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Van Dorn vs Romillo

Van Dorn vs. Romillo


139 SCRA 139

FACTS:

Alice Reyes Van Dorn, a Filipino Citizen and private respondent, Richard
Upton, a US citizen, was married in Hong Kong in 1979. They established
their residence in the Philippines and had 2 children. They were divorced in
Nevada, USA in 1982 and petitioner remarried, this time with Theodore Van
Dorn. A suit against petitioner was filed on June 8, 1983, stating that
petitioners business in Ermita Manila, the Galleon Shop, is a conjugal
property with Upton and prayed therein that Alice be ordered to render an
accounting of the business and he be declared as the administrator of the
said property.

ISSUE: Whether or not the foreign divorce between the petitioner and private
respondent in Nevada is binding in the Philippines where petitioner is a
Filipino citizen.

HELD:

Private respondent is no longer the husband of the petitioner. He would have


no standing to sue petitioner to exercise control over conjugal assets. He is
estopped by his own representation before the court from asserting his right
over the alleged conjugal property. Furthermore, aliens may obtain divorces
abroad, which may be recognized in the Philippines, provided they are valid
according to their national law. Petitioner is not bound to her marital
obligations to respondent by virtue of her nationality laws. She should not
be discriminated against her own country if the end of justice is to be served.

TESTATE ESTATE OF EDWARD E. CHRISTENSEN vs. HELEN


CHRISTENSEN GARCIA, G.R. No. L-16749 January 31, 1963
IN THE MATTER OF THE TESTATE ESTATE OF EDWARD E.
CHRISTENSEN, DECEASED.
ADOLFO C. AZNAR, Executor and LUCY CHRISTENSEN, Heir of the
deceased, Executor and
Heir-appellees, VS. HELEN CHRISTENSEN GARCIA, oppositor-appellant
January 31, 1963

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

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

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

Philippine Export and Foreign Loan Guarantee Corporation v V.P. Eusebio


Construction Inc.
Facts:
1. The State Organization of Buildings (SOB), Ministry of Housing and
Construction, Baghdad, Iraq awarded the construction of the Institute of
Physical Therapy-Medical Rehabilitation Center in Iraq to Ayjal Trading and
Contracting Company for a total contract price of about $18M.

2. Spouses Santos, in behalf of 3-Plex International, Inc., a local contractor


engaged in construction business, entered into a joint venture agreement
with Ayjal wherein the former undertook the execution of the entire a project,
while the latter would be entitled to a commission of 4%.

3. 3-Plex not accredited by the Philippine Overseas Construction Board


(POCB) assigned and transferred all its rights and interests to VPECI.

4. The SOB required the contractors to submit a performance bond


representing 5% of the total contract price, an advance payment bond
representing 10% of the advance payment to be released upon signing of
the contract. To comply with these requirements 3-Plex and VPECI applied
for a guarantee with Philguarantee, a government financial institution
empowered to issue guarantees for qualified Filipino contractors.

5. But what SOB required was a guarantee from the Rafidain Bank of
Baghdad so Rafidain Bank issued a performance bond in favor of SOB on
the condition that another foreign bank (not Phil Guarantee) would issue the
counter-guarantee. Hence, Al Ahli Bank of Kuwait was chosen to provide the
counter guarantee.

6.Afterwards, SOB and the joint venture of VPECI and Ayjal executed the
service contract. Under the contract, the joint venture would supply
manpower and materials, SOB would refund 25% of the project cost in Iraqi
Dinar and 75% in US dollars at an exchange rate of 1 Dinar to $3.37.
7.The project was not completed. Upon seeing the impossibility of meeting
the deadline, the joint venture worked for the renewal or extension (12x) of
the performance bond up to December 1986.

8. In October 1986, Al Ahli Bank sent a telex call demanding full payment of
its performance bond counter-guarantee. Upon receipt, VPECI requested
Iraq Trade and Economic Development Minister Fadhi Hussein to recall the
telex for being in contravention of its mutual agreement that the penalty will
be held in abeyance until completion of the project. It also wrote SOB
protesting the telex since the Iraqi government lacks foreign exchange to pay
VPECI and the non-compliance with the 75% billings in US dollars.

9. Philguarantee received another telex from Al Ahli stating that it already


paid to Rafidain Bank. The Central Bank authorized the remittance to Al Ahli
Bank representing the full payment of the performance counter-guarantee
for VPECI's project in Iraq.

10. Philguarantee sent letters to respondents demanding the full payment of


the surety bond. Respondents failed to pay so petitioner filed a civil case for
collection of sum of money.

11. Trial Court ruling: Dismissed. Philguarantee had no valid cause of action
against the respondents. The joint venture incurred no delay in the execution
of the project considering that SOB's violations of the contract rendered
impossible the performance of its undertaking.

12. CA: Affirmed.

Issue:
What law should be applied in determining whether or not contractor (joint
venture) has defaulted?

Held:
The question of whether there is a breach of the agreement which includes
default pertains to the INTRINSIC validity of the contract.

No conflicts rule on essential validity of contracts is expressly provided for in


our laws. The rule followed by most legal systems is that the intrinsic validity
of a contract must be governed by lex contractus (proper law of the contract).
This may be the law voluntarily agreed upon by the parties (lex loci
voluntatis) or the law intended by them either expressly or implicitly (lex loci
intentionis). The law selected may be implied from factors such as
substantial connection with the transaction, or the nationality or domicile of
the parties. Philippine courts adopt this: to allow the parties to select the law
applicable to their contract, SUBJECT to the limitation that it is not against
the law, morals, public policy of the forum and that the chosen law must bear
a substantive relationship to the transaction.

In the case, the service contract between SOB and VPECI contains no
express choice of law. The laws of Iraq bear substantial connection to the
transaction and one of the parties is the Iraqi government. The place of
performance is also in Iraq. Hence, the issue of whether VPECI defaulted
may be determined by the laws of Iraq.

BUT! Since foreign law was not properly pleaded or proved, processual
presumption will apply.

According to Art 1169 of the Civil Code: In reciprocal obligations, neither


party incurs in delay if the other party does not comply or is not ready to
comply in a proper manner what is incumbent upon him.

As found by the lower courts: the delay or non-completion of the project was
caused by factors not imputable to the Joint Venture, it was rather due to the
persistent violations of SOB, particularly it's failure to pay 75% of the
accomplished work in US dollars. Hence, the joint venture does not incur in
delay if the other party(SOB) fails to perform the obligation incumbent upon
him.

CONFLICT OF LAWS raytheon international vs rouzie gr 162894


FACTS

Brand Marine Services, Inc. (BMSI), a corporation duly organized & existing
under the laws of Connecticut, &Stockton Rouzie, Jr., an American citizen,
entered into a contract
BMSI hired Rouzie as its representative to negotiate the sale of services in
several government projects in thePhilippines for an agreed remuneration of
10% of the gross receipts.

Rouzie secured a service contract w/ the Rep. of Phil. on behalf of BMSI for
the dredging of rivers affected by the Mt.Pinatubo eruption & mudflows.

Rouzie filed before the NLRC a suit against BMSI and Rust International
(Rust) for alleged nonpayment of commissions, illegal termination, & breach
of employment contract.

The Labor Arbiter order


ed BMSI & Rust to pay Rouzies money claims.

Upon appeal, the NLRC reversed & dismissed Rouzies complaint on the
ground of lack of jurisdiction.

Rouzie filed an action for damages before the RTC of La Union (where he
was a resident) against Raytheon International. He reiterated that he was not
paid the commissions due him from the Pinatubo dredging project w/c
hesecured on behalf of BMSI. The complaint also averred that BMSI, RUST
and Raytheon had combined & functioned as 1 company.

RAYTHEON SOUGHT THE DISMISSAL OF THE COMPLAINT ON THE


GROUNDS OF FAILURE TO STATE ACAUSE OF ACTION & FORUM NON
CONVENIENS & PRAYED FOR DAMAGES BY WAY OF COMPULSORY
COUNTERCLAIM. THE RTC DENIED RAYTHEONS MOTION. THE CA
AFFIRMED.

Raytheons contention: The written contract between Rouzie & 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 that the parties &
witnesses involved are American corporations & citizens & the evidence to
be presented is located outside the Philippines, that renders our local courts
inconvenient forums. The foreign elements of the dispute necessitate the
immediate application of the doctrine of forum non conveniens.
ISSUES(a) W/N the RTC had jurisdiction.(b) W/N the complaint should be
dismissed on the ground of forum non conveniens.

RULING

(a) YES.

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.

Jurisdiction over the nature and subject matter of an action is conferred by


the Constitution and the law & by the material allegations in the complaint,
irrespective of w/n the plaintiff is entitled to recover all or some of the claims
or reliefs sought therein. The case file was an action for damages arising
from an alleged breach of contract. Undoubtedly, the nature of the action and
the amount of damages prayed are w/in the jurisdiction of the RTC.

As regards jurisdiction over the parties, the RTC acquired jurisdiction over
Rouzi upon the filing of the complaint. On the other hand, jurisdiction over
the person of Raytheon was acquired by its voluntary appearance in court.

That THE SUBJECT CONTRACT INCLUDED A STIPULATION THAT THE


SAME SHALL BE GOVERNED BYTHE LAWS OF THE STATE OF
CONNECTICUT DOES NOT SUGGEST THAT THE PHILIPPINE COURTS,
OR ANY OTHER FOREIGN TRIBUNAL FOR THAT MATTER, ARE PREC
LUDED FROM HEARING THE CIVIL ACTION.

JURISDICTION & CHOICE OF LAW ARE 2 DISTINCT CONCEPTS.


Jurisdiction considers whether it is fair to cause a defendant to travel to this
state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both
parties. The choice of law stipulation will be come relevant only when the
substantive issues of the instant case develop, that is, after hearing on the
merits proceeds before the trial court.
(b) NO.

UNDER THE DOCTRINE OF FORUM NON CONVENIENS, A COURT, IN


CONFLICTS-OF-LAWS CASES, MAY
REFUSE IMPOSITIONS ON ITS JURISDICTION WHERE IT IS NOT THE
MOST CONVENIENT OR
AVAILABLE FORUM AND THE PARTIES ARE NOT PRECLUDED FROM
SEEKING REMEDIES ELSEWHERE.
Raytheons averments of the foreign elements are not sufficient to oust the
RTC of its jurisdiction over the case 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 w/c 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.

Civil Law Conflict of Laws Processual Presumption Forum Non


Conveniens
Remedial Law Civil Procedure Rule 34 Summary Judgment
Gil Miguel Puyat, a foreigner, lost a collection suit filed against him by Ron
Zabarte in a court in California, USA. The California court ordered Puyat to
pay the amount of $241k. Puyat was only able to pay $5k.
In January 1994, Zabarte filed an action to enforce the California judgment
here in the Philippines against Puyat. Puyat filed an Answer where he
alleged, among others, that the California court had no jurisdiction over the
case, hence, the foreign judgment is void. He likewise averred that the trial
court had no jurisdiction because the issue involved are partnership matters
which are under the jurisdiction of the Securities and Exchange Commission
(SEC).
Zabarte then filed a motion for summary judgment as he argued that Puyats
Answer tendered no issue. The trial court granted the motion and eventually
gave a favorable judgment for Zabarte. The Court of Appeals affirmed the
decision of the trial court.
On appeal, Puyat now avers that the trial court should have never taken
cognizance of the case because it had no jurisdiction over the case pursuant
to the forum non conveniens rule. He averred that under this principle, since
all the transaction involved in this case occurred in California, he being a
foreigner, and the California law was not properly determined, the trial court
had no jurisdiction. He also assailed the validity of the trial courts act in
granting the motion for summary judgment filed by Zabarte.
ISSUE: Whether or not Puyat is correct.
HELD: No. The allowance of summary judgment is proper. In this case,
Puyats Answer did not really tender an issue. 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. In this case, Puyats Answer merely alleged that the California court, a
civil court, had no jurisdiction because the case involved was a partnership
issue. He however admitted that the issue involved is the payment of money
upon promissory notes with damages. Puyat also did not attach a copy of
the complaint filed by Zabarte with the California court. As such, the trial court
properly presumed, applying the principle of processual presumption, that
the California law is the same as Philippine law that cases involving
collection of money is cognizable by civil courts. And by applying the principle
of processual presumption, theres no longer a need to try the facts in this
case, hence, a summary judgment was in order.
Anent the issue of forum non conveniens, such does not exist in this
case. Under the principle of forum non conveniens, even if the exercise of
jurisdiction is authorized by law, courts may nonetheless refuse to entertain
a case for any of the following practical reasons:
1) The belief that the matter can be better tried and decided elsewhere,
either because the main aspects of the case transpired in a foreign
jurisdiction or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice
known as forum shopping[,] merely to secure procedural advantages or to
convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non-residents or
aliens when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right
sought to be maintained; and
The difficulty of ascertaining foreign law.
None of the above existed in this case, hence, the trial court properly took
cognizance of the case.

CIR V SC JOHNSON INC. June 25, 1999


Monday, January 26, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Taxation

Facts: Respondent is a domestic corporation organized and operating under


the Philippine Laws, entered into a licensed agreement with the SC Johnson
and Son, USA, a non-resident foreign corporation based in the USA pursuant
to which the respondent was granted the right to use the
trademark, patents and technology owned by the later including the right to
manufacture, package and distribute the products covered by the Agreement
and secure assistance in management, marketing and production from SC
Johnson and Son USA.

For the use of trademark or technology, respondent was obliged to pay SC


Johnson and Son, USA royalties based on a percentage of net sales and
subjected the same to 25% withholding tax on royalty payments which
respondent paid for the period covering July 1992 to May 1993 in the total
amount of P1,603,443.00.

On October 29, 1993, respondent filed with the International Tax Affairs
Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on
royalties arguing that, the antecedent facts attending respondents case fall
squarely within the same circumstances under which said MacGeorge
and Gillette rulings wereissued. Since the agreement was approved by the
Technology Transfer Board, the preferential tax rate of 10% should apply to
the respondent. So, royalties paid by the respondent to SC Johnson and
Son, USA is only subject to 10% withholding tax.

The Commissioner did not act on said claim for refund. Private respondent
SC Johnson & Son, Inc. then filed a petition for review before the CTA, to
claim a refund of the overpaid withholding tax on royalty payments from July
1992 to May 1993.

On May 7, 1996, the CTA rendered its decision in favor of SC Johnson and
ordered the CIR to issue a tax credit certificate in the amount of P163,266.00
representing overpaid withholding tax on royalty payments beginning July
1992 to May 1993.

The CIR thus filed a petition for review with the CA which rendered the
decision subject of this appeal on November 7, 1996 finding no meritin the
petition and affirming in toto the CTA ruling.

Issue: Whether or not tax refunds are considered as taxexemptions.

Held: It bears stress that tax refunds are in the nature of taxexemptions. As
such they are registered as in derogation of sovereign authority and to be
construed strictissimi juris against the person or entity claiming the
exemption. The burden of proof is upon him who claims the exemption in his
favor and he must be able to justify his claim by the clearest grant of organic
or statute law. Private respondent is claiming for a refund of the alleged
overpayment of tax on royalties; however there is nothing on record to
support a claim that the tax on royalties under the RP-US Treaty is paid
under similar circumstances as the tax on royalties under the RP-West
Germany Tax Treaty.

CIR VS SC JOHNSON & SON, INCS AND CA [G.R. No. 127105. June 25,
1999]
JOHNSON AND SON, INC a domestic corporation organized and operating
under the Philippine laws, entered into a license agreement with SC Johnson
and Son, United States of America(USA), a non-resident foreign corporation
based in the U.S.A. pursuant to which the [respondent] was granted the right
to use the trademark, patents and technology owned by the latter including
the right to manufacture, package and distribute the products covered by the
Agreement and secure assistance in management, marketing and
production from SC Johnson and Son, U. S. A. The said License Agreement
was duly registered with the Technology Transfer Board of the Bureau of
Patents, Trade Marks and Technology Transfer under Certificate of
Registration No. 8064 . For the use of the trademark or technology, SC
JOHNSON AND SON, INC was obliged to pay SC Johnson and Son, USA
royalties based on a percentage of net sales and subjected the same to 25%
withholding tax on royalty payments which respondent paid for the period
covering July 1992 to May 1993.00 On October 29,1993, SC JOHNSON
AND SON, USA filed with the International Tax Affairs Division (ITAD) of the
BIR a claim for refund of overpaid withholding tax on royalties arguing that,
since the agreement was approved by the Technology Transfer Board, the
preferential tax rate of 10% should apply to the respondent. Respondent
submits that royalties paid to SC Johnson and Son, USA is only subject to
10%withholding tax pursuant to the most-favored nation clause of the RP-
US Tax Treaty in relation to the RP-West Germany Tax Treaty. The Internal
Tax Affairs Division of the BIR ruled against SC Johnson and Son, Inc. and
an appeal was filed by the former to the Court of tax appeals. The CTA ruled
against CIR and ordered that a tax credit be issued in favor of SC Johnson
and Son, Inc. Unpleased with the decision, the CIR filed an appeal to the CA
which subsequently affirmed in toto the decision of the CTA. Hence, an
appeal on certiorari was filed to the SC.
THE MAIN ISSUE:
WON SC JOHNSON AND SON, USA IS ENTITLED TO THE MOST
FAVORED NATION TAX RATE OF 10%ON ROYALTIES AS PROVIDED IN
THE RP-US TAX TREATY IN RELATION TO THE RP-WEST GERMANY
TAX TREATY.
The concessional tax rate of 10 percent provided for in the RP-Germany Tax
Treaty could not apply to taxes imposed upon royalties in the RP-US Tax
Treaty since the two taxes imposed under the two tax treaties are not paid
under similar circumstances, they are not containing similar provisions on
tax crediting.
The United States is the state of residence since the taxpayer, S. C. Johnson
and Son, U. S. A., is based there. Under the RP-US Tax Treaty, the state of
residence and the state of source are both permitted to tax the royalties, with
a restraint on the tax that may be collected by the state of source.
Furthermore, the method employed to give relief from double taxation is the
allowance of a tax credit to citizens or residents of the United States against
the United States tax, but such amount shall not exceed the limitations
provided by United States law for the taxable year. The Philippines may
impose one of three rates- 25 percent of the gross amount of the royalties;
15 percent when the royalties are paid by a corporation registered with the
Philippine Board of Investments and engaged in preferred areas of activities;
or the lowest rate of Philippine tax that may be imposed on royalties of the
same kind paid under similar circumstances to a resident of a third state.
Given the purpose underlying tax treaties and the rationale for the most
favored nation clause, the Tax Treaty should apply only if the taxes imposed
upon royalties in the RP-US Tax Treaty and in the RP-Germany Tax Treaty
are paid under similar circumstances. This would mean that private
respondent must prove that the RP-US Tax Treaty grants similar tax reliefs
to residents of the United States in respect of the taxes imposable upon
royalties earned from sources within the Philippines as those allowed to their
German counterparts under the RP Germany Tax Treaty. The RP-US and
the RP-West Germany Tax Treaties do not contain similar provisions on tax
crediting. Article 24 of the RP-Germany Tax Treaty, supra, expressly allows
crediting against German income and corporation tax of 20% of the gross
amount of royalties paid under the law of the Philippines. On the other hand,
Article 23 of the RP-US Tax Treaty, which is the counterpart provision with
respect to relief for double taxation, does not provide for similar crediting of
20% of the gross amount of royalties paid. At the same time, the intention
behind the adoption of the provision on relief from double taxation in the two
tax treaties in question should be considered in light of the purpose behind
the most favored nation clause.
What is the most favored nation clause?
The purpose of a most favored nation clause is to grant to the contracting
party treatment not less favorable than that which has been or may be
granted to the most favored among other countries. It is intended to
establish the principle of equality of international treatment by providing that
the citizens or subjects of the contracting nations may enjoy the privileges
accorded by either party to those of the most favored nation. The essence of
the principle is to allow the taxpayer in one state to avail of more liberal
provisions granted in another tax treaty to which the country of residence of
such taxpayer is also a party provided that the subject matter of taxation, in
this case royalty income, is the same as that in the tax treaty under which
the taxpayer is liable. The RP-US Tax Treaty does not give a matching tax
credit of 20 percent for the taxes paid to the Philippines on royalties as
allowed under the RP-West Germany Tax Treaty, private respondent cannot
be deemed entitled to the 10 percent rate granted under the latter treaty for
the reason that there is no payment of taxes on royalties under similar
circumstances.
TAXATION RELATED TOPICS: What is the purpose of a tax treaty?
The purpose of these international agreements is to reconcile the national
fiscal legislations of the contracting parties in order to help the taxpayer avoid
simultaneous taxation in two different jurisdictions. The goal of double
taxation conventions would be thwarted if such treaties did not provide for
effective measures to minimize, if not completely eliminate, the tax burden
laid upon the income or capital of the investor. Thus, if the rates of tax are
lowered by the state of source, in this case, by the Philippines, there should
be a concomitant commitment on the part of the state of residence to grant
some form of tax relief, whether this be in the form of a tax credit or
exemption. Otherwise, the tax which could have been collected by the
Philippine government will simply be collected by another state, defeating
the object of the tax treaty since the tax burden imposed upon the investor
would remain unrelieved. If the state of residence does not grant some form
of tax relief to the investor, no benefit would redound to the Philippines, i.e.,
increased investment resulting from a favorable tax regime, should it impose
a lower tax rate on the royalty earnings of the investor, and it would be better
to impose the regular rate rather than lose much-needed revenues to another
country.
What is international double taxation and the rationale for doing away with
it?
International juridical double taxation is defined as the imposition of
comparable taxes in two or more states on the same taxpayer in respect of
the same subject matter and for identical periods; The apparent rationale for
doing away with double taxation is to encourage the free flow of goods and
services and the movement of capital, technology and persons between
countries, conditions deemed vital in creating robust and dynamic
economies.
When is there double taxation?
Double taxation usually takes place when a person is resident of a
contracting state and derives income from, or owns capital in, the other
contracting state and both states impose tax on that income or capital.
What are the methods of eliminating double taxation?
First, it sets out the respective rights to tax of the state of source or situs and
of the state of residence with regard to certain classes of income or capital.
In some cases, an exclusive right to tax is conferred on one of the contracting
states; however, for other items of income or capital, both states are given
the right to tax, although the amount of tax that may be imposed by the state
of source is limited.
The second method for the elimination of double taxation applies whenever
the state of source is given a full or limited right to tax together with the state
of residence. In this case, the treaties make it incumbent upon the state of
residence to allow relief in order to avoid double taxation. In this case, the
treaties make it incumbent upon the state of residence to allow relief in order
to avoid double taxation.
What are the methods of relief under the second method?
There are two methods of relief, the exemption method and the credit
method.
Exemption method, the income or capital which is taxable in the state of
source or situs is exempted in the state of residence, although in some
instances it may be taken into account in determining the rate of tax
applicable to the taxpayers remaining income or capital.
Credit method, although the income or capital which is taxed in the state of
source is still taxable in the state of residence, the tax paid in the former is
credited against the tax levied in the latter.
The basic difference between the two methods is that in the exemption
method, the focus is on the income or capital itself, whereas the credit
method focuses upon the tax.

What is the rationale of reducing tax rates in negotiating tax treaties?


In negotiating tax treaties, the underlying rationale for reducing the tax rate
is that the Philippines will give up a part of the tax in the expectation that the
tax given up for this particular investment is not taxed by the other country.
What are tax refunds?
Tax refunds are in the nature of tax exemptions, and as such they are
regarded as in derogation of sovereign authority and to be construed
strictissimi juris against the person or entity claiming the exemption.
Who has the burden of proof in tax exemption?
The burden of proof is upon him who claims the exemption in his favor and
he must be able to justify his claim by the clearest grant of organic or statute
law.

BAYAN v. ZAMORA
October 26, 2012 Leave a comment
BAYAN v. ZAMORA
G. R. No. 138570
October 10, 2000
Facts:
The United States panel met with the Philippine panel to discussed, among
others, the possible elements of the Visiting Forces Agreement (VFA). This
resulted to a series of conferences and negotiations which culminated on
January 12 and 13, 1998. Thereafter, President Fidel Ramos approved the
VFA, which was respectively signed by Secretary Siazon and United States
Ambassador Thomas Hubbard.
Pres. Joseph Estrada ratified the VFA on October 5, 1998 and on May 27,
1999, the senate approved it by (2/3) votes.
Cause of Action:
Petitioners, among others, assert that Sec. 25, Art XVIII of the 1987
constitution is applicable and not Section 21, Article VII.
Following the argument of the petitioner, under they provision cited, the
foreign military bases, troops, or facilities may be allowed in the Philippines
unless the following conditions are sufficiently met:
a) it must be a treaty,
b) it must be duly concurred in by the senate, ratified by a majority of the
votes cast in a national referendum held for that purpose if so required by
congress, and
c) recognized as such by the other contracting state.
Respondents, on the other hand, argue that Section 21 Article VII is
applicable so that, what is requires for such treaty to be valid and effective is
the concurrence in by at least two-thirds of all the members of the senate.

ISSUE: Is the VFA governed by the provisions of Section 21, Art VII or of
Section 25, Article XVIII of the Constitution?
HELD:
Section 25, Article XVIII, which specifically deals with treaties involving
foreign military bases, troops or facilities should apply in the instant case. To
a certain extent and in a limited sense, however, the provisions of section
21, Article VII will find applicability with regard to the issue and for the sole
purpose of determining the number of votes required to obtain the valid
concurrence of the senate.
The Constitution, makes no distinction between transient and permanent.
We find nothing in section 25, Article XVIII that requires foreign troops or
facilities to be stationed or placed permanently in the Philippines.
It is inconsequential whether the United States treats the VFA only as an
executive agreement because, under international law, an executive
agreement is as binding as a treaty.

DECISION
(En Banc)

BUENA, J.:

I. THE FACTS

The Republic of the Philippines and the United States of America entered
into an agreement called the Visiting Forces Agreement (VFA). The
agreement was treated as a treaty by the Philippine government and was
ratified by then-President Joseph Estrada with the concurrence of 2/3 of the
total membership of the Philippine Senate.

The VFA defines the treatment of U.S. troops and personnel visiting the
Philippines. It provides for the guidelines to govern such visits, and further
defines the rights of the U.S. and the Philippine governments in the matter
of criminal jurisdiction, movement of vessel and aircraft, importation and
exportation of equipment, materials and supplies.

Petitioners argued, inter alia, that the VFA violates 25, Article XVIII of the
1987 Constitution, which provides that foreign military bases, troops, or
facilities shall not be allowed in the Philippines except under a treaty duly
concurred in by the Senate . . . and recognized as a treaty by the other
contracting State.

II. THE ISSUE

Was the VFA unconstitutional?

III. THE RULING

[The Court DISMISSED the consolidated petitions, held that the petitioners
did not commit grave abuse of discretion, and sustained the constitutionality
of the VFA.]

NO, the VFA is not unconstitutional.

Section 25, Article XVIII disallows foreign military bases, troops, or facilities
in the country, unless the following conditions are sufficiently met, viz: (a) it
must be under a treaty; (b) the treaty must be duly concurred in by the
Senate and, when so required by congress, ratified by a majority of the votes
cast by the people in a national referendum; and (c) recognized as a
treaty by the other contracting state.

There is no dispute as to the presence of the first two requisites in the case
of the VFA. The concurrence handed by the Senate through Resolution No.
18 is in accordance with the provisions of the Constitution . . . the provision
in [in 25, Article XVIII] requiring ratification by a majority of the votes cast in
a national referendum being unnecessary since Congress has not required
it.

xxx xxx xxx

This Court is of the firm view that the phrase recognized as a treaty means
that the other contracting party accepts or acknowledges the agreement as
a treaty. To require the other contracting state, the United States of America
in this case, to submit the VFA to the United States Senate for concurrence
pursuant to its Constitution, is to accord strict meaning to the phrase.

Well-entrenched is the principle that the words used in the Constitution are
to be given their ordinary meaning except where technical terms are
employed, in which case the significance thus attached to them prevails. Its
language should be understood in the sense they have in common use.

Moreover, it is inconsequential whether the United States treats the VFA only
as an executive agreement because, under international law, an executive
agreement is as binding as a treaty. To be sure, as long as the VFA
possesses the elements of an agreement under international law, the said
agreement is to be taken equally as a treaty.

xxx xxx xxx

The records reveal that the United States Government, through Ambassador
Thomas C. Hubbard, has stated that the United States government has fully
committed to living up to the terms of the VFA. For as long as the United
States of America accepts or acknowledges the VFA as a treaty, and binds
itself further to comply with its obligations under the treaty, there is indeed
marked compliance with the mandate of the Constitution.
RTHUR D. LIM vs. HON. EXECUTIVE SECRETARY (G.R. No. 151445)
Case Digest

Facts:

Arthur D. Lim and Paulino P. Ersando filed a petition for certiorari and
prohibition attacking the constitutionality of Balikatan-02-1. They were
subsequently joined by SANLAKAS and PARTIDO NG MANGGAGAWA,
both party-list organizations, who filed a petition-in-intervention. Lim and
Ersando filed suits in their capacities as citizens, lawyers and taxpayers.
SANLAKAS and PARTIDO on the other hand, claimed that certain members
of their organization are residents of Zamboanga and Sulu, and hence will
be directly affected by the operations being conducted in Mindanao.

The petitioners alleged that Balikatan-02-1 is not covered by the Mutual


Defense Treaty (MDT) between the Philippines and the United States.
Petitioners posited that the MDT only provides for mutual military assistance
in case of armed attack by an external aggressor against the Philippines or
the US. Petitioners also claim that the Visiting Forces Agreement (VFA) does
not authorize American Soldiers to engage in combat operations in
Philippine Territory.

Issue:

Is the Balikatan-02-1 inconsistent with the Philippine Constitution?

Ruling:

The MDT is the core of the defense relationship between the Philippines and
the US and it is the VFA which gives continued relevance to it. Moreover, it
is the VFA that gave legitimacy to the current Balikatan exercise.

The constitution leaves us no doubt that US Forces are prohibited from


engaging war on Philippine territory. This limitation is explicitly provided for
in the Terms of Reference of the Balikatan exercise. The issues that were
raised by the petitioners was only based on fear of future violation of the
Terms of Reference.
Based on the facts obtaining, the Supreme court find that the holding of
Balikatan-02-1 joint military exercise has not intruded into that penumbra
of error that would otherwise call for the correction on its part.

The petition and the petition-in-intervention is DISMISSED.

Lim vs. Executive Secretary G.R. No. 151445 April 11, 2002
July 25, 2009 at 12:11 pm (1)
FACTS :
Beginning 2002, personnel from the armed forces of the United States
started arriving in Mindanao, to take part, in conjunction with the Philippine
military, in Balikatan 02-1. In theory, they are a simulation of joint military
maneuvers pursuant to the Mutual Defense Treaty, a bilateral defense
agreement entered into by the Philippines and the United States in 1951.
On Feb. 2002, Lim filed this petition for certiorari and prohibition, praying that
respondents be restrained from proceeding with the so-called Balikatan 02-
1, and that after due notice and hearing, judgment be rendered issuing a
permanent writ of injuction and/or prohibition against the deployment of US
troops in Basilan and Mindanao for being illegal and in violation of the
Constitution.
Petitioners contend that the RP and the US signed the Mutual Defense
Treaty to provide mutual military assistance in accordance with the
constitutional processes of each country only in the case of a armed attack
by an external aggressor, meaning a third country, against one of them. They
further argued that it cannot be said that the Abu Sayyaf in Basilan
constitutes an external aggressor to warrant US military assistance in
accordance with MDT of 1951. Another contention was that the VFA of 1999
does not authorize American soldiers to engage in combat operations in
Philippine territory.
ISSUE :
Whether or not the Balikatan 02-1 activities are covered by the VFA.
RULING :
Petition is dismissed. The VFA itself permits US personnel to engage on an
impermanent basis, in activities, the exact meaning of which is left
undefined. The sole encumbrance placed on its definition is couched in the
negative, in that the US personnel must abstain from any activity
inconsistent with the spirit of this agreement, and in particular, from any
political activity.
Under these auspices, the VFA gives legitimacy to the current Balikatan
exercises. It is only logical to assume that Balikatan 02-1 a mutual anti
terrorism advising assisting and training exercise falls under the umbrella of
sanctioned or allowable activities in the context of the agreement. Both the
history and intent of the Mutual Defense Treaty and the VFA support the
conclusion that combat-related activities as opposed to combat itself
such as the one subject of the instant petition, are indeed authorized.

Pimentel v. Executive Secretary Digest


G.R. No. 158088 July 6, 2005

Facts:

1. The petitioners filed a petition for mandamus to compel the Office of the
Executive Secretary and the Department of Foreign Affairs to transmit the
signed copy of the Rome Statute of the International Criminal Court to the
Senate of the Philippinesfor its concurrence pursuant to Sec. 21, Art VII of
the 1987 Constitution.

2. The Rome Statute established the Int'l Criminal Court which will have
jurisdiction over the most serious crimes as genocide, crimes against
humanity, war crimes and crimes of aggression as defined by the Statute.
The Philippines through the Chargie du Affairs in UN. The provisions of the
Statute however require that it be subject to ratification, acceptance or
approval of the signatory state.

3. Petitioners contend that ratification of a treaty, under both domestic and


international law, is a function of the Senate, hence it is the duty of the
Executive Department to transmit the signed copy to the senate to allow it to
exercise its discretion.

Issue: Whether or not the Exec. Secretary and the DFA have the ministerial
duty to transmit to the Senate the copy of the Rome Statute signed by a
member of the Philippine mission to the U.N. even without the signature of
the President.

The Supreme Court held NO.


1. The President as the head of state is the sole organ and authorized in the
external relations and he is also the country's sole representative with foreign
nations, He is the mouthpiece with respect to the country's foreign affairs.

2. In treaty-making, the President has the sole authority to negotiate with


other states and enter into treaties but this power is limited by the
Constitution with the 2/3 required vote of all the members of the Senate for
the treaty to be valid. (Sec. 21, Art VII).

3. The legislative branch part is essential to provide a check on the executive


in the field of foreign relations, to ensure the nation's pursuit of political
maturity and growth.

PIMENTEL v. EXECUTIVE SECRETARY


October 26, 2012 Leave a comment
Facts:
This is a petition of Senator Aquilino Pimentel and the other parties to ask
the Supreme Court to require the Executive Department to transmit the
Rome Statute which established the International Criminal Court for the
Senates concurrence in accordance with Sec 21, Art VII of the 1987
Constitution.
It is the theory of the petitioners that ratification of a treaty, under both
domestic law and international law, is a function of the Senate. Hence, it is
the duty of the executive department to transmit the signed copy of the Rome
Statute to the Senate to allow it to exercise its discretion with respect to
ratification of treaties. Moreover, petitioners submit that the Philippines has
a ministerial duty to ratify the Rome Statute under treaty law and customary
international law. Petitioners invoke the Vienna Convention on the Law of
Treaties enjoining the states to refrain from acts which would defeat the
object and purpose of a treaty when they have signed the treaty prior to
ratification unless they have made their intention clear not to become parties
to the treaty.[5]
The Office of the Solicitor General, commenting for the respondents,
questioned the standing of the petitioners to file the instant suit. It also
contended that the petition at bar violates the rule on hierarchy of courts. On
the substantive issue raised by petitioners, respondents argue that the
executive department has no duty to transmit the Rome Statute to the Senate
for concurrence.
Issue:
Whether or not the executive department has a ministerial duty to transmit
the Rome Statute (or any treaty) to the Senate for concurrence.
Ruling:
The petition was dismissed. The Supreme Court ruled that the the President,
being the head of state, is regarded as the sole organ and authority in
external relations and is the countrys sole representative with foreign
nations. As the chief architect of foreign policy, the President acts as the
countrys mouthpiece with respect to international affairs. Hence, the
President is vested with the authority to deal with foreign states and
governments, extend or withhold recognition, maintain diplomatic relations,
enter into treaties, and otherwise transact the business of foreign relations.
In the realm of treaty-making, the President has the sole authority to
negotiate with other states.
Nonetheless, while the President has the sole authority to negotiate and
enter into treaties, the Constitution provides a limitation to his power by
requiring the concurrence of 2/3 of all the members of the Senate for the
validity of the treaty entered into by him. Section 21, Article VII of the 1987
Constitution provides that no treaty or international agreement shall be valid
and effective unless concurred in by at least two-thirds of all the Members of
the Senate.
Justice Isagani Cruz, in his book on International Law, describes the treaty-
making process in this wise:
The usual steps in the treaty-making process are: negotiation, signature,
ratification, and exchange of the instruments of ratification. The treaty may
then be submitted for registration and publication under the U.N. Charter,
although this step is not essential to the validity of the agreement as between
the parties.
Negotiation may be undertaken directly by the head of state but he now
usually assigns this task to his authorized representatives. These
representatives are provided with credentials known as full powers, which
they exhibit to the other negotiators at the start of the formal discussions. It
is standard practice for one of the parties to submit a draft of the proposed
treaty which, together with the counter-proposals, becomes the basis of the
subsequent negotiations. The negotiations may be brief or protracted,
depending on the issues involved, and may even collapse in case the
parties are unable to come to an agreement on the points under
consideration.
If and when the negotiators finally decide on the terms of the treaty, the same
is opened for signature. This step is primarily intended as a means of
authenticating the instrument and for the purpose of symbolizing the good
faith of the parties; but, significantly, it does not indicate the final consent of
the state in cases where ratification of the treaty is required. The document
is ordinarily signed in accordance with the alternat, that is, each of the
several negotiators is allowed to sign first on the copy which he will bring
home to his own state.
Ratification, which is the next step, is the formal act by which a state confirms
and accepts the provisions of a treaty concluded by its representatives. The
purpose of ratification is to enable the contracting states to examine the
treaty more closely and to give them an opportunity to refuse to be bound by
it should they find it inimical to their interests. It is for this reason that most
treaties are made subject to the scrutiny and consent of a department of the
government other than that which negotiated them.
The last step in the treaty-making process is the exchange of the instruments
of ratification, which usually also signifies the effectivity of the treaty unless
a different date has been agreed upon by the parties. Where ratification is
dispensed with and no effectivity clause is embodied in the treaty, the
instrument is deemed effective upon its signature.
Petitioners arguments equate the signing of the treaty by the Philippine
representative with ratification. It should be underscored that the signing of
the treaty and the ratification are two separate and distinct steps in the treaty-
making process. As earlier discussed, the signature is primarily intended as
a means of authenticating the instrument and as a symbol of the good faith
of the parties. It is usually performed by the states authorized representative
in the diplomatic mission. Ratification, on the other hand, is the formal act by
which a state confirms and accepts the provisions of a treaty concluded by
its representative.
It should be emphasized that under our Constitution, the power to ratify is
vested in the President, subject to the concurrence of the Senate. The role
of the Senate, however, is limited only to giving or withholding its consent, or
concurrence, to the ratification. Hence, it is within the authority of the
President to refuse to submit a treaty to the Senate or, having secured its
consent for its ratification, refuse to ratify it. Although the refusal of a state to
ratify a treaty which has been signed in its behalf is a serious step that should
not be taken lightly, such decision is within the competence of the President
alone, which cannot be encroached by this Court via a writ of mandamus.
This Court has no jurisdiction over actions seeking to enjoin the President in
the performance of his official duties.
Abaya vs. Ebdane Jr.
ABAYA vs. EBDANE, JR.
515 SCRA 720
GR No. 167919, February 14, 2007
"A taxpayer need not be a party to the contract to challenge its validity."

FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the
instant petition as a taxpayer, former lawmaker, and a Filipino citizen, and
Plaridel C. Garcia likewise claiming that he filed the suit as a taxpayer, former
military officer, and a Filipino citizen, mainly seek to nullify a DPWH
resolution which recommended the award to private respondent China Road
& Bridge Corporation of the contract for the implementation of the civil works
known as Contract Package No. I (CP I). They also seek to annul the contract
of agreement subsequently entered into by and between the DPWH and
private respondent China Road & Bridge Corporation pursuant to the said
resolution.

ISSUE: Has petitioners the legal standing to file the instant case against the
government?

HELD: Petitioners, as taxpayers, possess locus standi to file the present suit.
Briefly stated, locus standi is a right of appearance in a court of justice on a
given question. More particularly, it is a partys personal and substantial
interest in a case such that he has sustained or will sustain direct injury as a
result of the governmental act being challenged. Locus standi, however, is
merely a matter of procedure and it has been recognized that in some cases,
suits are not brought by parties who have been personally injured by the
operation of a law or any other government act but by concerned citizens,
taxpayers or voters who actually sue in the public interest. Consequently, the
Court, in a catena of cases, has invariably adopted a liberal stance on locus
standi, including those cases involving taxpayers.
The prevailing doctrine in taxpayers suits is to allow taxpayers to question
contracts entered into by the national government or government- owned or
controlled corporations allegedly in contravention of law. A taxpayer is
allowed to sue where there is a claim that public funds are illegally disbursed,
or that public money is being deflected to any improper purpose, or that there
is a wastage of public funds through the enforcement of an invalid or
unconstitutional law. Significantly, a taxpayer need not be a party to the
contract to challenge its validity.
QUESTION: Must a Taxpayer be a party to a contract in order to challenge
it's validity?
ANSWER: NO. Ratio: TAXPAYER SUIT

Petitioners Plaridel M. Abaya who claims that he filed the instant petition as
a taxpayer, former lawmaker, and a Filipino citizen, and Plaridel C.
Garcia (birds of the same feather ;p) likewise claiming that he filed the suit
as a taxpayer, former military officer, and a Filipino citizen, mainly seek to
nullify a DPWH resolution which recommended the award to private
respondent China Road & Bridge Corporation of the contract for the
implementation of the civil works known as Contract Package No. 1.They
also seek to annul the contract of agreement subsequently entered into by
and between the DPWH and China Road & Bridge Corporation pursuant to
said resolution.

Respondent defends Petitioners dont have Locus Standi since they are not
party to the contract.

ISSUE:

Do petitioners have the LOCUS STANDI (Legal Standing) to file the instant
case against the government notwithstanding that they are not a party to the
contract to challenge its validity?

HELD:

YES. As TAXPAYERS they have Locus Standi to file the present suit.

Briefly stated, locus standi is a right of appearance in a court of justice on a


given question. More particularly, it is a partys personal and substantial
interest in a case such that he has sustained or will sustain direct injury as a
result of the governmental act being challenged.

Locus standi however is merely a matter of procedure and it has been


recognized that in some cases, suits are not brought by parties who have
been personally injured by operation of law or any other government act but
by concerned citizens, taxpayers or voters who actually sue in the public
interest. Consequently , the court in a catena of cases, has invariably
adopted a liberal stance on locus standi, including those cases involving
taxpayers.

Ito yung kaya minsan maynaririnig kang nagfafile ng kaso pero wala naman
silang kinalaman sa kontrata or agreement or deal and sinasabi lang nila "at
baket taxpayer ako ah? baket ba?". It is what you call a TAXPAYERS
SUIT. The prevailing doctrine in Taxpayer's Suit is to allow taxpayers to
question government contracts especially pag merong 1. illegal
disbursement of public funds, or 2. the public money is being deflected to
some other purpose or to someone's private bank account, or they see 3.
wastage of public funds through the enforcement of an invalid or
unconstitutional law entered into by the national government or
GOCCs allegedly in contravention of the law.

Significantly, a taxpayer need not be a party to the contract to challenge its


validity.

So if you see the same or have personal knowledge of the same, do


remember that as taxpayer, you have the legal standing (locus standi) to file
a case in court against the irregularity you see in the government. So di mo
na kailangan magsumbong kay President Digong, maraming inaasikaso
yung tao, and di mo na din kailangan pang magcreate ng sangkatutak ng
memes sa social media. You yourself as taxpayers have the right to
question those irregularities in court, kaya sige dong, day, ate, koya ifile mo
na yung case, sige te ihugot mo te :)

CADALIN ET AL VS. POEA ET AL


MARCH 28, 2013 ~ VBDIAZ
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B.
EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS, thru and
by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDOvs. PHILIPPINE
OVERSEAS EMPLOYMENT ADMINISTRATIONS ADMINISTRATOR,
NLRC, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA
INTERNATIONAL BUILDERS CORPORATION
GRN 104776, December 5,1994.
FACTS:
This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the
Supreme Court for Certiorari.
On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on
behalf of 728 other OCWs instituted a class suit by filing an Amended
Complaint with the POEA for money claims arising from their recruitment by
ASIA INTERNATIONAL BUILDERS CORPORATION (AIBC) and
employment by BROWN & ROOT INTERNATIONAL, INC (BRI) which is a
foreign corporation with headquarters in Houston, Texas, and is engaged in
construction; while AIBC is a domestic corporation licensed as a service
contractor to recruit, mobilize and deploy Filipino workers for overseas
employment on behalf of its foreign principals.
The amended complaint sought the payment of the unexpired portion of the
employment contracts, which was terminated prematurely, and secondarily,
the payment of the interest of the earnings of the Travel and Reserved Fund;
interest on all the unpaid benefits; area wage and salary differential pay;
fringe benefits; reimbursement of SSS and premium not remitted to the SSS;
refund of withholding tax not remitted to the BIR; penalties for committing
prohibited practices; as well as the suspension of the license of AIBC and
the accreditation of BRII
On October 2, 1984, the POEA Administrator denied the Motion to Strike
Out of the Records filed by AIBC but required the claimants to correct the
deficiencies in the complaint pointed out.
AIB and BRII kept on filing Motion for Extension of Time to file their answer.
The POEA kept on granting such motions.
On November 14, 1984, claimants filed an opposition to the motions for
extension of time and asked that AIBC and BRII declared in default for failure
to file their answers.
On December 27, 1984, the POEA Administrator issued an order directing
AIBC and BRII to file their answers within ten days from receipt of the order.
(at madami pang motions ang na-file, new complainants joined the case, ang
daming inavail na remedies ng both parties)
On June 19, 1987, AIBC finally submitted its answer to the complaint. At the
same hearing, the parties were given a period of 15 days from said date
within which to submit their respective position papers. On February 24,
1988, AIBC and BRII submitted position paper. On October 27, 1988, AIBC
and BRII filed a Consolidated Reply, POEA Adminitartor rendered his
decision which awarded the amount of $824, 652.44 in favor of only 324
complainants. Claimants submitted their Appeal Memorandum For Partial
Appeal from the decision of the POEA. AIBC also filed its MR and/or appeal
in addition to the Notice of Appeal filed earlier.
NLRC promulgated its Resolution, modifying the decision of the POEA. The
resolution removed some of the benefits awarded in favor of the claimants.
NLRC denied all the MRs. Hence, these petitions filed by the claimants and
by AlBC and BRII.
The case rooted from the Labor Law enacted by Bahrain where most of the
complainants were deployed. His Majesty Ise Bin Selman Al Kaifa, Amir of
Bahrain, issued his Amiri Decree No. 23 on June 16, 1176, otherwise known
re the Labour Law for the Private Sector. Some of the provision of Amiri
Decree No. 23 that are relevant to the claims of the complainants-appellants
are as follows:
Art. 79: x x x A worker shall receive payment for each extra hour equivalent
to his wage entitlement increased by a minimum of twenty-rive per centurn
thereof for hours worked during the day; and by a minimum off fifty per
centurn thereof for hours worked during the night which shall be deemed to
being from seven oclock in the evening until seven oclock in the morning .
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
If employee worked, 150% of his normal wage shall be paid to him x x x.
Art. 81; x x x When conditions of work require the worker to work on any
official holiday, he shall be paid an additional sum equivalent to 150% of his
normal wage.
Art. 84: Every worker who has completed one years continuous service with
his employer shall be entitled to Laos on full pay for a period of not less than
21 days for each year increased to a period not less than 28 days after five
continuous years of service.
A worker shall be entitled to such leave upon a quantum meruit in respect of
the proportion of his service in that year.
Art. 107: A contract of employment made for a period of indefinite duration
may be terminated by either party thereto after giving the other party prior
notice before such termination, in writing, in respect of monthly paid workers
and fifteen days notice in respect of other workers. The party terminating a
contract without the required notice shall pay to the other party compensation
equivalent to the amount of wages payable to the worker for the period of
such notice or the unexpired portion thereof.
Art. Ill: x x x the employer concerned shall pay to such worker, upon
termination of employment, a leaving indemnity for the period of his
employment calculated on the basis of fifteen days wages for each year of
the first three years of service and of one months wages for each year of
service thereafter. Such worker shall be entitled to payment of leaving
indemnity upon a quantum meruit in proportion to the period of his service
completed within a year.
ISSUE:
1. WON the foreign law should govern or the contract of the parties.(WON
the complainants who have worked in Bahrain are entitled to the above-
mentioned benefits provided by Amiri Decree No. 23 of Bahrain).
2. WON the Bahrain Law should apply in the case. (Assuming it is applicable
WON complainants claim for the benefits provided therein have prescribed.)
3. Whether or not the instant cases qualify as; a class suit (siningit ko nalang)
(the rest of the issues in the full text of the case refer to Labor Law)
RULING:
1. NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on
Evidence governing the pleading and proof of a foreign law and admitted in
evidence a simple copy of the Bahrains Amiri Decree No. 23 of 1976 (Labour
Law for the Private Sector).
NLRC applied the Amiri Deere, No. 23 of 1976, which provides for greater
benefits than those stipulated in the overseas-employment contracts of the
claimants. It was of the belief that where the laws of the host country are
more favorable and beneficial to the workers, then the laws of the host
country shall form part of the overseas employment contract. It approved the
observation of the POEA Administrator that in labor proceedings, all doubts
in the implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor.
The overseas-employment contracts, which were prepared by AIBC and
BRII themselves, provided that the laws of the host country became
applicable to said contracts if they offer terms and conditions more favorable
than those stipulated therein. However there was a part of the employment
contract which provides that the compensation of the employee may be
adjusted downward so that the total computation plus the non-waivable
benefits shall be equivalent to the compensation therein agree, another part
of the same provision categorically states that total remuneration and
benefits do not fall below that of the host country regulation and custom.
Any ambiguity in the overseas-employment contracts should be interpreted
against AIBC and BRII, the parties that drafted it. Article 1377 of the Civil
Code of the Philippines provides:
The interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where there
is already a prepared form containing the stipulations of the employment
contract and the employees merely take it or leave it. The presumption is
that there was an imposition by one party against the other and that the
employees signed the contracts out of necessity that reduced their
bargaining power.
We read the overseas employment contracts in question as adopting the
provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be governed. In
such a case, the foreign law is adopted as a system to regulate the relations
of the parties, including questions of their capacity to enter into the contract,
the formalities to be observed by them, matters of performance, and so forth.
Instead of adopting the entire mass of the foreign law, the parties may just
agree that specific provisions of a foreign statute shall be deemed
incorporated into their contract as a set of terms. By such reference to the
provisions of the foreign law, the contract does not become a foreign contract
to be governed by the foreign law. The said law does not operate as a statute
but as a set of contractual terms deemed written in the contract.
A basic policy of contract is to protect the expectation of the parties. Such
party expectation is protected by giving effect to the parties own choice of
the applicable law. The choice of law must, however, bear some relationship
the parties or their transaction. There is no question that the contracts sought
to be enforced by claimants have a direct connection with the Bahrain law
because the services were rendered in that country.
2. NLRC ruled that the prescriptive period for the filing of the claims of the
complainants was 3 years, as provided in Article 291 of the Labor Code of
the Philippines, and not ten years as provided in Article 1144 of the Civil
Code of the Philippines nor one year as provided in the Amiri Decree No. 23
of 1976.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not actionable after the
lapse of one year from the date of the expiry of the Contract.
As a general rule, a foreign procedural law will not be applied in the forum
(local court), Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed by the
laws of the forum. This is true even if the action is based upon a foreign
substantive law.
A law on prescription of actions is sui generis in Conflict of Laws in the sense
that it may be viewed either as procedural or substantive, depending on the
characterization given such a law. In Bournias v. Atlantic Maritime Company
(220 F. 2d. 152, 2d Cir. [1955]), where the issue was the applicability of the
Panama Labor Code in a case filed in the State of New York for claims arising
from said Code, the claims would have prescribed under the Panamanian
Law but not under the Statute of Limitations of New York. The U.S. Circuit
Court of Appeals held that the Panamanian Law was procedural as it was
not specifically intended to be substantive, hence, the prescriptive period
provided in the law of the forum should apply. The Court observed: . . . we
are dealing with a statute of limitations of a foreign country, and it is not clear
on the face of the statute that its purpose was to limit the enforceability,
outside as well as within the foreign country concerned, of the substantive
rights to which the statute pertains. We think that as a yardstick for
determining whether that was the purpose, this test is the most satisfactory
one.
The Court further noted: Applying that test here it appears to us that the
libellant is entitled to succeed, for the respondents have failed to satisfy us
that the Panamanian period of limitation in question was specifically aimed
against the particular rights which the libellant seeks to enforce. The Panama
Labor Code is a statute having broad objectives. The American court
applied the statute of limitations of New York, instead of the Panamanian
law, after finding that there was no showing that the Panamanian law on
prescription was intended to be substantive. Being considered merely a
procedural law even in Panama, it has to give way to the law of the forum
(local Court) on prescription of actions.
However the characterization of a statute into a procedural or substantive
law becomes irrelevant when the country of the forum (local Court) has a
borrowing statute. Said statute has the practical effect of treating the foreign
statute of limitation as one of substance. A borrowing statute directs the
state of the forum (local Court) to apply the foreign statute of limitations to
the pending claims based on a foreign law. While there are several kinds of
borrowing statutes, one form provides that an action barred by the laws of
the place where it accrued will not be enforced in the forum even though the
local statute was not run against it.
Section 48 of Code of Civil Procedure is of this kind. It provides: If by the
laws of the state or country where the cause of action arose, the action is
barred, it is also barred in the Philippine Islands.
Section 48 has not been repealed or amended by the Civil Code of the
Philippines. In the light of the 1987 Constitution, however, Section 48 cannot
be enforced ex proprio vigore insofar as it ordains the application in this
jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum (local Court) will not enforce any foreign claim
obnoxious to the forums public policy. To enforce the one-year prescriptive
period of the Amiri Decree No. 23 of 1976 as regards the claims in question
would contravene the public policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution
emphasized that:The state shall promote social justice in all phases of
national development (Sec. 10).
The state affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare (Sec. 18).
In Article XIII on Social Justice and Human Rights, the 1987 Constitution
provides:
Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
Thus, the applicable law on prescription is the Philippine law.
The next question is whether the prescriptive period governing the filing of
the claims is 3 years, as provided by the Labor Code or 10 years, as provided
by the Civil Code of the Philippines.
Article 1144 of the Civil Code of the Philippines provides:
The following actions must be brought within ten years from the time the
right of action accross:
(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon
a judgment
In this case, the claim for pay differentials is primarily anchored on the written
contracts between the litigants, the ten-year prescriptive period provided by
Art. 1144(l) of the New Civil Code should govern.
3. NO. A class suit is proper where the subject matter of the controversy is
one of common or general interest to many and the parties are so numerous
that it is impracticable to bring them all before the court. When all the claims
are for benefits granted under the Bahrain law many of the claimants worked
outside Bahrain. Some of the claimants were deployed in Indonesia under
different terms and condition of employment.
Inasmuch as the First requirement of a class suit is not present (common or
general interest based on the Amiri Decree of the State of Bahrain), it is only
logical that only those who worked in Bahrain shall be entitled to rile their
claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of the
claims is the same (for employees benefits), there is no common question
of law or fact. While some claims are based on the Amiri Law of Bahrain,
many of the claimants never worked in that country, but were deployed
elsewhere. Thus, each claimant is interested only in his own demand and
not in the claims of the other employees of defendants. A claimant has no
concern in protecting the interests of the other claimants as shown by the
fact, that hundreds of them have abandoned their co-claimants and have
entered into separate compromise settlements of their respective claims.
The claimants who worked in Bahrain can not be allowed to sue in a class
suit in a judicial proceeding.
WHEREFORE, all the three petitioners are DISMISSED.

CADALIN vs POEA ADMINISTRATOR 238 SCRA 721


Borrowing Statute

Ex: Sec. 48, Rule on Civil Procedure if by the laws of the State or country
where the cause of action arose the action is barred, it is also barred in
the Philippines.

Facts:
Cadalin et al. are Filipino workers recruited by Asia Intl Builders Co. (AIBC),
a domestic recruitment corporation, for employment in Bahrain to work for
Brown & Root Intl Inc. (BRII) which is a foreign corporation with
headquarters in Texas. Plaintiff instituted a class suit with the POEA for
money claims arising from the unexpired portion of their employment
contract which was prematurely terminated. They worked in Bahrain for BRII
and they filed the suit after 1 yr. from the termination of their employment
contract.

As provided by Art. 156 of the Amiri Decree aka as the Labor Law of the
Private Sector of Bahrain: a claim arising out of a contract of employment
shall not be actionable after the lapse of 1 year from the date of the expiry of
the contract, it appears that their suit has prescribed.
Plaintiff contends that the prescription period should be 10 years as provided
by Art. 1144 of the Civil Code as their claim arise from a violation of a
contract.

The POEA Administrator holds that the 10 year period of prescription should
be applied but the NLRC provides a different view asserting that Art 291 of
the Labor Code of the Phils with a 3 years prescription period should be
applied. The Solicitor General expressed his personal point of view that the
1 yr period provided by the Amiri Decree should be applied.

Ruling:
The Supreme Court held that as a general rule a foreign procedural law will
not be applied in our country as we must adopt our own procedural laws.

EXCEPTION:

Philippines may adopt foreign procedural law under the Borrowing


Statute such as Sec. 48 of the Civil Procedure Rule stating if by the laws of
the State or country where the cause of action arose the action is barred, it
is also barred in the Philippines. Thus, Bahrain law must be
applied. However, the court contends that Bahrains law on prescription
cannot be applied because the court will not enforce any foreign claim that
is obnoxious to the forums public policy and the 1 yr. rule on prescription is
against public policy on labor as enshrined in the Phils. Constitution.

The court ruled that the prescription period applicable to the case should
be Art 291 of the Labor Code of the Phils with a 3 years prescription
period since the claim arose from labor employment.

G.R. No. L-104776, Dec. 5, 1994

GENERAL RULE: A foreign procedural law will not be applied in the forum.
EXCEPTION: When the country of the forum has a "borrowing statute," the
country of the forum will apply the foreign statute of limitations.
EXCEPTION TO THE EXCEPTION: The court of the forum will not enforce
any foreign claim obnoxious to the forum's public policy.

FACTS:

Cadalin et al. are overseas contract workers recruited by respondent-


appellant AIBC for its accredited foreign principal, Brown & Root, on various
dates from 1975 to 1983. As such, they were all deployed at various projects
in several countries in the Middle East as well as in Southeast Asia, in
Indonesia and Malaysia. The case arose when their overseas employment
contracts were terminated even before their expiration. Under Bahrain law,
where some of the complainants were deployed, the prescriptive period for
claims arising out of a contract of employment is one year.
ISSUE:

Whether it is the Bahrain law on prescription of action based on the Amiri


Decree No. 23 of 1976 or a Philippine law on prescription that shall be the
governing law

HELD:

As a general rule, a foreign procedural law will not be applied in the forum.
Procedural matters, such as service of process, joinder of actions, period
and requisites for appeal, and so forth, are governed by teh laws of the
forum. This is true even if the action is based upon a foreign substantive law.

A law on prescription of actions is sui generis in Conflict of Laws in the sense


that it may be viewed either as procedural or substantive, depending on the
characterization given such a law.

However, the characterization of a statute into a procedural or substantive


law becomes irrelevant when the country of the forum has a borrowing
statute. Said statute has the practical effect of treating the foreign statute of
limitation as one of substance. A borrowing statute directs the state of the
forum to apply the foreign statute of limitations to the pending claims based
on a foreign law. While there are several kinds of borrowing statutes, one
form provides that an action barred by the laws of the place where it accrued,
will not be enforced in the forum even though the local statute has not run
against it. Section 48 of our Code of Civil Procedure is of this kind. Said
Section provides:

If by the laws of the state or country where the cause of action arose, the
action is barred, it is also barred in the Philippine Islands.

In the light of the 1987 Constitution, however, Section 48 cannot be enforced


ex propio vigore insofar as it ordains the application in this jurisdiction of
Section 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum will not enforce any foreign claims obnoxious to the
forums public policy. To enforce the one-year prescriptive period of the Amiri
Decree No. 23 of 1976 as regards the claims in question would contravene
the public policy on the protection to labor.