining whether he
or
she,
in
fact,
intended,
to
sever
his
or
her
employment.103(Emphasis supplied)
On the other hand, constructive dismissal has been defined as
"cessation of work because 'continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay' and other benefits." 104
In Penaflor
v.
Outdoor
Clothing
Manufacturing
Corporation,105 constructive dismissal has been described as
tantamount to "involuntarily [sic] resignation due to the harsh,
hostile, and unfavorable conditions set by the employer." 106 In the
same case, it was noted that "[t]he gauge for constructive
dismissal is whether a reasonable person in the employee's position
would feel compelled to give up his employment under the
prevailing
circumstances."107
Applying the cited standards on resignation and constructive
dismissal, it is clear that respondents were constructively
dismissed.
Hence,
their
termination
was
illegal.
The termination of respondents' employment happened when they
were pregnant and expecting to incur costs on account of child
delivery and infant rearing. As noted by the Court of Appeals,
pregnancy is a time when they need employment to sustain their
families.108 Indeed, it goes against normal and reasonable human
behavior to abandon one's livelihood in a time of great financial
need.
It is clear that respondents intended to remain employed with
Saudia. All they did was avail of their maternity leaves. Evidently,
the very nature of a maternity leave means that a pregnant
employee will not report for work only temporarily and that she will
resume the performance of her duties as soon as the leave
allowance
expires.
It is also clear that respondents exerted all efforts to' remain
employed with Saudia. Each of them repeatedly filed appeal letters
(as much as five [5] letters in the case of Rebesencio 109) asking
Saudia to reconsider the ultimatum that they resign or be
terminated along with the forfeiture of their benefits. Some of them
even went to Saudia's office to personally seek reconsideration. 110

Respondents also adduced a copy of the "Unified Employment


Contract for Female Cabin Attendants."111 This contract deemed
void the employment of a flight attendant who becomes pregnant
and threatened termination due to lack of medical fitness. 112 The
threat of termination (and the forfeiture of benefits that it entailed)
is enough to compel a reasonable person in respondents' position
to
give
up
his
or
her
employment.
Saudia draws attention to how respondents' resignation letters
were supposedly made in their own handwriting. This minutia fails
to surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof
of how any supposed resignation did not arise from respondents'
own initiative. As earlier pointed out, respondents' resignations
were executed on Saudia's blank letterheads that Saudia had
provided. These letterheads already had the word "RESIGNATION"
typed on the subject portion of their respective headings when
these were handed to respondents.113ChanRoblesVirtualawlibrary
"In termination cases, the burden of proving just or valid cause for
dismissing an employee rests on the employer." 114 In this case,
Saudia makes much of how respondents supposedly completed
their exit interviews, executed quitclaims, received their separation
pay, and took more than a year to file their Complaint. 115 If at all,
however, these circumstances prove only the fact of their
occurrence, nothing more. The voluntariness of respondents'
departure
from
Saudia
is non
sequitur.
Mere compliance with standard procedures or processes, such as
the completion of their exit interviews, neither negates compulsion
nor
indicates
voluntariness.
As with respondent's resignation letters, their exit interview forms
even support their claim of illegal dismissal and militates against
Saudia's arguments. These exit interview forms, as reproduced by
Saudia in its own Petition, confirms the unfavorable conditions as
regards respondents' maternity leaves. Ma. Jopette's and Loraine's
exit
interview
forms
are
particularly
telling:chanroblesvirtuallawlibrary
a.

From

Ma.

Jopette's

exit

interview

form:

3. In what respects has the job met or failed to meet your


expectations?

Page | 55

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY


LEAVE.116

employee relationships. As such, respondents are entitled to moral


damages.

b.

To provide an "example or correction for the public good" 121 as


against such discriminatory and callous schemes, respondents are
likewise
entitled
to
exemplary
damages.

From

Loraine's

exit

interview

form:

1. What are your main reasons for leaving Saudia? What


company are you joining?
xxx xxx xxx
Others
CHANGING
POLICIES
(PREGNANCY)117

REGARDING

MATERNITY

LEAVE

As to respondents' quitclaims, in Phil. Employ Services and


Resources, Inc. v. Paramio,118 this court noted that "[i]f (a) there is
clear proof that the waiver was wangled from an unsuspecting or
gullible person; or (b) the terms of the settlement are
unconscionable, and on their face invalid, such quitclaims must be
struck down as invalid or illegal." 119 Respondents executed their
quitclaims after having been unfairly given an ultimatum to resign
or
be
terminated
(and
forfeit
their
benefits).chanRoblesvirtualLawlibrary
V
Having been illegally and unjustly dismissed, respondents are
entitled to full backwages and benefits from the time of their
termination until the finality of this Decision. They are likewise
entitled to separation pay in the amount of one (1) month's salary
for every year of service until the fmality of this Decision, with a
fraction of a year of at least six (6) months being counted as one
(1)
whole
year.
Moreover, "[m]oral damages are awarded in termination cases
where the employee's dismissal was attended by bad faith, malice
or fraud, or where it constitutes an act oppressive to labor, or
where it was done in a manner contrary to morals, good customs or
public policy."120 In this case, Saudia terminated respondents'
employment in a manner that is patently discriminatory and
running afoul of the public interest that underlies employer-

In a long line of cases, this court awarded exemplary damages to


illegally dismissed employees whose "dismissal[s were] effected in
a wanton, oppressive or malevolent manner."122 This court has
awarded exemplary damages to employees who were terminated
on such frivolous, arbitrary, and unjust grounds as membership in
or involvement with labor unions,123 injuries sustained in the course
of employment,124 development of a medical condition due to the
employer's own violation of the employment contract, 125 and
lodging of a Complaint against the employer. 126 Exemplary
damages were also awarded to employees who were deemed
illegally dismissed by an employer in an attempt to evade
compliance
with
statutorily
established
employee
benefits.127 Likewise, employees dismissed for supposedly just
causes, but in violation of due process requirements, were awarded
exemplary
damages.128
These examples pale in comparison to the present controversy.
Stripped of all unnecessary complexities, respondents were
dismissed for no other reason than simply that they were pregnant.
This is as wanton, oppressive, and tainted with bad faith as any
reason for termination of employment can be. This is no ordinary
case of illegal dismissal. This is a case of manifest gender
discrimination. It is an affront not only to our statutes and policies
on employees' security of tenure, but more so, to the Constitution's
dictum of fundamental equality between men and women. 129
The award of exemplary damages is, therefore, warranted, not only
to remind employers of the need to adhere to the requirements of
procedural and substantive due process in termination of
employment, but more importantly, to demonstrate that gender
discrimination
should
in
no
case
be
countenanced.
Having been compelled to litigate to seek reliefs for their illegal and
unjust dismissal, respondents are likewise entitled to attorney's
fees in the amount of 10% of the total monetary award.130
VI

Page | 56

(3) Moral damages in the amount of P100,000.00 per respondent;


Petitioner

Brenda

J.

Betia

may

not

be

held

liable.

A corporation has a personality separate and distinct from those of


the persons composing it. Thus, as a rule, corporate directors and
officers are not liable for the illegal termination of a corporation's
employees. It is only when they acted in bad faith or with malice
that they become solidarity liable with the corporation. 131

(4) Exemplary damages


respondent; and

in

the

amount

of

P200,000.00

per

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang


Manggagawa ng Ever Electrical,132 this court clarified that "[b]ad
faith does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of
wrong; it means breach of a known duty through some motive or
interest or ill will; it partakes of the nature of fraud." 133

(5) Attorney's fees equivalent to 10% of the total award.

Respondents have not produced proof to show that Brenda J. Betia


acted in bad faith or with malice as regards their termination. Thus,
she may not be held solidarity liable with Saudia.cralawred

This case is REMANDED to the Labor Arbiter to make a detailed


computation of the amounts due to respondents which petitioner
Saudi
Arabian
Airlines
should
pay
without
delay.

WHEREFORE, with the MODIFICATIONS that first, petitioner


Brenda J. Betia is not solidarity liable with petitioner Saudi Arabian
Airlines, and second, that petitioner Saudi Arabian Airlines is liable
for moral and exemplary damages. The June 16, 2011 Decision and
the September 13, 2011 Resolution of the Court of Appeals in CAG.R. SP. No. 113006 are hereby AFFIRMED in all other respects.
Accordingly, petitioner Saudi Arabian Airlines is ordered to pay
respondents:

SO

Interest of 6% per annum shall likewise be imposed on the total


judgment award from the finality of this Decision until full
satisfaction
thereof.

ORDERED.chanroblesvirtuallawlibrary

Carpio, (Chairperson), Velasco, Jr.,*Del Castillo, and Mendoza, JJ.,


concur.

(1) Full backwages and all other benefits computed from the
respective dates in which each of the respondents were illegally
terminated until the finality of this Decision;

(2) Separation pay computed from the respective dates in which


each of the respondents commenced employment until the
finality of this Decision at the rate of one (1) month's salary for
every year of service, with a fraction of a year of at least six (6)
months being counted as one (1) whole year;

Page | 57