Académique Documents
Professionnel Documents
Culture Documents
BASIC PRINCIPLES
Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of
detention. Eventually, they were again put in service by defendant SAUDI (sic). In
September 1990, defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was
already behind her, her superiors requested her to see Mr. Ali Meniewy, Chief Legal
Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to
the police station where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure on her to make
a statement dropping the case against Thamer and Allah. Not until she agreed to
do so did the police return her passport and allowed her to catch the afternoon
flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few
minutes before the departure of her flight to Manila, plaintiff was not allowed to
board the plane and instead ordered to take a later flight to Jeddah to see Mr.
Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the
SAUDIA office brought her to a Saudi court where she was asked to sign a document
written in Arabic. They told her that this was necessary to close the case against
Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before
the court on June 27, 1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once
again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so
after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that the
investigation was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June
27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated
plaintiff through an interpreter about the Jakarta incident. After one hour of
interrogation, they let her go. At the airport, however, just as her plane was about
to take off, a SAUDIA officer told her that the airline had forbidden her to take
flight. At the Inflight Service Office where she was told to go, the secretary of Mr.
Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew
quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court
where the judge, to her astonishment and shock, rendered a decision, translated to
her in English, sentencing her to five months imprisonment and to 286 lashes. Only
then did she realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery;
(2) going to a disco, dancing and listening to the music in violation of Islamic laws;
and (3) socializing with the male crew, in contravention of Islamic tradition. [10]
Facing conviction, private respondent sought the help of her employer, petitioner
SAUDIA. Unfortunately, she was denied any assistance. She then asked the
Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to
pay for her upkeep, she worked on the domestic flight of SAUDIA, while Thamer and
Allah continued to serve in the international flights. [11]
Because she was wrongfully convicted, the Prince of Makkah dismissed the case
against her and allowed her to leave Saudi Arabia. Shortly before her return to
Manila,[12] she was terminated from the service by SAUDIA, without her being
informed of the cause.
On November 23, 1993, Morada filed a Complaint [13] for damages against SAUDIA,
and Khaled Al-Balawi (Al- Balawi), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss [14] which raised
the following grounds, to wit: (1) that the Complaint states no cause of action
against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that
the claim or demand set forth in the Complaint has been waived, abandoned or
otherwise extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) [15] Saudia
filed a reply[16] thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint [17] wherein Al-Balawi was
dropped as party defendant. On August 11, 1994, Saudia filed its Manifestation and
Motion to Dismiss Amended Complaint[18].
The trial court issued an Order [19] dated August 29, 1994 denying the Motion to
Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge[20] denying the Motion to Dismiss, SAUDIA filed
on September 20, 1994, its Motion for Reconsideration [21] of the Order dated August
29, 1994. It alleged that the trial court has no jurisdiction to hear and try the case
on the basis of Article 21 of the Civil Code, since the proper law applicable is the law
of the Kingdom of Saudi Arabia. On October 14, 1994, Morada filed her
Opposition[22] (To Defendants Motion for Reconsideration).
In the Reply[23] filed with the trial court on October 24, 1994, SAUDIA alleged that
since its Motion for Reconsideration raised lack of jurisdiction as its cause of action,
the Omnibus Motion Rule does not apply, even if that ground is raised for the first
time on appeal. Additionally, SAUDIA alleged that the Philippines does not have any
substantial interest in the prosecution of the instant case, and hence, without
jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order [24] dated February 2, 1995,
denying SAUDIAs Motion for Reconsideration. The pertinent portion of the assailed
Order reads as follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed,
thru counsel, on September 20, 1994, and the Opposition thereto of the plaintiff
filed, thru counsel, on October 14, 1994, as well as the Reply therewith of defendant
Saudi Arabian Airlines filed, thru counsel, on October 24, 1994, considering that a
perusal of the plaintiffs Amended Complaint, which is one for the recovery of
actual, moral and exemplary damages plus attorneys fees, upon the basis of the
applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is,
clearly, within the jurisdiction of this Court as regards the subject matter, and there
being nothing new of substance which might cause the reversal or modification of
the order sought to be reconsidered, the motion for reconsideration of the
defendant, is DENIED.
SO ORDERED.[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and
Prohibition with Prayer for Issuance of Writ of Preliminary Injunction and/or
Temporary Restraining Order[26] with the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining
Order[27] dated February 23, 1995, prohibiting the respondent Judge from further
conducting any proceeding, unless otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now assailed, the
appellate court denied SAUDIAs Petition for the Issuance of a Writ of Preliminary
Injunction dated February 18, 1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED,
after considering the Answer, with Prayer to Deny Writ of Preliminary Injunction
(Rollo, p. 135) the Reply and Rejoinder, it appearing that herein petitioner is not
clearly entitled thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et.
Al., 100335, April 7, 1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the instant
Petition[29] for Review with Prayer for Temporary Restraining Order dated October 13,
1995.
However, during the pendency of the instant Petition, respondent Court of Appeals
rendered the Decision[30] dated April 10, 1996, now also assailed. It ruled that the
Philippines is an appropriate forum considering that the Amended Complaints basis
for recovery of damages is Article 21 of the Civil Code, and thus, clearly within the
jurisdiction of respondent Court. It further held that certiorari is not the proper
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE CASE
PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at
the outset. It maintains that private respondents claim for alleged abuse of rights
occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a foreign
element qualifies the instant case for the application of the law of the Kingdom of
Saudi Arabia, by virtue of the lex loci delicti commissi rule.[34]
On the other hand, private respondent contends that since her Amended Complaint
is based on Articles 19[35] and 21[36] of the Civil Code, then the instant case is
properly a matter of domestic law.[37]
Under the factual antecedents obtaining in this case, there is no dispute that the
interplay of events occurred in two states, the Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint [38] dated June 23, 1994:
2.
Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines
corporation doing business in the Philippines. It may be served with summons and
other court processes at Travel Wide Associated Sales (Phils.), Inc., 3 rd Floor, Cougar
Building, 114 Valero St., Salcedo Village, Makati, Metro Manila.
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6.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and Allah after
two weeks of detention. Eventually, they were again put in service by defendant
SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to Manila.
7.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was
already behind her, her superiors requested her to see MR. Ali Meniewy, Chief Legal
Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to
the police station where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure on her to make
a statement dropping the case against Thamer and Allah. Not until she agreed to
do so did the police return her passport and allowed her to catch the afternoon
flight out of Jeddah.
8.
One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few
minutes before the departure of her flight to Manila, plaintiff was not allowed to
board the plane and instead ordered to take a later flight to Jeddah to see Mr.
Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the
SAUDIA office brought her to a Saudi court where she was asked to sign a document
written in Arabic. They told her that this was necessary to close the case against
Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before
the court on June 27, 1993. Plaintiff then returned to Manila.
9.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah
once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did
so after receiving assurance from SAUDIAs Manila manager, Aslam Saleemi, that
the investigation was routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on
June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge
interrogated plaintiff through an interpreter about the Jakarta incident. After one
hour of interrogation, they let her go. At the airport, however, just as her plane was
about to take off, a SAUDIA officer told her that the airline had forbidden her to take
that flight. At the Inflight Service Office where she was told to go, the secretary of
Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the
crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same
court where the judge, to her astonishment and shock, rendered a decision,
translated to her in English, sentencing her to five months imprisonment and to 286
lashes. Only then did she realize that the Saudi court had tried her, together with
Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of
(1) adultery; (2) going to a disco, dancing, and listening to the music in violation of
Islamic laws; (3) socializing with the male crew, in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the
help of the Philippine Embassy in Jeddah. The latter helped her pursue an appeal
from the decision of the court. To pay for her upkeep, she worked on the domestic
flights of defendant SAUDIA while, ironically, Thamer and Allah freely served the
international flights.[39]
Where the factual antecedents satisfactorily establish the existence of a foreign
element, we agree with petitioner that the problem herein could present a
conflicts case.
A factual situation that cuts across territorial lines and is affected by the diverse
laws of two or more states is said to contain a foreign element. The presence of a
foreign element is inevitable since social and economic affairs of individuals and
associations are rarely confined to the geographic limits of their birth or conception.
[40]
The forms in which this foreign element may appear are many. [41] The foreign
element may simply consist in the fact that one of the parties to a contract is an
alien or has a foreign domicile, or that a contract between nationals of one State
involves properties situated in another State. In other cases, the foreign element
may assume a complex form.[42]
In the instant case, the foreign element consisted in the fact that private respondent
Morada is a resident Philippine national, and that petitioner SAUDIA is a resident
foreign corporation. Also, by virtue of the employment of Morada with the
petitioner Saudia as a flight stewardess, events did transpire during her many
occasions of travel across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation to arise.
We thus find private respondents assertion that the case is purely domestic,
imprecise. A conflicts problem presents itself here, and the question of
jurisdiction[43] confronts the court a quo.
After a careful study of the private respondents Amended Complaint, [44] and the
Comment thereon, we note that she aptly predicated her cause of action on Articles
19 and 21 of the New Civil Code.
On one hand, Article 19 of the New Civil Code provides;
Art. 19. 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.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals,[45] this Court held that:
The aforecited provisions on human relations were intended to expand the concept
of torts in this jurisdiction by granting adequate legal remedy for the untold number
of moral wrongs which is impossible for human foresight to specifically provide in
the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its
provisions. Thus, we agree with private respondents assertion that violations of
Articles 19 and 21 are actionable, with judicially enforceable remedies in the
municipal forum.
Based on the allegations[46] in the Amended Complaint, read in the light of the Rules
of Court on jurisdiction[47] we find that the Regional Trial Court (RTC) of Quezon City
possesses jurisdiction over the subject matter of the suit. [48] Its authority to try and
hear the case is provided for under Section 1 of Republic Act No. 7691, to wit:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the
Judiciary Reorganization Act of 1980, is hereby amended to read as follows:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive
jurisdiction:
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(8) In all other cases in which demand, exclusive of interest, damages of whatever
kind, attorneys fees, litigation expenses, and costs or the value of the property in
controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other
cases in Metro Manila, where the demand, exclusive of the above-mentioned items
exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours)
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And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe venue,
Quezon City, is appropriate:
SEC. 2 Venue in Courts of First Instance. [Now Regional Trial Court]
(a) x x x
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(b) Personal actions. All other actions may be commenced and tried where the
defendant or any of the defendants resides or may be found, or where the plaintiff
or any of the plaintiff resides, at the election of the plaintiff.
Pragmatic considerations, including the convenience of the parties, also weigh
heavily in favor of the RTC Quezon City assuming jurisdiction. Paramount is the
private interest of the litigant. Enforceability of a judgment if one is obtained is
quite obvious. Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum, vex, harass, or
oppress the defendant, e.g. by inflicting upon him needless expense or
disturbance. But unless the balance is strongly in favor of the defendant, the
plaintiffs choice of forum should rarely be disturbed. [49]
Weighing the relative claims of the parties, the court a quo found it best to hear the
case in the Philippines. Had it refused to take cognizance of the case, it would be
forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in
the Kingdom of Saudi Arabia where she no longer maintains substantial
connections. That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and
inconvenience have been shown by either of the parties. The choice of forum of the
plaintiff (now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties
herein. By filing her Complaint and Amended Complaint with the trial court, private
respondent has voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions [50] praying for the
dismissal of Moradas Amended Complaint. SAUDIA also filed an Answer In Ex
Abundante Cautelam dated February 20, 1995. What is very patent and explicit
from the motions filed, is that SAUDIA prayed for other reliefs under the
premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial
courts jurisdiction by praying for the dismissal of the Amended Complaint on
grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
We observe that the motion to dismiss filed on April 14, 1962, aside from disputing
the lower courts jurisdiction over defendants person, prayed for dismissal of the
complaint on the ground that plaintiffs cause of action has prescribed. By
interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of
an affirmative defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea of defendant
Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latters person,
who, being the proponent of the affirmative defense, should be deemed to have
abandoned its special appearance and voluntarily submitted itself to the jurisdiction
of the court.
Similarly, the case of De Midgely vs. Ferandos, held that:
When the appearance is by motion for the purpose of objecting to the jurisdiction
of the court over the person, it must be for the sole and separate purpose of
objecting to the jurisdiction of the court. If his motion is for any other purpose than
to object to the jurisdiction of the court over his person, he thereby submits himself
to the jurisdiction of the court. A special appearance by motion made for the
purpose of objecting to the jurisdiction of the court over the person will be held to
be a general appearance, if the party in said motion should, for example, ask for a
dismissal of the action upon the further ground that the court had no jurisdiction
over the subject matter. [52]
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of
Quezon City. Thus, we find that the trial court has jurisdiction over the case and
that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems seek to
answer two important questions: (1) What legal system should control a given
situation where some of the significant facts occurred in two or more states; and (2)
to what extent should the chosen legal system regulate the situation. [53]
Several theories have been propounded in order to identify the legal system that
should ultimately control. Although ideally, all choice-of-law theories should
intrinsically advance both notions of justice and predictability, they do not always
do so. The forum is then faced with the problem of deciding which of these two
important values should be stressed. [54]
Before a choice can be made, it is necessary for us to determine under what
category a certain set of facts or rules fall. This process is known as
characterization, or the doctrine of qualification. It is the process of deciding
whether or not the facts relate to the kind of question specified in a conflicts
rule.[55] The purpose of characterization is to enable the forum to select the
proper law.[56]
Our starting point of analysis here is not a legal relation, but a factual situation,
event, or operative fact. [57] An essential element of conflict rules is the indication of
a test or connecting factor or point of contact. Choice-of-law rules invariably
consist of a factual relationship (such as property right, contract claim) and a
connecting factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing. [58]
Note that one or more circumstances may be present to serve as the possible test
for the determination of the applicable law. [59] These test factors or points of
contact or connecting factors could be any of the following:
(1) The nationality of a person, his domicile, his residence, his place of sojourn, or
his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to be
situated. In particular, the lex situs is decisive when real rights are involved;
(4) the place where an act has been done, the locus actus, such as the
place where a contract has been made, a marriage celebrated, a will
signed or a tort committed. The lex loci actus is particularly important in
contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the place of
performance of contractual duties, or the place where a power of attorney is to be
exercised;
(6) the intention of the contracting parties as to the law that should govern their
agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted or
done. The lex forithe law of the forumis particularly important because, as we
have seen earlier, matters of procedure not going to the substance of the claim
involved are governed by it; and because the lex fori applies whenever the content
of the otherwise applicable foreign law is excluded from application in a given case
for the reason that it falls under one of the exceptions to the applications of foreign
law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal
relationships of the ship and of its master or owner as such. It also covers
contractual relationships particularly contracts of affreightment. [60] (Underscoring
ours.)
After a careful study of the pleadings on record, including allegations in the
Amended Complaint deemed submitted for purposes of the motion to dismiss, we
are convinced that there is reasonable basis for private respondents assertion that
although she was already working in Manila, petitioner brought her to Jeddah on the
pretense that she would merely testify in an investigation of the charges she made
against the two SAUDIA crew members for the attack on her person while they were
in Jakarta. As it turned out, she was the one made to face trial for very serious
charges, including adultery and violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the handing over or
turning over of the person of private respondent to Jeddah officials, petitioner
may have acted beyond its duties as employer. Petitioners purported act
contributed to and amplified or even proximately caused additional humiliation,
misery and suffering of private respondent. Petitioner thereby allegedly facilitated
the arrest, detention and prosecution of private respondent under the guise of
petitioners authority as employer, taking advantage of the trust, confidence and
faith she reposed upon it. As purportedly found by the Prince of Makkah, the
alleged conviction and imprisonment of private respondent was wrongful. But these
capped the injury or harm allegedly inflicted upon her person and reputation, for
which petitioner could be liable as claimed, to provide compensation or redress for
the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the
connecting factor or point of contact could be the place or places where the
tortious conduct or lex loci actus occurred. And applying the torts principle in a
conflicts case, we find that the Philippines could be said as a situs of the tort (the
place where the alleged tortious conduct took place). This is because it is in the
Philippines where petitioner allegedly deceived private respondent, a Filipina
residing and working here. According to her, she had honestly believed that
petitioner would, in the exercise of its rights and in the performance of its duties,
act with justice, give her her due and observe honesty and good faith. Instead,
petitioner failed to protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment. For in our view what is
important here is the place where the over-all harm or the fatality of the alleged
injury to the person, reputation, social standing and human rights of complainant,
had lodged, according to the plaintiff below (herein private respondent). All told, it
is not without basis to identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti
commissi, modern theories and rules on tort liability [61] have been advanced to offer
fresh judicial approaches to arrive at just results. In keeping abreast with
the modern theories on tort liability, we find here an occasion to apply the State of
the most significant relationship rule, which in our view should be appropriate to
apply now, given the factual context of this case.
In applying said principle to determine the State which has the most significant
relationship, the following contacts are to be taken into account and evaluated
according to their relative importance with respect to the particular issue: (a) the
place where the injury occurred; (b) the place where the conduct causing the injury
occurred; (c) the domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if any, between the
parties is centered.[62]
As already discussed, there is basis for the claim that over-all injury occurred and
lodged in the Philippines. There is likewise no question that private respondent is a
resident Filipina national, working with petitioner, a resident foreign corporation
engaged here in the business of international air carriage. Thus, the relationship
between the parties was centered here, although it should be stressed that this suit
is not based on mere labor law violations. From the record, the claim that the
Philippines has the most significant contact with the matter in this dispute, [63] raised
by private respondent as plaintiff below against defendant (herein petitioner), in our
view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the tort complaint
of and the place having the most interest in the problem, we find, by way of
recapitulation, that the Philippine law on tort liability should have paramount
application to and control in the resolution of the legal issues arising out of this
case. Further, we hold that the respondent Regional Trial Court has jurisdiction over
the parties and the subject matter of the complaint; the appropriate venue is in
Quezon City, which could properly apply Philippine law. Moreover, we find
untenable petitioners insistence that [s]ince private respondent instituted this
suit, she has the burden of pleading and proving the applicable Saudi law on the
matter.[64] As aptly said by private respondent, she has no obligation to plead and
prove the law of the Kingdom of Saudi Arabia since her cause of action is based on
Articles 19 and 21 of the Civil Code of the Philippines. In her Amended Complaint
and subsequent pleadings she never alleged that Saudi law should govern this case.
[65]
And as correctly held by the respondent appellate court, considering that it was
the petitioner who was invoking the applicability of the law of Saudi Arabia, thus the
burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia
is.[66]
Lastly, no error could be imputed to the respondent appellate court in upholding the
trial courts denial of defendants (herein petitioners) motion to dismiss the
case. Not only was jurisdiction in order and venue properly laid, but appeal after
trial was obviously available, and the expeditious trial itself indicated by the nature
of the case at hand. Indubitably, the Philippines is the state intimately concerned
with the ultimate outcome of the case below not just for the benefit of all the
litigants, but also for the vindication of the countrys system of law and justice in a
transnational setting. With these guidelines in mind, the trial court must proceed to
try and adjudge the case in the light of relevant Philippine law, with due
consideration of the foreign element or elements involved. Nothing said herein, of
course, should be construed as prejudging the results of the case in any manner
whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No.
Q-93-18394 entitled Milagros P. Morada vs. Saudi Arabia Airlines is hereby
REMANDED to Regional Trial Court of Quezon City, Branch 89 for further
proceedings.
SO ORDERED.
JURISDICTION
KAZUHIRO HASEGAWA and NIPPON G.R. No. 149177
ENGINEERING CONSULTANTS CO., LTD.,
Petitioners,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus -
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
MINORU KITAMURA,
Promulgated:
Respondent.
November 23, 2007
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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 Resolution [2] denying the motion for
reconsideration thereof.
When the STAR Project was near completion, the Department of Public Works
and Highways (DPWH) engaged the consultancy services ofNippon, 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]
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 pretermination 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.
Frank
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 forCertiorari 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]
[14]
Ruling on the merits of the second petition, the appellate court rendered the
assailed April 18, 2001 Decision[22] finding 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]
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 CAG.R. SP No. 60827 (fundamentally raising the same issues as those in the first one)
and the instant petition for review thereof.
Necessarily, because the said dismissal is without prejudice and has no res
judicata effect, and even if petitioners still indicated in the verification and
certification of the second certiorari petition that the first had already been
dismissed on procedural grounds,[33] petitioners are no longer required by the Rules
to indicate in their certification of non-forum shopping in the instant petition for
review of the second certiorari petition, the status of the aforesaid first petition
before the CA. In any case, an omission in the certificate of non-forum shopping
about any event that will not constitute res judicata and litis pendentia, as in the
present case, is not a fatal defect. It will not warrant the dismissal and nullification
of the entire proceedings, considering that the evils sought to be prevented by the
said certificate are no longer present.[34]
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.[40] Considering that Hasegawa verified and certified the petition only on his
behalf and not on behalf of the other petitioner, the petition has to be denied
pursuant to Loquias v. Office of the Ombudsman.[41]Substantial compliance will not
suffice in a matter that demands strict observance of the Rules. [42] While technical
rules of procedure are designed not to frustrate the ends of justice, nonetheless,
they are intended to effect the proper and orderly disposition of cases and
effectively prevent the clogging of court dockets. [43]
Further, the Court has observed that petitioners incorrectly filed a Rule 65
petition to question the trial court's denial of their motion to dismiss. It is a wellestablished rule that an order denying a motion to dismiss is interlocutory,
The Court notes that petitioners adopted an additional but different theory
when they elevated the case to the appellate court. In the Motion to Dismiss[48] filed
with the trial court, petitioners never contended that the RTC is an inconvenient
forum. They merely argued that the applicable law which will determine the validity
or invalidity of 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 certiorarisignificantly 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.
can or should litigation be initiated? (2) Which law will the court apply? and (3)
Where can the resulting judgment be enforced? [53]
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. [62] What they rather raise as grounds to question subject
matter jurisdiction are the principles of lex loci celebrationis and lex contractus, and
the state of the most significant relationship rule.
Lex loci celebrationis relates to the law of the place of the ceremony [63] or
the law of the place where a contract is made. [64] The doctrine of lex
contractus or lex loci contractus means the law of the place where a contract is
executed or to be performed. [65] It controls the nature, construction, and validity of
the contract[66] and it may pertain to the law voluntarily agreed upon by the parties
or the law intended by them either expressly or implicitly. [67] Under the state of the
most significant relationship rule, to ascertain what state law to apply to a dispute,
the court should determine which state has the most substantial connection to the
occurrence and the parties. In a case involving a contract, the court should consider
where the contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the parties. [68] This rule
takes into account several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved. [69]
Since these three principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the second phase, the choice of
law.[70] They determine which 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.
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.
court against private respondent C.F. Sharp & Company, Inc., (hereinafter
SHARP), a corporation incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10
November 1993, 1 the following are the factual and procedural
antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp &
Company, through its Japan branch, entered into an International
Passenger Sales Agency Agreement, whereby the former authorized the
latter to sell its air transportation tickets. Unable to remit the proceeds of
the ticket sales made by defendant on behalf of the plaintiff under the
said agreement, plaintiff on March 25, 1980 sued defendant in Tokyo,
Japan, for collection of the unremitted proceeds of the ticket sales, with
claim for damages.
On April 11, 1980, a writ of summons was issued by the 36th Civil
Department, Tokyo District Court of Japan against defendant at its office
at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka-ku,
Yokohoma, Kanagawa Prefecture. The attempt to serve the summons was
unsuccessful because the bailiff was advised by a person in the office that
Mr. Dinozo, the person believed to be authorized to receive court
processes was in Manila and would be back on April 24, 1980.
On April 24, 1980, bailiff returned to the defendant's office to serve the
summons. Mr. Dinozo refused to accept the same claiming that he was no
longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the
Tokyo District Court decided to have the complaint and the writs of
summons served at the head office of the defendant in Manila. On July 11,
1980, the Director of the Tokyo District Court requested the Supreme
Court of Japan to serve the summons through diplomatic channels upon
the defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff Rolando
Balingit the writ of summons (p. 276, Records). Despite receipt of the
same, defendant failed to appear at the scheduled hearing. Thus, the
Tokyo Court proceeded to hear the plaintiff's complaint and on [January
29, 1981], rendered judgment ordering the defendant to pay the plaintiff
the sum of 83,158,195 Yen and damages for delay at the rate of 6% per
annum from August 28, 1980 up to and until payment is completed (pp.
12-14, Records).
On March 24, 1981, defendant received from Deputy Sheriff Balingit copy
of the judgment. Defendant not having appealed the judgment, the same
became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May 20,
1983, a suit for enforcement of the judgment was filed by plaintiff before
the Regional Trial Court of Manila Branch 54. 2
On July 16, 1983, defendant filed its answer averring that the judgment of
the Japanese Court sought to be enforced is null and void and
unenforceable in this jurisdiction having been rendered without due and
proper notice to the defendant and/or with collusion or fraud and/or upon
a clear mistake of law and fact (pp. 41-45, Rec.).
Unable to settle the case amicably, the case was tried on the merits. After
the plaintiff rested its case, defendant on April 21, 1989, filed a Motion for
Judgment on a Demurrer to Evidence based on two grounds:
(1) the foreign judgment sought to be enforced is null and void for want of
jurisdiction and (2) the said judgment is contrary to Philippine law and
public policy and rendered without due process of law. Plaintiff filed its
opposition after which the court a quo rendered the now assailed decision
dated June 21, 1989 granting the demurrer motion and dismissing the
complaint (Decision, pp. 376-378, Records). In granting the demurrer
motion, the trial court held that:
The foreign judgment in the Japanese Court sought in this action is null
and void for want of jurisdiction over the person of the defendant
considering that this is an action in personam; the Japanese Court did not
acquire jurisdiction over the person of the defendant because
jurisprudence requires that the defendant be served with summons in
Japan in order for the Japanese Court to acquire jurisdiction over it, the
process of the Court in Japan sent to the Philippines which is outside
Japanese jurisdiction cannot confer jurisdiction over the defendant in the
case before the Japanese Court of the case at bar. Boudard versus Tait 67
Phil. 170. The plaintiff contends that the Japanese Court acquired
jurisdiction because the defendant is a resident of Japan, having four (4)
branches doing business therein and in fact had a permit from the
Japanese government to conduct business in Japan (citing the exhibits
presented by the plaintiff); if this is so then service of summons should
have been made upon the defendant in Japan in any of these alleged four
branches; as admitted by the plaintiff the service of the summons issued
by the Japanese Court was made in the Philippines thru a Philippine
Sheriff. This Court agrees that if the defendant in a foreign court is a
resident in the court of that foreign court such court could acquire
jurisdiction over the person of the defendant but it must be served upon
which the action is brought and not elsewhere (St. Clair vs. Cox, 106 US
350, 27 L ed. 222, 1 S. Ct. 354). 5
It then concluded that the service of summons effected in Manila or
beyond the territorial boundaries of Japan was null and did not confer
jurisdiction upon the Tokyo District Court over the person of SHARP;
hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST elevated
the case to this Court contending that the respondent court erred in
holding that SHARP was not a resident of Japan and that summons on
SHARP could only be validly served within that country.
A foreign judgment is presumed to be valid and binding in the country
from which it comes, until the contrary is shown. It is also proper to
presume the regularity of the proceedings and the giving of due notice
therein. 6
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in
personam of a tribunal of a foreign country having jurisdiction to
pronounce the same is presumptive evidence of a right as between the
parties and their successors-in-interest by a subsequent title. The
judgment may, however, be assailed by evidence of want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of law or
fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines
or elsewhere, enjoys the presumption that it was acting in the lawful
exercise of jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of
overcoming the presumption of its validity. 7 Being the party challenging
the judgment rendered by the Japanese court, SHARP had the duty to
demonstrate the invalidity of such judgment. In an attempt to discharge
that burden, it contends that the extraterritorial service of summons
effected at its home office in the Philippines was not only ineffectual but
also void, and the Japanese Court did not, therefore acquire jurisdiction
over it.
It is settled that matters of remedy and procedure such as those relating
to the service of process upon a defendant are governed by the lex fori or
the internal law of the forum. 8 In this case, it is the procedural law of
Japan where the judgment was rendered that determines the validity of
the extraterritorial service of process on SHARP. As to what this law is is a
question of fact, not of law. It may not be taken judicial notice of and must
be pleaded and proved like any other fact. 9 Sections 24 and 25, Rule 132
of the Rules of Court provide that it may be evidenced by an official
publication or by a duly attested or authenticated copy thereof. It was
embodied in section 18, Rule 14 of the Rules of Court which allows service
of summons on residents temporarily out of the Philippines to be made
out of the country. The rationale for this rule was explained in Milliken as
follows:
[T]he authority of a state over one of its citizens is not terminated by the
mere fact of his absence from the state. The state which accords him
privileges and affords protection to him and his property by virtue of his
domicile may also exact reciprocal duties. "Enjoyment of the privileges of
residence within the state, and the attendant right to invoke the
protection of its laws, are inseparable" from the various incidences of
state citizenship. The responsibilities of that citizenship arise out of the
relationship to the state which domicile creates. That relationship is not
dissolved by mere absence from the state. The attendant duties, like the
rights and privileges incident to domicile, are not dependent on
continuous presence in the state. One such incident of domicile is
amenability to suit within the state even during sojourns without the
state, where the state has provided and employed a reasonable method
for apprising such an absent party of the proceedings against him. 23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a corporation
may have is single in its essence and a corporation can have only one
domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain purposes,
be regarded a resident in another state in which it has offices and
transacts business. This is the rule in our jurisdiction and apropos thereto,
it may be necessery to quote what we stated in State Investment House,
Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may be considered
"residents of the Philippine Islands" as that term is used in Section 20 of
the Insolvency Law . . . or residents of the state under the laws of which
they were respectively incorporated. The answer cannot be found in the
Insolvency Law itself, which contains no definition of the term, resident, or
any clear indication of its meaning. There are however other statutes,
albeit of subsequent enactment and effectivity, from which enlightening
notions of the term may be derived.
The National Internal Revenue Code declares that the term "'resident
foreign corporation' applies to a foreign corporation engaged in trade or
business within the Philippines," as distinguished from a "'non-resident
foreign corporation' . . . (which is one) not engaged in trade or bussiness
within the Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states "that
branches, subsidiaries, affiliation, extension offices or any other units of
corporation or juridical person organized under the laws of any foreign
country operating in the Philippines shall be considered residents of the
Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches and
agencies in the Philippines of foreign banks . . . (which are) called
Philippine branches," in the same category as "commercial banks, savings
associations, mortgage banks, development banks, rural banks, stock
savings and loan associations" (which have been formed and organized
under Philippine laws), making no distinction between the former and the
latter in so far as the terms "banking institutions" and "bank" are used in
the Act [Sec. 2], declaring on the contrary that in "all matters not
specifically covered by special provisions applicable only to foreign banks,
or their branches and agencies in the Philippines, said foreign banks or
their branches and agencies lawfully doing business in the Philippines
"shall be bound by all laws, rules, and regulations applicable to domestic
banking corporations of the same class, except such laws, rules and
regulations as provided for the creation, formation, organization, or
dissolution of corporations
or as fix the
relation,
liabilities,
responsibilities, or duties of members, stockholders or officers of
corporation. [Sec. 18].
This court itself has already had occasion to hold [Claude Neon Lights,
Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that a foreign
corporation licitly doing business in the Philippines, which is a defendant
in a civil suit, may not be considered a non-resident within the scope of
the legal provision authorizing attachment against a defendant not
residing in the Philippine Islands; [Sec. 424, in relation to Sec. 412 of Act
No. 190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of
1940, Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary
attachment may not be applied for and granted solely on the asserted fact
that the defendant is a foreign corporation authorized to do business in
the Philippines and is consequently and necessarily, "a party who
resides out of the Philippines." Parenthetically, if it may not be considered
as a party not residing in the Philippines, or as a party who resides out of
the country, then, logically, it must be considered a party who does reside
in the Philippines, who is a resident of the country. Be this as it may, this
Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to assimilate foreign
corporations, duly licensed to do business here, to the status of domestic
corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs.
Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil.
385, 411) We think it would be entirely out of line with this policy should
we make a discrimination against a foreign corporation, like the petitioner,
and subject its property to the harsh writ of seizure by attachment when it
has complied not only with every requirement of law made specially of
foreign corporations, but in addition with every requirement of law made
of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized to do
business in the Philippines "to the status of domestic corporations,
subsumes
their
being
found
and
operating
as
corporations,
hence,residing, in the country.
The same principle is recognized in American law: that the residence of a
corporation, if it can be said to have a residence, is necessarily where it
exercises corporate functions . . .;" that it is considered as dwelling "in the
place where its business is done . . .," as being "located where its
franchises are exercised . . .," and as being "present where it is engaged
in the prosecution of the corporate enterprise;" that a "foreign corporation
licensed to do business in a state is a resident of any country where it
maintains an office or agent for transaction of its usual and customary
business for venue purposes;" and that the "necessary element in its
signification is locality of existence." [Words and Phrases, Permanent Ed.,
vol. 37, pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan through its
four duly registered branches at the time the collection suit against it was
filed, then in the light of the processual presumption, SHARP may be
deemed a resident of Japan, and, as such, was amenable to the
jurisdiction of the courts therein and may be deemed to have assented to
the said courts' lawful methods of serving process. 27
Accordingly, the extraterritorial service of summons on it by the Japanese
Court was valid not only under the processual presumption but also
because of the presumption of regularity of performance of official duty.
We find NORTHWEST's claim for attorney's fees, litigation expenses, and
exemplary damages to be without merit. We find no evidence that would
justify an award for attorney's fees and litigation expenses under Article
2208 of the Civil Code of the Philippines. Nor is an award for exemplary
damages warranted. Under Article 2234 of the Civil Code, before the court
may consider the question of whether or not exemplary damages should
be awarded, the plaintiff must show that he is entitled to moral,
temperate, or compensatory damaged. There being no such proof
presented by NORTHWEST, no exemplary damages may be adjudged in its
favor.
521-1736
21-2095
accept the summons for his wife, Lourdes A. Valmonte, on the ground that
he was not authorized to accept the process on her behalf. Accordingly the
process server left without leaving a copy of the summons and complaint
for petitioner Lourdes A. Valmonte.
Petitioner Alfredo D. Valmonte thereafter filed his Answer with
Counterclaim. Petitioner Lourdes A. Valmonte, however, did not file her
Answer. For this reason private respondent moved to declare her in
default. Petitioner Alfredo D. Valmonte entered a special appearance in
behalf of his wife and opposed the private respondents motion.
In its Order dated July 3, 1992, the trial court, denied private respondents
motion to declare petitioner Lourdes A. Valmonte in default. A motion for
reconsideration was similarly denied on September 23, 1992. Whereupon,
private respondent filed a petition for certiorari, prohibition and
mandamus with the Court of Appeals.
On December 29, 1992, the Court of Appeals rendered a decision granting
the petition and declaring Lourdes A. Valmonte in default. A copy of the
appellate courts decision was received by petitioner Alfredo D. Valmonte
on January 15, 1993 at
his Manila office
and
on January
21,
1993 in Seattle,Washington. Hence, this petition.
The issue at bar is whether in light of the facts set forth above, petitioner
Lourdes A. Valmonte was validly served with summons. In holding that she
had been, the Court of Appeals stated:[1]
[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally
directed the aforementioned counsel of Dimalanta to address all
communications (evidently referring to her controversy with her sister
Mrs. Dimalanta over the Paco property, now the subject of the instant
case) to her lawyer who happens also to be her husband. Such directive
was made without any qualification just as was her choice/designation of
her husband Atty. Valmonte as her lawyer likewise made without any
qualification or reservation. Any disclaimer therefore on the part of Atty.
Valmonte as to his being his wifes attorney (at least with regard to the
dispute vis-a-vis [sic] the Paco property) would appear to be feeble or
trifling, if not incredible.
This view is bolstered by Atty. Valmontes subsequent alleged special
appearance made on behalf of his wife. Whereas Mrs. Valmonte had
manifestly authorized her husband to serve as her lawyer relative to her
dispute with her sister over the Paco property and to receive all
communications regarding the same and subsequently to appear on her
behalf by way of a so-called special appearance, she would nonetheless
now insist that the same husband would nonetheless had absolutely no
xxx
xxx
Turning to another point, it would not do for Us to overlook the fact that
the disputed summons was served not upon just an ordinary lawyer of
private respondent Lourdes A. Valmonte, but upon her lawyer husband.
But that is not all, the same lawyer/husband happens to be also her codefendant in the instant case which involves real property which,
according to her lawyer/husband/ co-defendant, belongs to the conjugal
partnership of the defendants (the spouses Valmonte). It is highly
inconceivable and certainly it would be contrary to human nature for the
lawyer/husband/co-defendant to keep to himself the fact that they (the
spouses Valmonte) had been sued with regard to a property which he
claims to be conjugal. Parenthetically, there is nothing in the records of
the case before Us regarding any manifestation by private respondent
Lourdes A. Valmonte about her lack of knowledge about the case
instituted against her and her lawyer/husband/co-defendant by her sister
Rosita.
PREMISES CONSIDERED, the instant petition for certiorari, prohibition and
mandamus is given due course. This Court hereby Resolves to nullify the
orders of the court a quo dated July 3, 1992 and September 23, 1992 and
further declares private respondent Lourdes Arreola Valmonte as having
been properly served with summons.
Petitioners assail the aforequoted decision, alleging that the Court of
Appeals erred (1) in refusing to apply the provisions of Rule 14, 17 of the
Revised Rules of Court and applying instead Rule 14, 8 when the fact is
that petitioner Lourdes A. Valmonte is a nonresident defendant; and (2)
because even if Rule 14, 8 is the applicable provision, there was no valid
substituted service as there was no strict compliance with the
requirement by leaving a copy of the summons and complaint with
petitioner Alfredo D. Valmonte. Private respondent, upon the other hand,
asserts that petitioners are invoking a technicality and that strict
adherence to the rules would only result in a useless ceremony.
of the summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the court
may deem sufficient. Any order granting such leave shall specify a
reasonable time, which shall not be less than sixty (60) days after notice,
within which the defendant must answer.
In such cases, what gives the court jurisdiction in an action in rem or
quasi in rem is that it has jurisdiction over the res, i.e. the personal status
of the plaintiff who is domiciled in the Philippines or the property litigated
or attached. Service of summons in the manner provided in 17 is not for
the purpose of vesting it with jurisdiction but for complying with the
requirements of fair play or due process, so that he will be informed of the
pendency of the action against him and the possibility that property in the
Philippines belonging to him or in which he has an interest may be
subjected to a judgment in favor of the plaintiff and he can thereby take
steps to protect his interest if he is so minded. [6]
Applying the foregoing rules to the case at bar, private respondents
action, which is for partition and accounting under Rule 69, is in the
nature of an action quasi in rem. Such an action is essentially for the
purpose of affecting the defendants interest in a specific property and not
to render a judgment against him. As explained in the leading case
of Banco Espaol Filipino v. Palanca :[7]
[An action quasi in rem is] an action which while not strictly speaking an
action in rem partakes of that nature and is substantially such. . . . The
action quasi in rem differs from the true action in rem in the circumstance
that in the former an individual is named as defendant and the purpose of
the proceeding is to subject his interest therein to the obligation or lien
burdening the property. All proceedings having for their sole object the
sale or other disposition of the property of the defendant, whether by
attachment, foreclosure, or other form of remedy, are in a general way
thus designated. The judgment entered in these proceedings is conclusive
only between the parties.
As petitioner Lourdes A. Valmonte is a nonresident who is not found in the
Philippines, service of summons on her must be in accordance with Rule
14, 17. Such service, to be effective outside the Philippines, must be
made either (1) by personal service; (2) by publication in a newspaper of
general circulation in such places and for such time as the court may
order, in which case a copy of the summons and order of the court should
be sent by registered mail to the last known address of the defendant; or
(3) in any other manner which the court may deem sufficient.
Since in the case at bar, the service of summons upon petitioner Lourdes
A. Valmonte was not done by means of any of the first two modes, the
question is whether the service on her attorney, petitioner Alfredo D.
Valmonte, can be justified under the third mode, namely, in any . . .
manner the court may deem sufficient.
We hold it cannot. This mode of service, like the first two, must be made
outside the Philippines, such as through the Philippine Embassy in the
foreign country where the defendant resides.[8] Moreover, there are
several reasons why the service of summons on Atty. Alfredo D. Valmonte
cannot be considered a valid service of summons on petitioner Lourdes A.
Valmonte. In the first place, service of summons on petitioner Alfredo D.
Valmonte was not made upon the order of the court as required by Rule
14, 17 and certainly was not a mode deemed sufficient by the court
which in fact refused to consider the service to be valid and on that basis
declare petitioner Lourdes A. Valmonte in default for her failure to file an
answer.
In the second place, service in the attempted manner on petitioner was
not made upon prior leave of the trial court as required also in Rule 14,
17. As provided in 19, such leave must be applied for by motion in
writing, supported by affidavit of the plaintiff or some person on his behalf
and setting forth the grounds for the application.
Finally, and most importantly, because there was no order granting such
leave, petitioner Lourdes A. Valmonte was not given ample time to file her
Answer which, according to the rules, shall be not less than sixty (60) days
after notice. It must be noted that the period to file an Answer in an action
against a resident defendant differs from the period given in an action
filed against a nonresident defendant who is not found in the Philippines.
In the former, the period is fifteen (15) days from service of summons,
while in the latter, it is at least sixty (60) days from notice.
Strict compliance with these requirements alone can assure observance of
due process. That is why in one case, [9] although the Court considered
publication in the Philippines of the summons (against the contention that
it should be made in the foreign state where defendant was residing)
sufficient, nonetheless the service was considered insufficient because no
copy of the summons was sent to the last known correct address in
the Philippines.
Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA
458,462-463 (1975), in which it was held that service of summons upon
the defendants husband was binding on her. But the ruling in that case is
justified because summons were served upon defendants husband in
their conjugal home in Cebu City and the wife was only temporarily
absent, having gone to Dumaguete City for a vacation. The action was for
collection of a sum of money. In accordance with Rule 14, 8, substituted
service could be made on any person of sufficient discretion in the
dwelling place of the defendant, and certainly defendants husband, who
was there, was competent to receive the summons on her behalf. In any
event, it appears that defendant in that case submitted to the jurisdiction
of the court by instructing her husband to move for the dissolution of the
writ of attachment issued in that case.
On the other hand, in the case of Gemperle v. Schenker, [10] it was held that
service on the wife of a nonresident defendant was found sufficient
because the defendant had appointed his wife as his attorney-in-fact. It
was held that although defendant Paul Schenker was a Swiss citizen and
resident of Switzerland, service of summons upon his wife Helen Schenker
who was in the Philippines was sufficient because she was her husbands
representative and attorney-in-fact in a civil case, which he had earlier
filed against William Gemperle. In fact Gemperles action was for damages
arising from allegedly derogatory statements contained in the complaint
filed in the first case. As this Court said, i]n other words, Mrs. Schenker
had authority to sue, and had actually sued, on behalf of her husband, so
that she was, also, empowered to represent him in suits filed against him,
particularly in a case, like the one at bar, which is a consequence of the
action brought by her on his behalf. [11] Indeed, if instead of filing an
independent action Gemperle filed a counterclaim in the action brought by
Mr. Schenker against him, there would have been no doubt that the trial
court could have acquired jurisdiction over Mr. Schenker through his agent
and attorney-in-fact, Mrs. Schenker.
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not
appoint her husband as her attorney-in-fact. Although she wrote private
respondent s attorney that all communications intended for her should
be addressed to her husband who is also her lawyer at the latters address
in Manila, no power of attorney to receive summons for her can be
inferred therefrom. In fact the letter was written seven months before the
filing of this case below, and it appears that it was written in connection
with the negotiations between her and her sister, respondent Rosita
Dimalanta, concerning the partition of the property in question. As is
usual in negotiations of this kind, the exchange of correspondence was
carried on by counsel for the parties. But the authority given to
petitioners husband in these negotiations certainly cannot be construed
as also including an authority to represent her in any litigation.
For the foregoing reasons, we hold that there was no valid service on
petitioner Lourdes A. Valmonte in this case.
which had been deferred, was denied by the Court in its Order of October
4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then set
for pre-trial conference. At the conference, the parties could not arrive at
any settlement. However, they agreed on the following stipulations of
facts:
1)
The defendant admits the existence of the judgment dated
December 28, 1984 as well as its amendment dated April 13, 1987, but not
necessarily the authenticity or validity thereof;
2)
The plaintiff is not doing business and is not licensed to do business
in the Philippines;
3)
The residence of defendant, Antonio Heras, is New Manila, Quezon
City.
The only issue for this Court to determine is, whether or not the judgment
of the Hong Kong Court has been repelled by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud or clear mistake
of law or fact, such as to overcome the presumption established in Section
50, Rule 39 of the Rules of Court in favor of foreign judgments.
In view of the admission by the defendant of the existence of the
aforementioned judgment (Pls. See Stipulations of Facts in the Order
dated January 5, 1989 as amended by the Order of January 18, 1989), as
well as the legal presumption in favor of the plaintiff as provided for in
paragraph (b), Sec. 50, (Ibid.), the plaintiff presented only documentary
evidence to show rendition, existence, and authentication of such
judgment by the proper officials concerned (Pls. See Exhibits A thru B,
with their submarkings). In addition, the plaintiff presented testimonial
and documentary evidence to show its entitlement to attorneys fees and
other expenses of litigation.
On the other hand, the defendant presented two witnesses, namely,
Fortunata dela Vega and Russel Warren Lousich.
The gist of Ms. dela Vegas testimony is to the effect that no writ of
summons or copy of a statement of claim of Asiavest Limited was ever
served in the office of the Navegante Shipping Agency Limited and/or for
Mr. Antonio Heras, and that no service of the writ of summons was either
served on the defendant at his residence in New Manila, Quezon City. Her
knowledge is based on the fact that she was the personal secretary of Mr.
Heras during his JD Transit days up to the latter part of 1972 when he
shifted or diversified to shipping business in Hong Kong; that she was in-
contained no statements of the facts and the law on which it was based,
the trial court ruled that since the issue related to procedural matters, the
law of the forum, i.e., Hong Kong laws, should govern. As testified by the
expert witness Lousich, such legalities were not required under Hong
Kong laws. The trial court also debunked HERAS contention that the
principle of excussion under Article 2058 of the Civil Code of the
Philippines was violated. It declared that matters of substance are
subject to the law of the place where the transaction occurred; in this
case, Hong Kong laws must govern.
The trial court concluded that the Hong Kong court judgment should be
recognized and given effect in this jurisdiction for failure of HERAS to
overcome the legal presumption in favor of the foreign judgment. It then
decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay to
the plaintiff the following sums or their equivalents in Philippine currency
at the time of payment: US$1,810,265.40 plus interest on the sum of
US$1,500,000.00 at 9.875% per annum from October 31, 1984 to
December 28, 1984, and HK$905 as fixed cost, with legal interests on the
aggregate amount from December 28, 1984, and to pay attorneys fees in
the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an
award of judicial costs and an increase in attorneys fees in the amount of
US$19,346.45 with interest until full payment of the said obligations. On
the other hand, HERAS no longer opposed the motion and instead
appealed the decision to the Court of Appeals, which docketed the appeal
as CA-G.R. CV No. 29513.
In its order[2] November 1990, the trial court granted ASIAVESTs motion
for reconsideration by increasing the award of attorneys fees to
US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE CURRENCY, AND TO PAY
THE COSTS OF THIS SUIT, provided that ASIAVEST would pay the
corresponding filing fees for the increase. ASIAVEST appealed the order
requiring prior payment of filing fees. However, it later withdrew its
appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision [3] reversing the
decision of the trial court and dismissing ASIAVESTs complaint without
prejudice. It underscored the fact that a foreign judgment does not of
itself have any extraterritorial application. For it to be given effect, the
foreign tribunal should have acquired jurisdiction over the person and the
subject matter. If such tribunal has not acquired jurisdiction, its judgment
is void.
The Court of Appeals agreed with the trial court that matters of remedy
and procedure such as those relating to service of summons upon the
defendant are governed by the lex fori, which was, in this case, the law of
Hong Kong. Relative thereto, it gave weight to Lousichs testimony that
under the Hong Kong law, the substituted service of summons upon
HERAS effected in the Philippines by the clerk of Sycip Salazar Hernandez
& Gatmaitan firm would be valid provided that it was done in accordance
with Philippine laws. It then stressed that where the action is in
personam and the defendant is in the Philippines, the summons should be
personally served on the defendant pursuant to Section 7, Rule 14 of the
Rules of Court.[4] Substituted service may only be availed of where the
defendant cannot be promptly served in person, the fact of impossibility
of personal service should be explained in the proof of service. It also
found as persuasive HERAS argument that instead of directly using the
clerk of the Sycip Salazar Hernandez & Gatmaitan law office, who was not
authorized by the judge of the court issuing the summons, ASIAVEST
should have asked for leave of the local courts to have the foreign
summons served by the sheriff or other court officer of the place where
service was to be made, or for special reasons by any person authorized
by the judge.
The Court of Appeals agreed with HERAS that notice sent outside the
state to a non-resident is unavailing to give jurisdiction in an action
against him personally for money recovery. Summons should have been
personally served on HERAS in Hong Kong, for, as claimed by ASIAVEST,
HERAS was physically present in Hong Kong for nearly 14 years. Since
there was not even an attempt to serve summons on HERAS in Hong Kong,
the Hong Kong Supreme Court did not acquire jurisdiction over
HERAS. Nonetheless, it did not totally foreclose the claim of ASIAVEST;
thus:
While We are not fully convinced that [HERAS] has a meritorious defense
against [ASIAVESTs] claims or that [HERAS] ought to be absolved of any
liability, nevertheless, in view of the foregoing discussion, there is a need
to deviate from the findings of the lower court in the interest of justice
and fair play. This, however, is without prejudice to whatever action
[ASIAVEST] might deem proper in order to enforce its claims against
[HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was
necessary that evidence supporting the validity of the foreign judgment
be submitted, and that our courts are not bound to give effect to foreign
judgments which contravene our laws and the principle of sound morality
and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court of
Appeals erred in ruling that
I.
IT WAS NECESSARY FOR [ASIAVEST] TO
SUPPORTING THE VALIDITY OF THE JUDGMENT;
PRESENT
EVIDENCE
II.
THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER
PHILIPPINE LAW;
III.
SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN
HONG KONG;
IV.
THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE
OF PHILIPPINE COURTS;
V.
THE FOREIGN JUDGMENT CONTRAVENES PHILIPPINE LAWS, THE
PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court, [5] which
was the governing law at the time this case was decided by the trial court
and respondent Court of Appeals, a foreign judgment against a person
rendered by a court having jurisdiction to pronounce the judgment is
presumptive evidence of a right as between the parties and their
successors in interest by the subsequent title. However, the judgment
may be repelled by evidence of want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that
in the absence of proof to the contrary, a court, or judge acting as such,
whether in the Philippines or elsewhere, is presumed to have acted in the
lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the
burden to repel it on grounds provided for in paragraph (b) of Section 50,
Sections 24 and 25, Rule 132 of the New Rules of Evidence, the record of
public documents of a sovereign authority, tribunal, official body, or public
officer may be proved by (1) an official publication thereof or (2) a copy
attested by the officer having the legal custody thereof, which must be
accompanied, if the record is not kept in the Philippines, with a certificate
that such officer has the custody. The certificate may be issued by a
secretary of the embassy or legation, consul general, consul, vice consul,
or consular agent, or any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. The attestation must state, in
substance, that the copy is a correct copy of the original, or a specific part
thereof, as the case may be, and must be under the official seal of the
attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to prove
a foreign law. An authority[12] on private international law thus noted:
Although it is desirable that foreign law be proved in accordance with the
above rule, however, the Supreme Court held in the case of Willamette
Iron and Steel Works v. Muzzal,[13] that Section 41, Rule 123 (Section 25,
Rule 132 of the Revised Rules of Court) does not exclude the presentation
of other competent evidence to prove the existence of a foreign law. In
that case, the Supreme Court considered the testimony under oath of an
attorney-at-law of San Francisco, California, who quoted verbatim a
section of California Civil Code and who stated that the same was in force
at the time the obligations were contracted, as sufficient evidence to
establish the existence of said law. Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et al.,
[14]
upheld the Tax Court in considering the pertinent law of California as
proved by the respondents witness. In that case, the counsel for
respondent testified that as an active member of the California Bar since
1951, he is familiar with the revenue and taxation laws of the State of
California. When asked by the lower court to state the pertinent California
law as regards exemption of intangible personal properties, the witness
cited Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue
Code as published in Derrings California Code, a publication of BancroftWhitney Co., Inc. And as part of his testimony, a full quotation of the cited
section was offered in evidence by respondents. Likewise, in several
naturalization cases, it was held by the Court that evidence of the law of a
foreign country on reciprocity regarding the acquisition of citizenship,
although not meeting the prescribed rule of practice, may be allowed and
used as basis for favorable action, if, in the light of all the circumstances,
the Court is satisfied of the authenticity of the written proof
offered.[15] Thus, in a number of decisions, mere authentication of the
October 1984 for good.[40] His absence in Hong Kong must have been the
reason why summons was not served on him therein; thus, ASIAVEST was
constrained to apply for leave to effect service in the Philippines, and
upon obtaining a favorable action on the matter, it commissioned the
Sycip Salazar Hernandez & Gatmaitan law firm to serve the summons here
in the Philippines.
In Brown v. Brown,[41] the defendant was previously a resident of the
Philippines. Several days after a criminal action for concubinage was filed
against him, he abandoned the Philippines. Later, a proceeding quasi in
rem was instituted against him. Summons in the latter case was served
on the defendants attorney-in-fact at the latters address. The Court held
that under the facts of the case, it could not be said that the defendant
was still a resident of the Philippines because he ha[d] escaped to his
country and [was] therefore an absentee in the Philippines. As such, he
should have been summoned in the same manner as one who does not
reside and is not found in the Philippines.
Similarly, HERAS, who was also an absentee, should have been served
with summons in the same manner as a non-resident not found in Hong
Kong. Section 17, Rule 14 of the Rules of Court providing for
extraterritorial service will not apply because the suit against him was in
personam. Neither can we apply Section 18, which allows extraterritorial
service on a resident defendant who is temporarily absent from the
country, because even if HERAS be considered as a resident of Hong Kong,
the undisputed fact remains that he left Hong Kong not only temporarily
but for good.
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING
the petition in this case and AFFIRMING the assailed judgment of the
Court of Appeals in CA-G.R. CV No. 29513.
No costs.
SO ORDERED.
alleged in the Second (actually, third) Amended Petition [26] that the owners
of the vessel intended to transfer and alienate their rights and interest
over the vessel and its cargo, to the detriment of the private respondent.
The trial court granted leave to private respondent to amend its Petition,
but only to exclude the customs commissioner and the district collector.
[27]
Instead, private respondent filed the "Second Amended Petition with
Supplemental Petition" against Singkong Trading Company; and Omega
and M/V Star Ace,[28] to which Cadacio and Rada filed a Joint Answer.[29]
Declared in default in an Order issued by the trial court on January 23,
1991, were the following: Singkong Trading Co., Commissioner Mison, M/V
Star Ace and Omega.[30] Private respondent filed, and the trial court
granted, an ex parte Motion to present evidence against the defaulting
respondents.[31] Only private respondent, Atty. Tamondong, Commissioner
Mison, Omega and M/V Star Ace appeared in the next pretrial hearing;
thus, the trial court declared the other respondents in default and allowed
private respondent to present evidence against them. [32]Cesar Urbino,
general manager of private respondent, testified and adduced evidence
against the other respondents, x x x.[33]
On December 29, 1990, private respondent and Rada, representing
Omega, entered into a Memorandum of Agreement stipulating that Rada
would write and notify Omega regarding the demand for salvage fees of
private respondent; and that if Rada did not receive any instruction from
his principal, he would assign the vessel in favor of the salvor. [34]
On February 18, 1991, the trial court disposed as follows:
"WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations,
prayer and evidence adduced, both testimonial and documentary, the
Court is convinced, that, indeed, defendants/respondents are liable to
[private respondent] in the amount as prayed for in the petition for which
it renders judgment as follows:
1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief
[c]aptain of the vessel and Omega Sea Transport Company, Inc.,
represented by Frank Cadacio[,] is ordered to refrain from alienating or
[transferring] the vessel M/V Star Ace to any third parties;
2. Singkong Trading Company to pay the following:
a. Taxes due the government;
b. Salvage fees on the vessel in the amount of $1,000,000.00 based on xxx
Lloyds Standard Form of Salvage Agreement;
ABELARDO
B.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 9
August 2001 of the Court of Appeals in CA-G.R. SP No. 58487, as well as
the Resolution dated 23 October 2001 denying the motion for
reconsideration. The Court of Appeals dismissed the petition to annul the
following decisions[3]rendered by Branch 143 of the Regional Trial Court of
Makati:
(1) The Decision dated 27 December 1990 [4] granting the dissolution of the
conjugal partnership of gains of the spouses Abelardo B. Licaros and
Margarita Romualdez-Licaros;
(2) The Decision dated 8 November 1991 [5] declaring the marriage between
the same spouses null and void.
The Facts
The antecedent facts as found by the Court of Appeals are as follows:
x x x Abelardo Licaros (Abelardo, for short) and Margarita RomualdezLicaros (Margarita, hereafter) were lawfully married on December 15,
1968. Out of this marital union were born Maria Concepcion and Abelardo,
Jr. Ironically, marital differences, squabbles and irreconcilable conflicts
transpired between the spouses, such that sometime in 1979, they agreed
to separate from bed and board.
In 1982, Margarita left for the United States and there, to settle down with
her two (2) children. In the United States, on April 26, 1989, Margarita
applied for divorce before the Superior Court of California, County of San
Mateo (Annex 1, Rejoinder, pp. 164-165) where she manifested that she
does not desire counseling at that time(Quotation, p. 166, Rollo). On
August 6, 1990, Margarita was granted the decree of divorce (Annex 2,
Answer, p. 108, Rollo) together with a distribution of properties between
her and Abelardo (pp. 167-168, Rollo).
Not long after, on August 17, 1990, Abelardo and Margarita executed an
Agreement of Separation of Properties (pp. 60-64, Rollo). This was
followed-up by a petition filed on August 21, 1990 before the Regional
Trial Court of Makati for the dissolution of the conjugal partnership of
gains of the spouses and for the approval of the agreement of separation
of their properties. This was docketed as Special Proceeding No.
2551. On December 27, 1990, a decision was issued granting the petition
and approving the separation of property agreement.
For his part, on June 24, 1991, Abelardo commenced Civil Case No. 911757, for the declaration of nullity of his marriage with Margarita, based
on psychological incapacity under the New Family Code. As Margarita was
then residing at 96 Mulberry Lane, Atherton, California, U.S.A., Abelardo
initially moved that summons be served through the International Express
Courier Service. The court a quo denied the motion. Instead, it ordered
that summons be served by publication in a newspaper of general
circulation once a week for three (3) consecutive weeks, at the same time
furnishing respondent a copy of the order, as well as the corresponding
summons and a copy of the petition at the given address in the United
States through the Department of Foreign Affairs, all at the expense of
Abelardo. Respondent was given sixty (60) days after publication to file a
responsive pleading.
On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted his
Officers Return quoted hereunder:
OFFICERS RETURN
THIS IS TO CERTIFY that on July 3, 1991, I have served a copy of summons
and complaint with annexes together with order dated June 28, 1991
never received any notice of the pendency of the petition nor a copy of the
decision.
Antithetically, a meticulous perusal of the controversial petition
(Annex B-1) and the agreement of separation of properties (pp. 60-64,
Rollo) readily shows that the same were signed by the petitioner on the
proper space after the prayer and on the portion for the verification of the
petition. The same is true with the agreement of separation of
properties. What is striking to note is that on August 6, 1990, Margarita
appeared before Amado P. Cortez, Consul of the Republic of the
Philippines at the San Francisco, California, United States Consulate
Office, to affirm and acknowledge before said official that she executed
the agreement of separation of properties of her own free will and deed,
after being informed of the contents thereof. And yet, there is no showing
that Abelardo was with her at the Philippine Consulate Office in confirming
the separation of property agreement. Moreover, on page 2 of the same
agreement, it is specifically stated that such property separation
document shall be subject to approval later on by the proper court of
competent jurisdiction. The clear import of this is that the agreement
must have to be submitted before the proper court for approval, which
explains and confirms petitioners signature on the petition filed in court.
In main, We see no indication nor showing of coercion or fraud from these
facts, which could very well be considered as extrinsic or collateral fraud
to justify a petition under Rule 47. From all indications, the pretended
coerced documents were rather freely and voluntarily executed by the
parties therein knowing fully well the imports thereof. This conclusion
finds more weight if We consider the fact that the separation of property
was fully implemented and enforced, when apparently both parties
correspondingly received the properties respectively assigned to each of
them under the said document.[7]
The Court of Appeals also rejected Margaritas claim that the trial court
lacked jurisdiction to hear and decide the Petition for Declaration of
Nullity of Marriage for improper service of summons on her. The case
involves the marital status of the parties, which is an action in
rem or quasi in rem. The Court of Appeals ruled that in such an action the
purpose of service of summons is not to vest the trial court with
jurisdiction over the person of the defendant, but only to comply with
due process. The Court of Appeals concluded that any irregularity in the
service of summons involves due process which does not destroy the trial
courts
jurisdiction
over
the res which is
the
parties
marital
status. Neither does such irregularity invalidate the judgment rendered in
the case. Thus, the Court of Appeals dismissed the petition for annulment
of judgment, stating that:
At bar, the case involves the personal (marital) status of the plaintiff and
the defendant. This status is the res over which the Philippine court has
acquired jurisdiction. This is also the kind of action which the Supreme
Court had ruled that service of summons may be served extraterritorially
under Section 15 (formerly Section 17) of Rule 14 and where such service
of summons is not for the purpose of vesting the trial court with
jurisdiction over the person of the defendant but only for the purpose of
complying with the requirements of fair play and due process. A fortiori,
the court a quo had properly acquired jurisdiction over the person of
herein petitioner-defendant when summons was served by publication and
a copy of the summons, the complaint with annexes, together with the
Order of June 28, 1991, was served to the defendant through the
Department of Foreign Affairs by registered mail and duly received by said
office to top it all. Such mode was upon instruction and lawful order of the
court and could even be treated as any other manner the court may deem
sufficient.[8]
Hence, the instant petition.
The Issues
The issues raised by Margarita are restated as follows:
I. Whether Margarita was validly served with summons in the case for
declaration of nullity of her marriage with Abelardo;
II. Whether there was extrinsic fraud in the preparation and filing by
Abelardo of the Petition for Dissolution of the Conjugal Partnership of
Gains and its annex, the Agreement of Separation of Properties.
The Courts Ruling
The petition is bereft of merit.
First Issue: Validity of the Service of Summons on Margarita
Margarita insists that the trial court never acquired jurisdiction over her
person in the petition for declaration of nullity of marriage since she was
never validly served with summons. Neither did she appear in court to
submit voluntarily to its jurisdiction.
On the other hand, Abelardo argues that jurisdiction over the person of a
non-resident defendant in an action in rem or quasi in rem is not
necessary. The trial and appellate courts made a clear factual finding that
there was proper summons by publication effected through the
Department of Foreign Affairs as directed by the trial court. Thus, the
address, also with leave of court; or (3) by any other means the judge may
consider sufficient.
Applying the foregoing rule, the trial court required extraterritorial service
of summons to be effected on Margarita in the following manner:
x x x, service of Summons by way of publication in a newspaper of general
circulation once a week for three (3) consecutive weeks, at the same time,
furnishing respondent copy of this Order as well as the corresponding
Summons and copy of the petition at her given address at No. 96 Mulberry
Lane, Atherton, California, U.S.A.,thru the Department of Foreign Affairs,
all at the expense of petitioner.[15] (Emphasis ours)
The trial courts prescribed mode of extraterritorial service does not fall
under the first or second mode specified in Section 15 of Rule 14, but
under the third mode. This refers to any other means that the judge may
consider sufficient.
The Process Servers Return of 15 July 1991 shows that the summons
addressed to Margarita together with the complaint and its annexes were
sent by mail to the Department of Foreign Affairs with acknowledgment of
receipt. The Process Servers certificate of service of summons is prima
facie evidence of the facts as set out in the certificate. [16] Before
proceeding to declare the marriage between Margarita and Abelardo null
and void, the trial court stated in its Decision dated 8 November 1991
that compliance with the jurisdictional requirements hav(e) (sic) been
duly established. We hold that delivery to the Department of Foreign
Affairs was sufficient compliance with the rule. After all, this is exactly
what the trial court required and considered as sufficient to effect service
of summons under the third mode of extraterritorial service pursuant to
Section 15 of Rule 14.
Second Issue: Validity of the Judgment Dissolving the
Conjugal Partnership of Gains
Margarita claims that Abelardo coerced her into signing the Petition for
Dissolution of the Conjugal Partnership of Gains (Petition) and its
annex,
theAgreement
of
Separation
of
Properties (Agreement). Abelardo allegedly threatened to cut off all
financial and material support to their children if Margarita did not sign
the documents.
The trial court did not find anything amiss in the Petition and Agreement
that Abelardo filed, and thus the trial court approved the same. The Court
of Appeals noted that a meticulous perusal of the Petition and Agreement
readily shows that Margarita signed the same on the proper space after
the prayer and on the portion for the verification of the petition. The
Court of Appeals observed further that on 6 August 1990, Margarita
appeared before Consul Amado Cortez in the Philippine Consulate Office in
San Francisco, California, to affirm that she executed the Agreement of
her own free will. There was no showing that Abelardo was at that time
with her at the Philippine Consulate Office. Abelardo secured judicial
approval of the Agreement as specifically required in the Agreement.
The Court is bound by the factual findings of the trial and appellate courts
that the parties freely and voluntarily executed the documents and that
there is no showing of coercion or fraud. As a rule, in an appeal
by certiorari under Rule 45, the Court does not pass upon questions of fact
as the factual findings of the trial and appellate courts are binding on the
Court. The Court is not a trier of facts. The Court will not examine the
evidence introduced by the parties below to determine if the trial and
appellate courts correctly assessed and evaluated the evidence on record.
[17]
them, Adolfo Trocino was already in Ohio, U.S.A., and has been residing
there for 25 years, while Mariano Trocino was in Talibon, Bohol, and has
been residing there since 1986. They also refuted the receipt of the
summons by Caridad A. Trocino, and the representation made by Atty.
Bugarin in their behalf. Respondents also contended that they have a
meritorious defense.[7] Petitioners filed their Comment/Answer to the
petition.[8]
On September 30, 1996, the Court of Appeals issued the assailed Decision
granting the petition and annulling the decision of the RTC-Cebu (Branch
10). The decretal portion of the decision reads:
WHEREFORE, the decision of the Regional Trial Court of Cebu City, Branch
10, in Civil Case No. CEB-11103 as well as all Orders issued to implement
the same are hereby ANNULLED AND SET ASIDE. The Register of Deeds of
Cebu City is hereby ENJOINED from cancelling Transfer Certificates of Title
Nos. 10616 and 31856. No pronouncement as to costs.
SO ORDERED.[9]
Their motion for reconsideration having been denied by the Court of
Appeals, petitioners filed the present petition, setting forth the following
assignment of errors:
I. THE COURT OF APPEALS ERRED IN FINDING LACK OF PRIOR
KNOWLEDGE ON THE PART OF RESPONDENTS TROCINO, REGARDING THE
PROCEEDINGS BEFORE THE RTC OF CEBU CITY AND IN NOT DISMISSING
THE PETITION FOR VIOLATION OF SUPREME COURT CIRCULAR 04-94.
II. THE COURT OF APPEALS ERRED IN DECLARING THE NEED FOR
PERSONAL AND/OR EXTRATERRITORIAL SERVICE OF SUMMONS, DESPITE
THE NATURE OF THE CAUSE OF ACTION BEING ONE IN REM.
III. THE COURT OF APPEALS ERRED IN ANNULLING THE JUDGMENT,
CAUSING FURTHER USELESS LITIGATION AND UNNECESSARY EXPENSE ON
PETITIONERS AND RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE
NOT SHOWN ANY VALID DEFENSE AS GROUND FOR REVERSAL OF
JUDGMENT OF THE RTC.
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS JUDGMENT IS
APPLICABLE IN FAVOR OF CARIDAD TROCINO.[10]
Summons is a writ by which the defendant is notified of the action brought
against him. Service of such writ is the means by which the court acquires
jurisdiction over his person.[11] Any judgment without such service in the
absence of a valid waiver is null and void.[12]
summons must be served upon the defendant in order to satisfy the due
process requirements.[19]Thus, where the defendant is a non-resident who
is not found in the Philippines, and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of
which is property in the Philippines in which the defendant has or claims a
lien or interest; (3) the action seeks the exclusion of the defendant from
any interest in the property located in the Philippines; or (4) the property
of the defendant has been attached in the Philippines, summons may be
served extraterritorially by (a) personal service out of the country, with
leave of court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.[20]
In the present case, petitioners cause of action in Civil Case No. CEB11103 is anchored on the claim that the spouses Jesus and Caridad Trocino
reneged on their obligation to convey ownership of the two parcels of land
subject of their sale. Thus, petitioners pray in their complaint that the
spouses Trocino be ordered to execute the appropriate deed of sale and
that the titles be delivered to them (petitioners); or in the alternative,
that the sale be revoked and rescinded; and spouses Trocino ordered to
return to petitioners their down payment in the amount of P500,000.00
plus interests. The action instituted by petitioners affect the parties
alone, not the whole world. Hence, it is an action in personam, i.e., any
judgment therein is binding only upon the parties properly impleaded. [21]
Contrary to petitioners belief, the complaint they filed for specific
performance and/or rescission is not an action in rem. While it is a real
action because it affects title to or possession of the two parcels of land
covered by TCT Nos. 10616 and 31856, it does not automatically follow
that the action is already one in rem. In Hernandez vs. Rural Bank of
Lucena, Inc., the Court made the following distinction:
In a personal action, the plaintiff seeks the recovery of personal property,
the enforcement of a contract or the recovery of damages. In a real action,
the plaintiff seeks the recovery of real property, or, as indicated in section
2(a) of Rule 4, a real action is an action affecting title to real property or
for the recovery of possession, or for partition or condemnation of, or
foreclosure of a mortgage on, real property.
An action in personam is an action against a person on the basis of his
personal liability, while an action in rem is an action against the thing
itself, instead of against the person. Hence, a real action may at the same
time be an action in personam and not necessarily an action in rem. [22]
The objective sought in petitioners complaint was to establish a claim
against respondents for their alleged refusal to convey to them the title to
the two parcels of land that they inherited from their father, Jesus Trocino,
who was one of the sellers of the properties to petitioners. Hence, to
repeat, Civil Case No. CEB-11103 is an action in personam because it is an
action against persons, namely, herein respondents, on the basis of their
personal liability. As such, personal service of summons upon the
defendants is essential in order for the court to acquire of jurisdiction over
their persons.[23]
A distinction, however, must be made with regard to service of summons
on respondents Adolfo Trocino and Mariano Trocino. Adolfo Trocino, as
records show, is already a resident of Ohio, U.S.A. for 25 years. Being a
non-resident, the court cannot acquire jurisdiction over his person and
validly try and decide the case against him.
On the other hand, Mariano Trocino has been in Talibon, Bohol since
1986. To validly acquire jurisdiction over his person, summons must be
served on him personally, or through substituted service, upon showing of
impossibility of personal service. Such impossibility, and why efforts
exerted towards personal service failed, should be explained in the proof
of service. The pertinent facts and circumstances attendant to the service
of summons must be stated in the proof of service or Officers
Return. Failure to do so would invalidate all subsequent proceedings on
jurisdictional grounds.[24]
In the present case, the process server served the summons and copies of
the complaint on respondents Jacob, Jesus, Jr., Adolfo, Mariano,
Consolacion, Alice and Racheal,[25] through their mother, Caridad Trocino.
[26]
The return did not contain any particulars as to the impossibility of
personal service on Mariano Trocino within a reasonable time. Such
improper service renders the same ineffective.
Due process of law requires personal service to support a personal
judgment, and, when the proceeding is strictly in personam brought to
determine the personal rights and obligations of the parties, personal
service within the state or a voluntary appearance in the case is essential
to the acquisition of jurisdiction so as to constitute compliance with the
constitutional requirement of due process. [27]
Moreover, inasmuch as the sheriffs return failed to state the facts and
circumstances showing the impossibility of personal service of summons
upon respondents within a reasonable time, petitioners should have
sought the issuance of an alias summons. Under Section 5, Rule 14 of the
Rules of Court, alias summons may be issued when the original summons
is returned without being served on any or all of the defendants.
[28]
Petitioners, however, did not do so, and they should now bear the
consequences of their lack of diligence.
The fact that Atty. Expedito Bugarin represented all the respondents
without any exception does not transform the ineffective service of
summons into a valid one. It does not constitute a valid waiver or even a
voluntary submission to the trial courts jurisdiction. There was not even
the slightest proof showing that respondents authorized Atty. Bugarins
appearance for and in their behalf. As found by the Court of Appeals:
While Caridad Trocino may have engaged the services of Atty. Bugarin, it
did not necessarily mean that Atty. Bugarin also had the authority to
represent the defendant heirs. The records show that in all the pleadings
which required verification, only Caridad Trocino signed the same. There
was never a single instance where defendant heirs signed the
pleading. The fact that a pleading is signed by one defendant does not
necessarily mean that it is binding on a co-defendant. Furthermore,
Caridad Trocino represented herself as the principal defendant in her
Motion to Withdraw Appeal. (Rollo, p. 80)
Since the defendant heirs are co-defendants, the trial court should have
verified the extent of Atty. Bugarins authority when petitioners failed to
appear as early as the pre-trial stage, where the parties are required to
appear. The absence of the defendant heirs should have prompted the
trial court to inquire from the lawyer whether he was also representing
the other petitioners. As co-defendant and co-heirs over the disputed
properties, the defendant heirs had every right to be present during the
trial. Only Caridad Trocino appeared and testified on her own behalf. All
the defenses raised were her own, not the defendant heirs. [29]
Consequently, the judgment sought to be executed against respondents
were rendered without jurisdiction as there was neither a proper service
of summons nor was there any waiver or voluntary submission to the trial
courts jurisdiction. Hence, the same is void, with regard to private
respondents except Caridad Trocino.
It must be pointed out that while it was the spouses Jesus and Caridad
Trocino who sold the properties to petitioners, their right to proceed
against Jesus Trocino when he died was passed on to his heirs, which
includes respondents and Caridad Trocino. Such transmission of right
occurred by operation of law, more particularly by succession, which is a
mode of acquisition by virtue of which the property, rights and obligations
to the extent of the value of the inheritance of a person are transmitted.
[30]
When the process server personally served the summons on Caridad
Trocino, the trial court validly acquired jurisdiction over her person
alone. Hence, the trial courts decision is valid and binding with regard to
her, but only in proportion to Caridad Trocinos share. As aptly stated by
the Court of Appeals:
This Courts decision is therefore applicable to all the defendant heirs with
the exception of defendant Caridad Trocino considering that it was the
latter who entered into the alleged sale without the consent of her
husband. She is therefore estopped from questioning her own authority
to enter into the questioned sale. Moreover, Caridad Trocino was validly
served with summons and was accorded due process.[31]
WHEREFORE, the petition for review is DENIED. The decision of the Court
of Appeals in CA-G.R. SP No. 40067 is AFFIRMED.
Costs against petitioners.
SO ORDERED.
-versus-
AZCUNA, and
GARCIA, JJ.
GRAND
INTERNATIONAL Promulgated:
AIRWAYS, INC.,
Respond
ent.
x-----------------------------------------------------------------------------------------x
DECISION
SANDOVAL-GUTIERREZ, J.:
Challenged in the instant Petition for Review on Certiorari are the Decision
of the Court of Appeals dated July 30, 1999 and its Resolution
dated September 29, 1999 in CA-G.R. SP No. 51134 setting aside the
Orders dated October 30, 1998 and December 16, 1998 of the Regional
Trial Court (RTC), Branch 117, Pasay City in Civil Case No. 98-1389.
St. Aviation Services Co., Pte., Ltd., petitioner, is a foreign corporation
based in Singapore. It is engaged in the manufacture, repair, and
maintenance of airplanes and aircrafts. Grand International Airways, Inc.,
respondent, is a domestic corporation engaged in airline operations.
Sometime in January 1996, petitioner and respondent executed an
Agreement for the Maintenance and Modification of Airbus A 300 B4-103
Aircraft Registration No. RP-C8882 (First Agreement). Under this
stipulation, petitioner agreed to undertake maintenance and modification
works on respondents aircraft. The parties agreed on the mode and
manner of payment by respondent of the contract price, including interest
in case of default. They also agreed that the construction, validity and
performance thereof shall be governed by the laws of Singapore. They
further agreed to submit any suit arising from their agreement to the nonexclusive jurisdiction of the Singapore courts.
At about the same time, or on January 12, 1996, the parties verbally
agreed that petitioner will repair and undertake maintenance works on
respondents other aircraft, Aircraft No. RP-C8881; and that the works
On July 30, 1999, the Court of Appeals issued its Decision granting
petition
and
setting
aside
the
Orders
dated October
1998 and
December 16, 1998 of the RTC without prejudice to
right of private respondent to initiate another proceeding before
proper court to enforce its claim. It found:
the
30,
the
the
In the case at bar, the complaint does not involve the personal status of
plaintiff, nor any property in which the defendant has a claim or interest,
or which the private respondent has attached but purely an action for
collection of debt. It is a personal action as well as an
action in personam, not an action in rem or quasi in rem. As a personal
action, the service of summons should be personal or substituted, not
extraterritorial, in order to confer jurisdiction on the court.
(a)
In case of a judgment or final order upon a specific
thing, the judgment or final order is conclusive upon the title to the thing;
and
(b)
In case of a judgment or final order against a person,
the judgment or final order is presumptive evidence of a right as between
the parties and their successors in interest by a subsequent title;
In either case, the judgment or final order may be repelled by evidence of
a want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
The RTC, Branch 117, Pasay City is hereby DIRECTED to hear Civil Case No.
98-1389 with dispatch.
Petitioner,
Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
CARPIO MORALES,
- versus -
TINGA, and
VELASCO, JR., JJ.
Promulgated:
Respondents.
x-------------------------------------------------- x
DECISION
CARPIO, J.:
The Case
The Facts
Annex D[11] shows that Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to McDonald of PIL. Todaro confirmed the
following to McDonald:
1.
That I am accepting the proposal of PIONEER INTL. as a
consultant for three (3) months, starting October 1, 1996, with a retainer
fee of U.S. $15,000.00 per month;
2.
That after three (3) months consultancy, I should be
employed by PIONEER INTL., on a permanent basis, as its Managing
Director or CEO in thePhilippines. Remuneration package will be mutually
agreed upon by PIONEER and the undersigned;
3.
That Gino Martinel and the Sales Manager Jun Ong, will be
hired as well, on a permanent basis, by PIONEER as soon as the company
is established. Salary, likewise, will be accepted by both PIONEER and the
respective parties.
n
Monthly fee USD 15,000 per month billed on monthly basis
and payable 15 days from billing date.
n
n
Driver and secretarial support-basis for reimbursement of
this to be agreed.
n
Arrangement to commence from 1st November 96, reflecting
your contributions so far and to continue until Pioneer makes a decision.
dated 19
November
1996. Todaro confirmed
McDonalds
package
concerning the consultancy and reiterated his desire to be the manager of
Pioneers Philippine business venture.
It has not proven possible for this company to meet with your
expectations regarding the conditions of your providing Pioneer with
consultancy services. This, and your refusal to consider my terms of offer
of permanent employment, leave me no alternative but to withdraw these
offers of employment with this company.
As you provided services under your previous agreement with our Pioneer
Hong Kong office during the month of August, I will see that they pay you
at the previous rates until the end of August. They have authorized me on
behalf of Pioneer International Ltd. to formally advise you that the
agreement will cease from August 31st as per our previous discussions.
Annex
I[16] shows
the
letter
dated
20
October
1997
of
K.M. Folwell (Folwell), PILs Executive General Manager of Australia and
Asia, to Todaro. Folwell confirmed the contents of Klepzigs 18 September
1997 letter. Folwells message reads:
Thank you for your letter to Dr. Schubert dated 29th September
1997 regarding the alleged breach of contract with you. Dr. Schubert has
asked me to investigate this matter.
I have discussed and examined the material regarding your association
with Pioneer over the period from mid 1996 through to September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well
documented and have been appropriately rewarded. However, in regard
to your request and expectation to be given permanent employment with
PIL
filed,
by
special
appearance,
a
motion
to
dismiss Todaros complaint. PILs co-defendants, PCPI, PPHI, and Klepzig,
filed a separate motion to dismiss. [17] PIL asserted that the trial court has
no jurisdiction over PIL because PIL is a foreign corporation not doing
business in thePhilippines. PIL also questioned the service of summons on
it. Assuming arguendo that Klepzig is PILs agent in the Philippines, it was
notKlepzig but De Leon who received the summons for PIL. PIL further
stated that the National Labor Relations Commission (NLRC), and not the
trial court, has jurisdiction over the subject matter of the action. It
claimed that assuming that the trial court has jurisdiction over the subject
matter of the action, the complaint should be dismissed on the ground
of forum non-conveniens. Finally, PIL maintained that the complaint does
not state a cause of action because there was no perfected contract, and
no personal judgment could be rendered by the trial court against PIL
because PIL is a foreign corporation not doing business in
the Philippines and there was improper service of summons on PIL.
On 4 January 1999, the trial court issued an order [18] which ruled in
favor of Todaro. The trial court denied the motions to dismiss filed by PIL,
PCPI, PPHI, and Klepzig.
The trial court also asserted its jurisdiction over PIL, holding that
PIL did business in the Philippines when it entered into a contract
withTodaro. Although PIL questions the service of summons on Klepzig,
whom PIL claims is not its agent, the trial court ruled that PIL failed to
adduce evidence to prove its contention. Finally, on the issue of forum
non-conveniens, the trial court found that it is more convenient to hear
and decide the case in the Philippines because Todaro resides in
the Philippines and the contract allegedly breached involves employment
in thePhilippines.
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The appellate court denied PILs petition and affirmed the trial
courts ruling in toto. The dispositive portion of the appellate courts
decision reads:
The Issues
A.
[The trial court] did not and cannot acquire jurisdiction over the
person of [PIL] considering that:
A.1.
[PIL] is
the Philippines.
foreign
corporation
not
doing
business
in
A.2.
Moreover, the complaint does not contain appropriate allegations
of ultimate facts showing that [PIL] is doing or transacting business in
thePhilippines.
A.3.
Assuming arguendo that jurisdiction may be acquired over
the
person of [PIL], [the trial court] still failed to acquire
jurisdiction since
summons was improperly served on [PIL].
B.
[Todaro] does not have a cause of action and the complaint fails to
state a cause of action. Jurisprudence is settled in that in resolving a
motion to dismiss, a court can consider all the pleadings filed in the case,
including annexes, motions and all evidence on record.
C.
[The trial court] did not and cannot acquire jurisdiction over the
subject matter of the complaint since the allegations contained therein
indubitably show that [Todaro] bases his claims on an alleged breach of an
employment contract. Thus, exclusive jurisdiction is vested with the
[NLRC].
Cause of Action
33.
Alternatively, assuming without conceding, that there was
no contractual obligation on the part of the Pioneer Group to employ
[Todaro] on a permanent basis, in their Philippine operations, the Pioneer
Group and the other defendants did not act with justice, give [Todaro] his
due and observe honesty and good faith and/or they have willfully caused
injury to [Todaro] in a manner that is contrary to morals, good customs,
and public policy, as mandated under Arts. 19 and 21 of the New Civil
Code.
sufficiently establish a cause of action for breach of contract and/or
violation of Articles 19 and 21 of the New Civil Code. Whether or not these
allegations are true is immaterial for the court cannot inquire into the
truth thereof, the test being whether, given the allegations of fact in the
complaint, a valid judgment could be rendered in accordance with the
prayer in the complaint.[24]
Forum Non-Conveniens
As to the first sub-issue, PIL insists that its sole act of transacting
or doing business in the Philippines consisted of its investment in
PPHI. Under Philippine law, PILs mere investment in PPHI does not
constitute doing business. However, we affirm the lower courts ruling
and declare that, based on the allegations in Todaros complaint, PIL was
doing business in the Philippines when it negotiated Todarosemployment
with PPHI. Section 3(d) of Republic Act No. 7042, Foreign Investments Act
of 1991, states:
Thus,
we
rule
that
PIL
transacted
business
in
the Philippines and Klepzig was its agent within the Philippines. However,
there was improper service of summons on PIL since summons was not
served personally on Klepzig.
NLRC Jurisdiction
SO ORDERED.
VICTORIA REGNER,
Petitioner,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus -
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
and
REYES, JJ.
Promulgated:
NACHURA,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
Civil Case
antecedents:
No.
CEB.
23927
arose
from
the
following
factual
Luis Regner (Luis) had three daughters with his first wife, Anicita C.
Regner, namely, Cynthia Logarta (Cynthia) and Teresa Tormis (Teresa), the
respondents herein, and Melinda Regner-Borja (Melinda).
Upon her arrival in the Philippines, on 1 June 2000, Teresa was personally
served the summons at Room 304, Regency Crest Condominium,
Banilad, Cebu City. She filed her Answer[4] with counterclaim with the RTC
on 6 June 2000.
Petitioner opposed[5] the motion and filed her own motion to set the case
for pre-trial, to which Teresa filed her rejoinder on the ground that their
sister, Cynthia, an indispensable party, had not yet been served a
summons. Thus, Teresa prayed for the dismissal of petitioners complaint,
as the case would not proceed without Cynthias presence.
From the foregoing, this Court identifies the issues to be resolved in this
petition as: (1) Whether a co-donee is an indispensable party in an action
to declare the nullity of the deed of donation, and (2) whether delay in the
service of summons upon one of the defendants constitutes failure to
prosecute that would warrant dismissal of the complaint.
void for want of authority to act, not only as to the absent parties but
even as to those present.[14]
Cynthia and Teresa, as Luis was already very ill and no longer of sound
and disposing mind at the time of donation on 15 May 1997. Accordingly,
the prayer in petitioners complaint was for the trial court to declare null
and void the Deed of Donation and to restrain the Cebu Country Club, Inc.
from transferring title and ownership of Proprietary Ownership Certificate
No. 0272 to Cynthia and Teresa.
Thus, based on the Deed of Donation, Teresa and Cynthia are co-owners of
Proprietary Membership Certificate No. 0272 of Cebu Country Club,
Inc. The country club membership certificate is undivided and it is
impossible to pinpoint which specific portion of the property belongs to
either Teresa or Cynthia. Indeed, both Teresa and Cynthia are
indispensable parties in Civil Case No. CEB 23927.
Applying the foregoing definitions and principles to the present case, this
Court finds that any decision in Civil Case No. CEB 23927 cannot bind
Cynthia, and the Court cannot nullify the donation of the property she now
co-owns with Teresa, even if limited only to the portion belonging to
Teresa, to whom summons was properly served, since ownership of the
property is still pro indiviso. Obviously, Cynthia is an indispensable party
in Civil Case No. CEB 23927 without whom the lower court is barred from
making a final adjudication as to the validity of the entire
donation. Without the presence of indispensable parties to a suit or
proceeding, a judgment therein cannot attain finality.[19]
Being an indispensable party in Civil Case No. CEB 23927, the trial
court must also acquire jurisdiction over Cynthias person through the
proper service of summons.
Section 15. Extraterritorial service. - When the defendant does not reside
and is not found in the Philippines, and the action affects the personal
status of the plaintiff or relates to, or the subject of which is, property
within the Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded consists,
wholly or in part, in excluding the defendant from any interest therein, or
the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by
personal service as under Section 6; or by publication in a newspaper of
general circulation in such places and for such time as the court may
order, in which case a copy of the summons and order of the court shall be
sent by registered mail to the last known address of the defendant, or in
any other manner the court may deem sufficient. Any order granting such
leave shall specify a reasonable time, which shall not be less than sixty
(60) days after notice, within which the defendant must answer.
As stated above, there are only four instances wherein a defendant who
is a non-resident and is not found in the country may be served a
summons by extraterritorial service, to wit: (1) when the action affects
the personal status of the plaintiff; (2) when the action relates to, or the
subject of which is property within the Philippines, on which the defendant
claims a lien or an interest, actual or contingent; (3) when the relief
demanded in such action consists, wholly or in part, in excluding the
defendant from any interest in property located in the Philippines; and (4)
when the defendant non-residents property has been attached within the
Philippines. In these instances, service of summons may be effected by
(a) personal service out of the country, with leave of court; (b) publication,
also with leave of court; or (c) any other manner the court may deem
sufficient.[25]
In petitioners Complaint in Civil Case No. CEB No. 23427, she alleged that
Cynthia is residing at 462 West Vine No. 201, Glendale, California, 912041,
U.S.A.; while Teresa is residing at 2408 South Hacienda Boulevard,
Hacienda Heights, California, but they usually visit here in the Philippines
and can be served summonses and other processes at the Borja Family
Clinic, Bohol. Pertinent portions of the Complaint read:
2.
Defendant Cynthia R. Logarta is a Filipino, of legal age, married to
Ramon Logarta, resident (sic) 463 West Vine No.201, Glendale, California,
912041, USA. She however usually visits in the Philippines and can be
served with summons and other processes of this Honorable Court at
Borja Family Clinic, Tagbilaran, Bohol;
3.
Defendant Teresa R. Tormis is likewise a Filipino, of legal age,
married to Antonio Tormis, and a resident of 2408 South Hacienda
Heights, California, 19745, U.S.A. She however usually visits in
the Philippines and can be served with summons and other processes of
this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol.[27]
Since in the case at bar, the service of summons upon Cynthia was not
done by any of the authorized modes, the trial court was correct in
dismissing petitioners complaint.
As can be gleaned from the rule, there are three instances when the
complaint may be dismissed due to the plaintiff's fault: (1) if he fails to
appear during a scheduled trial, especially on the date for the
presentation of his evidence in chief; (2) if he fails to prosecute his action
for an unreasonable length of time; and (3) if he fails to comply with the
rules or any order of the court.[28]
While a court can dismiss a case on the ground of failure to prosecute, the
true test for the exercise of such power is whether, under the prevailing
circumstances, the plaintiff is culpable for want of due diligence in failing
to proceed with reasonable promptitude. [30] As to what constitutes an
unreasonable length of time, within the purview of the above-quoted
provision, the Court has ruled that it depends upon the circumstances of
each particular case, and that the sound discretion of the court in the
determination of said question will not be disturbed, in the absence of
patent abuse; and that the burden of showing abuse of judicial
discretion is upon the appellant since every presumption is in favor of the
correctness of the court's action. [31] Likewise, the concept of promptness
is a relative term and must not unnecessarily be an inflexible one. It
connotes an action without hesitation and loss of time. As to what
constitutes the term is addressed to the consideration of the trial court,
bearing in mind that while actions must be disposed of with dispatch, the
essential ingredient is the administration of justice and not mere speed. [32]
Gas Service, Inc. v. De la Gerna, L-17631, October 19, 1966, 18 SCRA 390),
such discretion must be exercised soundly with a view to the
circumstances surrounding each particular case (Vernus-Sanciangco v.
Sanciangco, L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that
serve as mitigating circumstances for the delay, the same should be
considered and dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d
672; Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]), especially
where the suit appears to be meritorious and the plaintiff was not culpably
negligent and no injury results to defendant (27 C.J.S. 235-36; 15 ALR 3rd
680). (Abinales vs. Court of First Instance of Zamboanga City, Br. I, 70
SCRA 590, 595).
This Court recalls that the complaint herein was filed on 15 June
1999. The summonses for Cynthia and Teresa were served on their sister
Melinda at the Borja Family Clinic in Tagbilaran City, but the latter refused
to receive the same. It was only on 1 June 2000 that summons was served
on Teresa at Room 304, Regency Crest Condominium, Banilad, Cebu City,
when she was in the Philippines for a visit. However, the summons for
Cynthia was never served upon her.
Although Section 1, Rule 14 of the Rules, imposes upon the clerk of court
the duty to serve summons, this does not relieve the petitioner of her own
duty as the plaintiff in a civil case to prosecute the case diligently. If the
clerk had been negligent, it was petitioners duty to call the courts
attention to that fact. It must be noted that it was not even petitioner
who called the courts attention that summons had not been served on
Cynthia, but Teresa. This despite the fact that petitioner was aware, as
early as 15 June 1999, when she filed her complaint, that the summonses
could not be served on Teresa and Cynthia, as she admitted therein that
Teresa and Cynthia were residing abroad. Petitioner as plaintiff should
have asked that Cynthia and Teresa be summoned by publication at the
earliest possible time. She cannot idly sit by and wait till this is
done. She cannot afterwards wash her hands and say that the delay was
not her fault. She cannot simply "fold [her] hands" and say that it is the
duty of the clerk of court to have the summonses served on Cynthia and
Teresa for the prompt disposition of her case. If there were no means of
summoning any of the defendants, petitioner should have so informed the
court within a reasonable period of time, so that the case could be
disposed of one way or another and the administration of justice would
not suffer delay. The non-performance of that duty by petitioner as
plaintiff is an express ground for dismissing an action. For, indeed, this
duty imposed upon her was precisely to spur on the slothful.
For failure to diligently pursue the complaint, petitioner trifled with the
right of the respondents to speedy trial. It also sorely tried the patience
of the court and wasted its precious time and attention. To allow
petitioner to wait until such time that summonses were served on
respondents would frustrate the protection against unreasonable delay in
the prosecution of cases and violate the constitutional mandate of speedy
dispensation of justice which would in time erode the peoples confidence
in the judiciary. We take a dim view of petitioners complacent
attitude. Ex nihilo nihil fit.[35]
SO ORDERED.
FOREIGN CORPORTATIONS
MR HOLDINGS, LTD., petitioner, vs. SHERIFF CARLOS P. BAJAR, SHERIFF
FERDINAND M. JANDUSAY, SOLIDBANK CORPORATION, AND MARCOPPER
MINING CORPORATION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
In the present Petition for Review on Certiorari, petitioner MR Holdings,
Ltd. assails the a) Decision[1] dated January 8, 1999 of the Court of
Appeals in CA-G.R. SP No. 49226 finding no grave abuse of discretion on
the part of Judge Leonardo P. Ansaldo of the Regional Trial Court (RTC),
Branch 94, Boac, Marinduque, in denying petitioners application for a writ
of preliminary injunction;[2] and b) Resolution[3] dated March 29, 1999
denying petitioners motion for reconsideration.
The facts of the case are as follows:
Under a Principal Loan Agreement [4] and Complementary Loan
Agreement,[5] both dated November 4, 1992, Asian Development Bank
(ADB), a multilateral development finance institution, agreed to extend to
Marcopper Mining Corporation (Marcopper) a loan in the aggregate
amount of US$40,000,000.00 to finance the latters mining project at Sta.
Cruz, Marinduque. The principal loan of US$ 15,000,000.00 was sourced
from ADBs ordinary capital resources, while the complementary loan of
US$ 25,000,000.00 was funded by the Bank of Nova Scotia, a participating
finance institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign
corporation which owns 40% of Marcopper, executed a Support and
Standby Credit Agreement whereby the latter agreed to provide
Marcopper with cash flow support for the payment of its obligations to
ADB.
To secure the loan, Marcopper executed in favor of ADB a Deed of Real
Estate and Chattel Mortgage[6] dated November 11, 1992, covering
substantially all of its (Marcoppers) properties and assets in Marinduque.
It was registered with the Register of Deeds on November 12, 1992.
When Marcopper defaulted in the payment of its loan obligation, Placer
Dome, in fulfillment of its undertaking under the Support and Standby
Credit Agreement, and presumably to preserve its international credit
standing, agreed to have its subsidiary corporation, petitioner MR
Holding, Ltd., assumed Marcoppers obligation to ADB in the amount of
US$ 18,453,450.02. Consequently, in an Assignment Agreement[7] dated
March 20, 1997, ADB assigned to petitioner all its rights, interests and
obligations under the principal and complementary loan agreements,
(Deed of Real Estate and Chattel Mortgage, and Support and Standby
Credit Agreement). On December 8, 1997, Marcopper likewise executed
a Deed of Assignment[8] in favor of petitioner. Under its provisions,
Marcopper assigns, transfers, cedes and conveys to petitioner, its assigns
and/or successors-in-interest all of its (Marcoppers) properties, mining
equipment and facilities, to wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation
(Solidbank) obtained a Partial Judgment [9] against Marcopper from the RTC,
Branch 26, Manila, in Civil Case No. 96-80083 entitled Solidbank
Corporation vs. Marcopper Mining Corporation, John E. Loney, Jose E.
Reyes and Teodulo C. Gabor, Jr., the decretal portion of which reads:
WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby
rendered ordering defendant Marcopper Mining Corporation, as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine Hundred
Seventy Thousand Pesos Seven Hundred Fifty Six and 89/100 only (PHP
52,970,756.89), plus interest and charges until fully paid;
xxx
We agree with the finding of the respondent court that petitioner is not
suing on an isolated transaction as it claims to be, as it is very obvious
from the deed of assignment and its relationships with Marcopper and
Placer Dome, Inc. that its unmistakable intention is to continue the
operations of Marcopper and shield its properties/assets from the reach of
legitimate creditors, even those holding valid and executory court
judgments against it. There is no other way for petitioner to recover its
huge financial investments which it poured into Marcoppers rehabilitation
and the local situs where the Deeds of Assignment were executed, without
petitioner continuing to do business in the country.
xxx
xxx
C.
THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR
IN MAKING A FACTUAL FINDING ON THE EXISTENCE OF AN ATTACHMENT ON
THE PROPERTIES SUBJECT OF INSTANT CASE, THE SAME BEING CONTRARY
TO THE FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE
SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF
PETITIONERS CASE.
D.
THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR
IN HOLDING THAT THE SAID ASSIGNMENT AGREEMENT AND THE DEED OF
ASSIGNMENT ARE NOT BINDING ON RESPONDENT SOLIDBANK WHO IS NOT
A PARTY THERETO, THE SAME BEING CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE LIENS AND ON
PREFERENCE OF CREDITS.
E.
THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR
IN FINDING THAT THE AFOREMENTIONED ASSIGNMENT AGREEMENT AND
DEED OF ASSIGNMENT ARE SHAM, SIMULATED, OF DUBIOUS CHARACTER,
AND WERE MADE IN BAD FAITH AND IN FRAUD OF CREDITORS,
PARTICULARLY RESPONDENT SOLIDBANK, THE SAME BEING IN COMPLETE
DISREGARD OF, VIZ: (1) THE LAW AND ESTABLISHED JURISPRUDENCE ON
PRIOR, REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF CREDITS,
BY REASON OF WHICH THERE EXISTS NO CAUSAL CONNECTION BETWEEN
THE SAID CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO. 9680083; (2) THAT THE ASIAN DEVELOPMENT BANK WILL NOT OR COULD NOT
HAVE AGREED TO A SHAM; SIMULATED, DUBIOUS AND FRAUDULENT
TRANSACTION; AND (3) THAT RESPONDENT SOLIDBANKS BIGGEST
STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A MAJOR BENEFICIARY
OF THE ASSIGNMENT AGREEMENT IN QUESTION.
F.
THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR
IN HOLDING THAT PETITIONER IS WITHOUT LEGAL CAPACITY TO SUE AND
SEEK REDRESS FROM PHILIPPINE COURTS, IT BEING THE CASE THAT
SECTION 133 OF THE CORPORATION CODE IS WITHOUT APPLICATION TO
PETITIONER, AND IT BEING THE CASE THAT THE SAID COURT MERELY
RELIED ON SURMISES AND CONJECTURES IN OPINING THAT PETITIONER
INTENDS TO DO BUSINESS IN THE PHILIPPINES.
G.
THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR
IN HOLDING THAT RESPONDENT MARCOPPER, PLACER DOME, INC., AND
PETITIONER ARE ONE AND THE SAME ENTITY, THE SAME BEING WITHOUT
FACTUAL OR LEGAL BASIS.
H.
THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR
IN HOLDING PETITIONER GUILTY OF FORUM SHOPPING, IT BEING CLEAR
THAT NEITHER LITIS PENDENTIA NOR RES JUDICATA MAY BAR THE INSTANT
violated the rule on forum shopping since the object of Civil Case No. 9813 (at RTC, Boac, Marinduque) is similar to the other cases filed by
Marcopper in order to forestall the sale of the levied properties.
Marcopper, in a separate comment, states that it is merely a nominal party
to the present case and that its principal concerns are being ventilated in
another case.
The petition is impressed with merit.
Crucial to the outcome of this case is our resolution of the following
issues: 1) Does petitioner have the legal capacity to sue? 2) Was the
Deed of Assignment between Marcopper and petitioner executed in fraud
of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome, and
Marcopper one and the same entity? and 4) Is petitioner guilty of forum
shopping?
We shall resolve the issues in seriatim.
I
The Court of Appeals ruled that petitioner has no legal capacity to sue in
the Philippine courts because it is a foreign corporation doing business
here without license. A review of this ruling does not pose much
complexity
as
the
principles
governing
a
foreign
corporations right to sue in local courts have long been settled by our
Corporation Law.[17] These principles may be condensed in three
statements, to wit: a) if a foreign corporation does business in the
Philippines without a license, it cannot sue before the Philippine courts;
[18]
b) if a foreign corporation is not doing business in the Philippines,
it needs no license to sue before Philippine courts on an isolated
transaction[19]or on a cause of action entirely independent of any business
transaction;[20] and c) if a foreign corporation does business in the
Philippines with the required license, it can suebefore Philippine courts on
any transaction. Apparently, it is not the absence of the prescribed
license but the doing (of) business in the Philippines without such
license which debars the foreign corporation from access to our courts. [21]
The task at hand requires us to weigh the facts vis--vis the established
principles. The question whether or not a foreign corporation is doing
business is dependent principally upon the facts and circumstances of
each particular case, considered in the light of the purposes and language
of the pertinent statute or statutes involved and of the general principles
governing the jurisdictional authority of the state over such corporations.
[22]
SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase doing
business shall include soliciting orders, purchases, service contracts,
opening offices, whether called liaison offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or who
in any calendar year stay in the Philippines for a period or periods totaling
one hundred eighty 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 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.
There are other statutes[27] defining the term doing business in the same
tenor as those above-quoted, and as may be observed, one
common denominator among them all is the concept of continuity.
In the case at bar, the Court of Appeals categorized as doing
business petitioners participation under the Assignment Agreement
and the Deed of Assignment. This is simply untenable. The expression
doing business should not be given such a strict and literal construction
as to make it apply to any corporate dealing whatever.[28] At this early
stage and with petitioners acts or transactions limited to the assignment
contracts, it cannot be said that it had performed acts intended to
continue the business for which it was organized. It may not be amiss to
point out that the purpose or business for which petitioner was
organized is not discernible in the records. No effort was exerted by the
Court of Appeals to establish the nexus between petitioners business and
the acts supposed to constitute doing business. Thus, whether the
assignment contracts were incidental to petitioners business or were
continuation thereof is beyond determination. We cannot apply the case
cited by the Court of Appeals, Far East Intl Import and Export Corp. vs.
Nankai Kogyo Co., Ltd.,[29] which held that a single act may still constitute
doing business if it is not merely incidental or casual, but is of such
character as distinctly to indicate a purpose on the part of the foreign
corporation to do other business in the state. In said case, there was an
express admission from an official of the foreign corporation that he was
sent to the Philippines to look into the operation of mines, thereby
revealing the foreign corporations desire to continue engaging in
business here. But in the case at bar, there is no evidence of similar
desire or intent. Unarguably, petitioner may, as the Court of Appeals
suggested, decide to operate Marcoppers mining business, but, of course,
at this stage, that is a mere speculation. Or it may decide to sell the
credit secured by the mining properties to an offshore investor, in which
case the acts will still be isolated transactions. To see through the
present facts an intention on the part of petitioner to start a series of
business transaction is to rest on assumptions or probabilities falling
short of actual proof. Courts should never base its judgments on a state
of facts so inadequately developed that it cannot be determined where
inference ends and conjecture begins.
Indeed, the Court of Appeals holding that petitioner was determined to be
doing business in the Philippines is based mainly on conjectures and
speculation. In concluding that the unmistakable intention of petitioner
is to continue Marcoppers business, the Court of Appeals hangs on the
wobbly premise that there is no other way for petitioner to recover its
huge financial investments which it poured into Marcoppers rehabilitation
without it (petitioner) continuing Marcoppers business in the
country.[30] This is a mere presumption. Absent overt acts of petitioner
from which we may directly infer its intention to continue Marcoppers
business, we cannot give our concurrence. Significantly, a view
subscribed upon by many authorities is that the mere ownership by a
foreign corporation of a property in a certain state,unaccompanied by its
active use in furtherance of the business for which it was formed, is
insufficient in itself to constitute doing business. [31] In Chittim vs. Belle
Fourche Bentonite Products Co.,[32] it was held that even if a foreign
corporation
purchased
and took conveyances of a mining
claim, did some assessment work thereon, and endeavored to sell it, its
acts will not constitute the doing of business so as to subject the
corporation to the statutory requirements for the transacting of
business. On the same vein, petitioner, a foreign corporation, which
becomes the assignee of mining properties, facilities and equipment
cannot be automatically considered as doing business, nor presumed to
have the intention of engaging in mining business.
One important point. Long before petitioner assumed Marcoppers debt to
ADB and became their assignee under the two assignment contracts,
there already existed a Support and Standby Credit Agreement between
ADB and Placer Dome whereby the latter bound itself to provide cash flow
support for Marcoppers payment of its obligations to ADB. Plainly,
petitioners payment of US$ 18,453, 450.12 to ADB was more of a
fulfillment of an obligation under the Support and Standby Credit
Agreement rather than an investment. That petitioner had to step into
the shoes of ADB as Marcoppers creditor was just a necessary legal
consequence of the transactions that transpired. Also, we must hasten to
add that the Support and Standby Credit Agreement was executed four
(4) years prior to Marcoppers insovency, hence, the alleged intention of
(f) The parent corporation pays the salaries and other expenses or losses
of the subsidiary.
(g)
The subsidiary has substantially no business except with the
parent corporation or no assets except those conveyed to or by the parent
corporation.
(h)
In the papers of the parent corporation or in the statements of
its officers, the subsidiary is described as a department or division of the
parent corporation, or its business or financial responsibility is referred to
as the parent corporations own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently
in the interest of the subsidiary, but take their orders from the parent
corporation.
(k)
The
observed.
formal
legal
requirements
of
the
subsidiary
are
not
judgment presents no issue for determination by the court issuing the writ
of execution.
. . .Thus, when a property levied upon by the sheriff pursuant to a writ of
execution is claimed by third person in a sworn statement of ownership
thereof, as prescribed by the rules, an entirely different matter calling for
a new adjudication arises. And dealing as it does with the all important
question of title, it is reasonable to require the filing of proper pleadings
and the holding of a trial on the matter in view of the requirements of due
process.
. . . In other words, construing Section 17 of Rule 39 of the Revised Rules
of Court (now Section 16 of the 1997 Rules of Civil Procedure), the rights
of third-party claimants over certain properties levied upon by the sheriff
to satisfy the judgment may not be taken up in the case where such
claims are presented but in a separate and independent action instituted
by the claimants. (Emphasis supplied)
This reivindicatory action has for its object the recovery of ownership or
possession of the property seized by the sheriff, despite the third party
claim, as well as damages resulting therefrom, and it may be brought
against the sheriff and such other parties as may be alleged to have
connived with him in the supposedly wrongful execution proceedings,
such as the judgment creditor himself. Such action is an entirely separate
and distinct action from that in which execution has been issued. Thus,
there being no identity of parties and cause of action between Civil Case
No. 98-13 (RTC, Boac) and those cases filed by Marcopper, including Civil
Case No. 96-80083 (RTC, Manila) as to give rise to res judicata or litis
pendentia, Solidbanks allegation of forum-shopping cannot prosper. [43]
All considered, we find petitioner to be entitled to the issuance of a writ of
preliminary injunction. Section 3, Rule 58 of the 1997 Rules of Civil
Procedure provides:
SEC. 3 Grounds for issuance of preliminary injunction. A preliminary
injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance of
the act or acts complained of, or in requiring the performance of an act or
acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the acts or
acts complained of during the litigation would probably work injustice to
the applicant; or
the RTC, Branch 26, Manila, until further orders from this Court. The RTC,
Branch 94, Boac, Marinduque, is directed to dispose of Civil Case No. 9813 with dispatch.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Carpio, JJ., concur.
....
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff
that it was willing to maintain with Plaintiff a relationship but only "on the
basis of a standard BMW importer contract as adjusted to reflect the
particular situation in the Philippines" subject to certain conditions,
otherwise, defendant BMW would terminate Plaintiff's exclusive
dealership and any relationship for cause effective June 30, 1993. . . .
....
15. The actuations of defendant BMW are in breach of the assignment
agreement between itself and plaintiff since the consideration for the
assignment of the BMW trademark is the continuance of the exclusive
dealership agreement. It thus, follows that the exclusive dealership should
continue for so long as defendant BMW enjoys the use and ownership of
the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch
104 of the Quezon City Regional Trial Court, which on June 14, 1993 issued
a temporary restraining order. Summons and copies of the complaint and
amended complaint were thereafter served on the private respondent
through the Department of Trade and Industry, pursuant to Rule 14, 14
of the Rules of Court. The order, summons and copies of the complaint and
amended complaint were later sent by the DTI to BMW via registered mail
on June 15, 1993[5] and received by the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the
application for the writ of preliminary injunction proceeded ex parte, with
petitioner Hahn testifying. On June 30, 1993, the trial court issued an
order granting the writ of preliminary injunction upon the filing of a bond
of P100,000.00. On July 13, 1993, following the posting of the required
bond, a writ of preliminary injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial
court did not acquire jurisdiction over it through the service of summons
on the Department of Trade and Industry, because it (BMW) was a foreign
corporation and it was not doing business in the Philippines. It contended
that the execution of the Deed of Assignment was an isolated transaction;
that Hahn was not its agent because the latter undertook to assemble and
sell BMW cars and products without the participation of BMW and sold
other products; and that Hahn was an indentor or middleman transacting
business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was
doing business in the Philippines through him as its agent, as shown by
the fact that BMW invoices and order forms were used to document his
transactions; that he gave warranties as exclusive BMW dealer; that BMW
officials periodically inspected standards of service rendered by him; and
that he was described in service booklets and international publications of
BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.
The trial court[6] deferred resolution of the Motion to dismiss until after
trial on the merits for the reason that the grounds advanced by BMW in its
motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a
petition for certiorari with the Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE
INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE
WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR
THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION
OF THE MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION,
AND THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order
and, after hearing, for a writ of preliminary injunction, to enjoin the trial
court from proceeding further in Civil Case No. Q-93-15933. Private
respondent pointed out that, unless the trial court's order was set aside, it
would be forced to submit to the jurisdiction of the court by filing its
answer or to accept judgment in default, when the very question was
whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's
complaint. On December 20, 1993, it rendered judgment finding the trial
court guilty of grave abuse of discretion in deferring resolution of the
motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it
came out with its questioned order of July 26, 1993, we rule and so hold
that petitioner's (BMW) motion to dismiss could be resolved then and
there, and that the respondent judge's deferment of his action thereon
until after trial on the merit constitutes, to our mind, grave abuse of
discretion.
....
. . . [T]here is not much appreciable disagreement as regards the factual
matters relating, to the motion to dismiss. What truly divide (sic) the
parties and to which they greatly differ is the legal conclusions they
respectively draw from such facts, (sic) with Hahn maintaining that on the
basis thereof, BMW is doing business in the Philippines while the latter
asserts that it is not.
Then, after stating that any ruling which the trial court might make on the
motion to dismiss would anyway be elevated to it on appeal, the Court of
Appeals itself resolved the motion. It ruled that BMW was not doing
business in the country and, therefore, jurisdiction over it could not be
acquired through service of summons on the DTI pursuant to Rule 14,
Section 14. The court upheld private respondent's contention that Hahn
acted in his own name and for his own account and independently of BMW,
based on Alfred Hahn's allegations that he had invested his own money
and resources in establishing BMW's goodwill in the Philippines and on
BMW's claim that Hahn sold products other than those of BMW. It held
that petitioner was a mere indentor or broker and not an agent through
whom private respondent BMW transacted business in the Philippines.
Consequently, the Court of Appeals dismissed petitioner's complaint
against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred (1)
in finding that the trial court gravely abused its discretion in deferring
action on the motion to dismiss and (2) in finding that private respondent
BMW is not doing business in the Philippines and, for this reason,
dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign
corporation, or a nonresident joint stock company or association, doing
business in the Philippines, service may be made on its resident agent
designated in accordance with law for that purpose, or, if there be no such
agent, on the government official designated by law to that effect, or on
any of its officers or agents within the Philippines. (Emphasis added)
What acts are considered "doing business in the Philippines" are
enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows:[7]
d) the phrase "doing business" shall include soliciting orders, service
contracts,
opening
offices,
whether
called
"liaison"
offices
or
branches, appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country 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 of commercial dealings or arrangements and
8. From the time the trademark "BMW & DEVICE" was first used by the
Plaintiff in the Philippines up to the present, Plaintiff, through its firm
name "HAHN MANILA" and without any monetary contributions from
defendant BMW; established BMW's goodwill and market presence in the
Philippines. Pursuant thereto, Plaintiff invested a lot of money and
resources in order to single-handedly compete against other motorcycle
and car companies.... Moreover, Plaintiff has built buildings and other
infrastructures such as service centers and showrooms to maintain and
promote the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show, however,
there is nothing to support the appellate court's finding that Hahn
solicited orders alone and for his own account and without "interference
from, let alone direction of, BMW." (p. 13) To the contrary, Hahn claimed
he took orders for BMW cars and transmitted them to BMW. Upon receipt
of the orders, BMW fixed the down payment and pricing charges, notified
Hahn of the scheduled production month for the orders, and reconfirmed
the orders by signing and returning to Hahn the acceptance sheets.
Payment was made by the buyer directly to BMW. Title to cars purchased
passed directly to the buyer and Hahn never paid for the purchase price of
BMW cars sold in the Philippines. Hahn was credited with a commission
equal to 14% of the purchase price upon the invoicing of a vehicle order
by BMW. Upon confirmation in writing that the vehicles had been
registered in the Philippines and serviced by him, Hahn received an
additional 3% of the full purchase price. Hahn performed after-sale
services,
including,
warranty
services,
for
which
he
received
reimbursement from BMW. All orders were on invoices and forms of BMW.
[8]
This is not to say, however, that the petitioner's right to question the
jurisdiction of the court over its person is now to be deemed a foreclosed
matter. If it is true, as Signetics claims, that its only involvement in the
Philippines was through a passive investment in Sigfil, which it even later
disposed of, and that TEAM Pacific is not its agent, then it cannot really be
said to be doing business in the Philippines. It is a defense, however, that
requires the contravention of the allegations of the complaint, as well as a
full ventilation, in effect, of the main merits of the case, which should not
thus be within the province of a mere motion to dismiss. So, also, the
issue posed by the petitioner as to whether a foreign corporation which
has done business in the country, but which has ceased to do business at
the time of the filing, of a complaint, can still be made to answer for a
cause of action which accrued while it was doing, business, is another
matter that would yet have to await the reception and admission of
evidence. Since these points have seasonably been raised by the
petitioner, there should be no real cause for what may understandably be
its apprehension, i.e., that by its participation during the trial on the
merits, it may, absent an invocation of separate or independent reliefs of
its own, be considered to have voluntarily submitted itself to the court's
jurisdiction.[19]
Far from committing an abuse of discretion, the trial court properly
deferred resolution of the motion to dismiss and thus avoided prematurely
deciding a question which requires a factual basis, with the same result if
it had denied the motion and conditionally assumed jurisdiction. It is the
Court of Appeals which, by ruling that BMW is not doing business on the
basis merely of uncertain allegations in the pleadings, disposed of the
whole case with finality and thereby deprived petitioner of his right to be
heard on his cause of action. Nor was there justification for nullifying the
writ of preliminary injunction issued by the trial court. Although the
injunction was issued ex parte, the fact is that BMW was subsequently
heard on its defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the
case is REMANDED to the trial court for further proceedings.
SO ORDERED.
YNARES-SANTIAGO, J.:
Assailed in this Petition for Review under Rule 45 of the Rules of Court is
the Decision[1] of the Court of Appeals dated May 15, 2003, which
sustained the Order of the Regional Trial Court of Angeles City, Branch 61,
dated June 28, 2001, and its subsequent Resolution dated August 3, 2003
denying petitioners motion for reconsideration.
European Resources and Technologies Inc. (hereinafter ERTI), a
corporation organized and existing under the laws of the Republic of
the Philippines, is joined by Delfin J. Wenceslao as petitioner in this
case. Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh and Heers &
Brockstedt Gmbh & Co. are German corporations who are respondents in
this case and shall be collectively referred to as the German
Consortium.
The German Consortium tendered and submitted its bid to the Clark
Development Corporation (CDC) to construct, operate and manage
the IntegratedWaste Management Center at the Clark Special Economic
Zone (CSEZ). CDC accepted the German Consortiums bid and awarded
the contract to it. OnOctober 6, 1999, CDC and the German Consortium
executed the Contract for Services[2] which embodies the terms and
conditions of their agreement.
The Contract for Services provides that the German Consortium shall be
empowered to enter into a contract or agreement for the use of the
integrated waste management center by corporations, local government
units, entities, and persons not only within the CSEZ but also outside. For
waste collected within the CSEZ, the German Consortium may impose a
tipping fee per ton of waste collected from locators and residents of the
CSEZ, which fees shall be subject to the schedule agreed upon by the
parties and specified in the Contract for Services. For its operations
outside of the CSEZ, the German Consortium shall pay CDC US$1.50 per
ton of non-hazardous solid waste collected.[3] The CDC shall guarantee that
nineteen thousand eighteen hundred (19,800) tons per year of solid waste
volume shall be collected from inside and outside the CSEZ. [4] The contract
has a term of twenty-five (25) years, [5] during which time the German
Consortium shall operate the waste management center on a day-to-day
basis.[6]
Article VIII, Section 7 of the Contract for Services provides that the
German Consortium shall undertake to organize a local corporation as its
representative for this project. On April 18, 2000, the German Consortium
entered into a Joint Venture with D.M. Wenceslao and Associates, Inc.
(DMWAI) and Ma. Elena B. Villarama (doing business as LBV and
the
the
for
21,
(c)
Not holding that the dispute is covered by the arbitration clause in
the memorandum of agreement.
(d)
Issuing the writ of preliminary injunction that is tantamount to a
decision of the case on the merits.[18]
The petition is partly meritorious.
There is no general rule or governing principle laid down as to what
constitutes doing or engaging in or transacting business in
the Philippines. Thus, it has often been held that a single act or
transaction may be considered as doing business when a corporation
performs acts for which it was created or exercises some of the functions
for which it was organized.[19] We have held that the act of participating in
a bidding process constitutes doing business because it shows the
foreign corporations intention to engage in business in the Philippines. In
this regard, it is the performance by a foreign corporation of the acts for
which it was created, regardless of volume of business, that determines
whether a foreign corporation needs a license or not.[20]
Consequently,
the
German
Consortium
is
doing
business
in
the Philippines without the appropriate license as required by our
laws. By participating in the bidding conducted by the CDC for the
operation of the waste management center, the German Consortium
exhibited its intent to transact business in thePhilippines. Although the
Contract for Services provided for the establishment of a local corporation
to serve as respondents representative, it is clear from the other
provisions of the Contract for Services as well as the letter by the CDC
containing the disapproval that it will be the German Consortium which
Thus, it is clear that for the issuance of the writ of preliminary injunction
to be proper, it must be shown that the invasion of the right sought to be
protected is material and substantial, that the right of complainant is
clear and unmistakable and that there is an urgent and paramount
necessity for the writ to prevent serious damage. [31] At the time of its
application for an injunctive writ, respondents right to operate and
manage the waste management center, to the exclusion of or without any
participation by petitioner ERTI, cannot be said to be clear and
AGILENT
TECHNOLOGIES
SINGAPORE
(PTE)
LTD., petitioner,
vs. INTEGRATED SILICON TECHNOLOGY PHILIPPINES CORPORATION, TEOH
KIANG HONG, TEOH KIANG SENG, ANTHONY CHOO, JOANNE KATE M. DELA
CRUZ, JEAN KAY M. DELA CRUZ and ROLANDO T. NACILLA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12, 2002 of the
Court of Appeals in CA-G.R. SP No. 66574, which dismissed Civil Case No.
3123-2001-C and annulled and set aside the Order dated September 4,
2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a
foreign corporation, which, by its own admission, is not licensed to do
business in thePhilippines.[1] Respondent Integrated Silicon Technology
Philippines Corporation (Integrated Silicon) is a private domestic
corporation, 100% foreign owned, which is engaged in the business of
manufacturing
and
assembling
electronics
components.
[2]
Respondents Teoh Kiang
Hong, Teoh Kiang Seng and
Anthony Choo,
Malaysian nationals, are current members of Integrated Silicons board of
directors, while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and
Rolando T. Nacilla are its former members.[3]
The juridical relation among the various parties in this case can be traced
to a 5-year Value Added Assembly Services Agreement (VAASA), entered
into on April 2, 1996 between Integrated Silicon and the Hewlett-Packard
Singapore (Pte.) Ltd., Singapore Components Operation (HP-Singapore).
[4]
Under the terms of the VAASA, Integrated Silicon was to locally
manufacture and assemble fiber optics for export to HP-Singapore. HP-
Singapore, for its part, was to consign raw materials to Integrated Silicon;
transport machinery to the plant of Integrated Silicon; and pay Integrated
Silicon the purchase price of the finished products. [5] The VAASA had a
five-year term, beginning on April 2, 1996, with a provision for annual
renewal by mutual written consent. [6] On September 19, 1999, with the
consent of Integrated Silicon,[7] HP-Singapore assigned all its rights and
obligations in the VAASA to Agilent.[8]
On May 25, 2001, Integrated Silicon filed a complaint for Specific
Performance and Damages against Agilent and its officers Tan Bian Ee,
Lim Chin Hong, Tey Boon Teck and Francis Khor, docketed as Civil Case No.
3110-01-C. It alleged that Agilent breached the parties oral agreement to
extend theVAASA. Integrated Silicon thus prayed that defendant be
ordered to execute a written extension of the VAASA for a period of five
years as earlier assured and promised; to comply with the
extended VAASA; and to pay actual, moral, exemplary damages and
attorneys fees.[9]
On June 1, 2001, summons and a copy of the complaint were served on
Atty. Ramon Quisumbing, who returned these processes on the claim that
he was not the registered agent of Agilent. Later, he entered a special
appearance to assail the courts jurisdiction over the person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated
Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne Kate
M. delaCruz, Jean Kay M. dela Cruz and Rolando T. Nacilla,[10] for Specific
Performance, Recovery of Possession, and Sum of Money with Replevin,
Preliminary Mandatory Injunction, and Damages, before the Regional
Trial Court, Calamba, Laguna, Branch 92, docketed as Civil Case No. 31232001-C. Agilentprayed that a writ of replevin or, in the alternative, a writ
of preliminary mandatory injunction, be issued ordering defendants to
immediately return and deliver to plaintiff its equipment, machineries and
the materials to be used for fiber-optic components which were left in the
plant of Integrated Silicon. It further prayed that defendants be ordered
to pay actual and exemplary damages and attorneys fees. [11]
Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C, [12] on
the grounds of lack of Agilents legal capacity to sue;[13] litis pendentia;
[14]
forum shopping;[15] and failure to state a cause of action.[16]
On September 4, 2001, the trial court denied the Motion to Dismiss and
granted petitioner Agilents application for a writ of replevin.[17]
Without filing a motion for reconsideration, respondents filed a petition
for certiorari with the Court of Appeals.[18]
for,
(c)
the identity in the two cases should be such that the judgment
that may be rendered in one would, regardless of which party is
successful, amount tores judicata in the other.[28]
The Court of Appeals correctly appreciated the identity of parties in Civil
Cases No. 3123-2001-C and 3110-2001-C. Well-settled is the rule
that lispendens requires only substantial, and not absolute, identity of
parties.[29] There is substantial identity of parties when there is a
community of interest between a party in the first case and a party in the
second case, even if the latter was not impleaded in the first case.[30] The
parties in these cases are vying over the interests of the two opposing
corporations; the individuals are only incidentally impleaded, being the
natural persons purportedly accused of violating these corporations
rights.
Likewise, the fact that the positions of the parties are reversed, i.e., the
plaintiffs in the first case are the defendants in the second case or vice
versa, does not negate the identity of parties for purposes of determining
whether the case is dismissible on the ground of litis pendentia.[31]
The identity of parties notwithstanding, litis pendentia does not obtain in
this case because of the absence of the second and third requisites. The
rights asserted in each of the cases involved are separate and distinct;
there are two subjects of controversy presented for adjudication; and two
causes of action are clearly involved. The fact that respondents instituted
a prior action for Specific Performance and Damages is not a ground for
defeating the petitioners action for Specific Performance, Recovery of
Possession, and Sum of Money with Replevin, Preliminary Mandatory
Injunction, and Damages.
In Civil Case No. 3110-2001-C filed by respondents, the issue is whether or
not there was a breach of an oral promise to renew of the VAASA. The
issue in Civil Case No. 3123-2001-C, filed by petitioner, is whether
petitioner has the right to take possession of the subject
properties. Petitioners right of possession is founded on the ownership
of the subject goods, which ownership is not disputed and is not
contingent on the extension or non-extension of theVAASA. Hence,
the replevin suit can validly be tried even while the prior suit is being
litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No. 31102001-C. The reliefs sought by respondent Integrated Silicon therein are as
follows: (1) execution of a written extension or renewal of the VAASA; (2)
compliance with the extended VAASA; and (3) payment of overdue
accounts,
damages,
and
attorneys
fees. The reliefs sought
by
petitioner Agilent in Civil Case No. 3123-2001-C, on the other hand, are as
follows: (1) issuance of a Writ of Replevin or Writ of Preliminary
Mandatory Injunction; (2) recovery of possession of the subject properties;
(3) damages and attorneys fees.
Concededly, some items or pieces of evidence may be admissible in both
actions. It cannot be said, however, that exactly the same evidence will
support the decisions in both, since the legally significant and controlling
facts in each case are entirely different. Although the VAASA figures
prominently in both suits, Civil Case No. 3110-2001-C is premised on a
purported breach of an oral obligation to extend the VAASA, and damages
arising out of Agilents alleged failure to comply with such purported
extension. Civil Case No. 3123-2001-C, on the other hand, is premised on
a breach of the VAASA itself, and damages arising to Agilent out of that
purported breach.
It necessarily follows that the third requisite for litis pendentia is also
absent. The following are the elements of res judicata:
(a)
(b)
The court which rendered judgment must have jurisdiction over
the parties and the subject matter;
(c)
(d)
There must be between the first and second actions identity of
parties, subject matter, and cause of action. [32]
In this case, any judgment rendered in one of the actions will not amount
to res judicata in the other action. There being different causes of action,
the decision in one case will not constitute res judicata as to the other.
Of course, a decision in one case may, to a certain extent, affect the other
case. This, however, is not the test to determine the identity of the
causes of action. Whatever difficulties or inconvenience may be entailed if
both causes of action are pursued on separate remedies, the proper
solution is not the dismissal order of the Court of Appeals. The possible
consolidation of said cases, as well as stipulations and appropriate modes
of discovery, may well be considered by the court below to subserve not
only procedural expedience but, more important, the ends of justice. [33]
We now proceed to the issue of forum shopping.
The test for determining whether a party violated the rule against forumshopping was laid down in the case of Buan v. Lopez.[34] Forum shopping
exists where the elements of litis pendentia are present, or where a final
judgment in one case will amount to res judicata in the final other. There
being no litispendentia in this case, a judgment in the said case will not
amount to res judicata in Civil Case No. 3110-2001-C, and respondents
contention on forum shopping must likewise fail.
We are not unmindful of the afflictive consequences that may be suffered
by both petitioner and respondents if replevin is granted by the trial court
in Civil Case No. 3123-2001-C. If respondent Integrated Silicon eventually
wins Civil Case No. 3110-2001-C, and the VAASAs terms are extended,
petitioner corporation will have to comply with its obligations thereunder,
which would include the consignment of properties similar to those it may
recover by way ofreplevin in Civil Case No. 3123-2001-C. However,
petitioner will also suffer an injustice if denied the remedy of replevin,
resort to which is not only allowed but encouraged by law.
statutes chiefly in cases where such person has received the benefits of
the contract.[46]
The principles regarding the right of a foreign corporation to bring suit in
Philippine courts may thus be condensed in four statements: (1) if a
foreign corporation does business in the Philippines without a license, it
cannot sue before the Philippine courts; [47] (2) if a foreign corporation
is not doing business in the Philippines, it needs no license to sue before
Philippine courts on an isolated transaction or on a cause of action
entirely independent of any business transaction [48]; (3) if a foreign
corporation does business in the Philippines without a license, a Philippine
citizen or entity which has contracted with said corporation may
be estopped from challenging the foreign corporations corporate
personality in a suit brought before Philippine courts; [49] and (4) if a
foreign corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction.
The challenge to Agilents legal capacity to file suit hinges on whether or
not it is doing business in the Philippines. However, there is no definitive
rule on what constitutes doing, engaging in, or transacting
business in the Philippines, as this Court observed in the case
of Mentholatum v. Mangaliman.[50] The Corporation Code itself is silent as
to what acts constitute doing or transacting business in the Philippines.
Jurisprudence has it, however, that the term implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent,
the performance of acts or works or the exercise of some of the functions
normally incident to or in progressive prosecution of the purpose and
subject of its organization.[51]
In Mentholatum,[52] this Court discoursed on the two general tests to
determine whether or not a foreign corporation can be considered as
doing
business
in
the Philippines. The
first
of
these
is
[53]
the substance test, thus:
The true test [for doing business], however, seems to be whether the
foreign corporation is continuing the body of the business or enterprise
for which it was organized or whether it has substantially retired from it
and turned it over to another.
The second test is the continuity test, expressed thus:[54]
The term [doing business] implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of acts
or works or the exercise of some of the functions normally incident to, and
in the progressive
organization.
prosecution
of,
the
purpose
and
object
of
its
Sec. 3, par. (d). The phrase doing business shall include soliciting
orders, service contracts, opening offices, whether called liaison offices
or branches; appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a period or
periods totaling one hundred eighty (180) days or more; participating in
the management, supervision or control of any domestic business, firm,
entity, or corporation in the Philippines; and any other act or acts that
imply a continuity 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 the
progressive prosecution of, commercial gain or of the purpose and object
of the business organization.
An analysis of the relevant case law, in conjunction with Section 1 of the
Implementing Rules and Regulations of the FIA (as amended by Republic
Act No. 8179), would demonstrate that the acts enumerated in the VAASA
do not constitute doing business in the Philippines.
Section 1 of the Implementing Rules and Regulations of the FIA (as
amended by Republic Act No. 8179) provides that the following
shall not be deemed doing business:
(1)
Mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the exercise
of rights as such investor;
(2)
Having a nominee director or officer to represent its interest in
such corporation;
(3)
Appointing a representative or distributor domiciled
the Philippines which transacts business in the representatives
distributors own name and account;
in
or
(4)
The publication of a general advertisement through any print or
broadcast media;
(5)
Maintaining a stock of goods in the Philippines solely for the
purpose of having the same processed by another entity in
the Philippines;
(6)
Consignment by a foreign entity of equipment with a local
company to be used in the processing of products for export;
(7)
(8)
Performing services auxiliary to an existing isolated contract of
sale which are not on a continuing basis, such as installing in the
Petitioner,
Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
CARPIO MORALES,
- versus -
TINGA, and
VELASCO, JR., JJ.
Promulgated:
Respondents.
x-------------------------------------------------- x
DECISION
CARPIO, J.:
The Case
The Facts
of PILs representatives and even gave PIL the names of three of his
subordinates in Betonval whom he would like to join him in PIL.
Annex D[11] shows that Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to McDonald of PIL. Todaro confirmed the
following to McDonald:
1.
That I am accepting the proposal of PIONEER INTL. as a
consultant for three (3) months, starting October 1, 1996, with a retainer
fee of U.S. $15,000.00 per month;
2.
That after three (3) months consultancy, I should be
employed by PIONEER INTL., on a permanent basis, as its Managing
Director or CEO in thePhilippines. Remuneration package will be mutually
agreed upon by PIONEER and the undersigned;
3.
That Gino Martinel and the Sales Manager Jun Ong, will be
hired as well, on a permanent basis, by PIONEER as soon as the company
is established. Salary, likewise, will be accepted by both PIONEER and the
respective parties.
n
Monthly fee USD 15,000 per month billed on monthly basis
and payable 15 days from billing date.
n
n
Driver and secretarial support-basis for reimbursement of
this to be agreed.
n
Arrangement to commence from 1st November 96, reflecting
your contributions so far and to continue until Pioneer makes a decision.
It has not proven possible for this company to meet with your
expectations regarding the conditions of your providing Pioneer with
consultancy services. This, and your refusal to consider my terms of offer
of permanent employment, leave me no alternative but to withdraw these
offers of employment with this company.
As you provided services under your previous agreement with our Pioneer
Hong Kong office during the month of August, I will see that they pay you
at the previous rates until the end of August. They have authorized me on
behalf of Pioneer International Ltd. to formally advise you that the
agreement will cease from August 31st as per our previous discussions.
Annex
I[16] shows
the
letter
dated
20
October
1997
of
K.M. Folwell (Folwell), PILs Executive General Manager of Australia and
Asia, to Todaro. Folwell confirmed the contents of Klepzigs 18 September
1997 letter. Folwells message reads:
Thank you for your letter to Dr. Schubert dated 29th September
1997 regarding the alleged breach of contract with you. Dr. Schubert has
asked me to investigate this matter.
I have discussed and examined the material regarding your association
with Pioneer over the period from mid 1996 through to September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well
documented and have been appropriately rewarded. However, in regard
to your request and expectation to be given permanent employment with
Pioneer Philippines Holdings, Inc. I am informed that negotiations to
reach agreement on appropriate terms and conditions have not been
successful.
PIL
filed,
by
special
appearance,
a
motion
to
dismiss Todaros complaint. PILs co-defendants, PCPI, PPHI, and Klepzig,
filed a separate motion to dismiss. [17] PIL asserted that the trial court has
no jurisdiction over PIL because PIL is a foreign corporation not doing
business in thePhilippines. PIL also questioned the service of summons on
it. Assuming arguendo that Klepzig is PILs agent in the Philippines, it was
notKlepzig but De Leon who received the summons for PIL. PIL further
stated that the National Labor Relations Commission (NLRC), and not the
trial court, has jurisdiction over the subject matter of the action. It
claimed that assuming that the trial court has jurisdiction over the subject
matter of the action, the complaint should be dismissed on the ground
of forum non-conveniens. Finally, PIL maintained that the complaint does
not state a cause of action because there was no perfected contract, and
no personal judgment could be rendered by the trial court against PIL
because PIL is a foreign corporation not doing business in
the Philippines and there was improper service of summons on PIL.
On 4 January 1999, the trial court issued an order [18] which ruled in
favor of Todaro. The trial court denied the motions to dismiss filed by PIL,
PCPI, PPHI, and Klepzig.
The trial court also asserted its jurisdiction over PIL, holding that
PIL did business in the Philippines when it entered into a contract
withTodaro. Although PIL questions the service of summons on Klepzig,
whom PIL claims is not its agent, the trial court ruled that PIL failed to
adduce evidence to prove its contention. Finally, on the issue of forum
non-conveniens, the trial court found that it is more convenient to hear
and decide the case in the Philippines because Todaro resides in
the Philippines and the contract allegedly breached involves employment
in thePhilippines.
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The appellate court denied PILs petition and affirmed the trial
courts ruling in toto. The dispositive portion of the appellate courts
decision reads:
The Issues
A.
[The trial court] did not and cannot acquire jurisdiction over the
person of [PIL] considering that:
A.1.
[PIL] is
the Philippines.
foreign
corporation
not
doing
business
in
A.2.
Moreover, the complaint does not contain appropriate allegations
of ultimate facts showing that [PIL] is doing or transacting business in
thePhilippines.
A.3.
Assuming arguendo that jurisdiction may be acquired over
the
person of [PIL], [the trial court] still failed to acquire
jurisdiction since
summons was improperly served on [PIL].
B.
[Todaro] does not have a cause of action and the complaint fails to
state a cause of action. Jurisprudence is settled in that in resolving a
motion to dismiss, a court can consider all the pleadings filed in the case,
including annexes, motions and all evidence on record.
C.
[The trial court] did not and cannot acquire jurisdiction over the
subject matter of the complaint since the allegations contained therein
indubitably show that [Todaro] bases his claims on an alleged breach of an
employment contract. Thus, exclusive jurisdiction is vested with the
[NLRC].
Cause of Action
33.
Alternatively, assuming without conceding, that there was
no contractual obligation on the part of the Pioneer Group to employ
[Todaro] on a permanent basis, in their Philippine operations, the Pioneer
Group and the other defendants did not act with justice, give [Todaro] his
due and observe honesty and good faith and/or they have willfully caused
injury to [Todaro] in a manner that is contrary to morals, good customs,
and public policy, as mandated under Arts. 19 and 21 of the New Civil
Code.
sufficiently establish a cause of action for breach of contract and/or
violation of Articles 19 and 21 of the New Civil Code. Whether or not these
allegations are true is immaterial for the court cannot inquire into the
truth thereof, the test being whether, given the allegations of fact in the
complaint, a valid judgment could be rendered in accordance with the
prayer in the complaint.[24]
Forum Non-Conveniens
As to the first sub-issue, PIL insists that its sole act of transacting
or doing business in the Philippines consisted of its investment in
PPHI. Under Philippine law, PILs mere investment in PPHI does not
constitute doing business. However, we affirm the lower courts ruling
and declare that, based on the allegations in Todaros complaint, PIL was
doing business in the Philippines when it negotiated Todarosemployment
with PPHI. Section 3(d) of Republic Act No. 7042, Foreign Investments Act
of 1991, states:
Thus,
we
rule
that
PIL
transacted
business
in
the Philippines and Klepzig was its agent within the Philippines. However,
there was improper service of summons on PIL since summons was not
served personally on Klepzig.
NLRC Jurisdiction
EXCEPTIONS TO COMITY
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v.
Philippine Overseas Employment Administration's Administrator, et. al.,"
was filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the National
Labor
Relations
Commission
(NLRC)
in
POEA
Cases
Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a
new decision: (i) declaring private respondents as in default; (ii) declaring
the said labor cases as a class suit; (iii) ordering Asia International
Builders Corporation (AIBC) and Brown and Root International Inc. (BRII)
to pay the claims of the 1,767 claimants in said labor cases; (iv) declaring
Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing
POEA Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the
motion for reconsideration of its Resolution dated September 2, 1991
(Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et.
al., v. Hon. National Labor Relations Commission, et. al.," was filed under
Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA
Cases
Nos.
L-84-06-555,
L-85-10-777,
L-85-10-799
and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period
under the Labor Code of the Philippines instead of the ten-year
prescriptive period under the Civil Code of the Philippines; and (ii) denied
the
"three-hour daily average" formula in the computation of petitioners'
overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the
motion for reconsideration of its Resolution dated September 2, 1991
(Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders
Corporation, et. al., v. National Labor Relations Commission, et. al." was
filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA
Cases
Nos.
L-84-06-555,
L-85-10-777,
L-85-10-779
and
L-86-05-460, insofar as it granted the claims of 149 claimants; and
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it
denied the motions for reconsideration of AIBC and BRII (Rollo, pp. 2-59;
61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the
decision of POEA in four labor cases: (1) awarded monetary benefits only
to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to conduct
hearings and to receive evidence on the claims dismissed by the POEA for
lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third
Division while G.R. Nos. 104911-14 were raffled to the Second Division. In
the Resolution dated July 26, 1993, the Second Division referred G.R. Nos.
104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division granted
the motion filed in G.R. Nos. 104911-14 for the consolidation of said cases
with G.R. Nos. 104776 and 105029-32, which were assigned to the First
Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 10502930, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27,
1993, the First Division granted the motion to consolidate G.R. Nos.
104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R.
Nos. 105029-32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B.
Evangelista, in their own behalf and on behalf of 728 other overseas
contract workers (OCWs) instituted a class suit by filing an "Amended
Complaint" with the Philippine Overseas Employment Administration
(POEA) for money claims arising from their recruitment by AIBC and
employment by BRII (POEA Case No. L-84-06-555). The claimants were
represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is
engaged in construction; while AIBC is a domestic corporation licensed as
a service contractor to recruit, mobilize and deploy Filipino workers for
overseas employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired
portion of the employment contracts, which was terminated prematurely,
and secondarily, the payment of the interest of the earnings of the Travel
and Reserved Fund, interest on all the unpaid benefits; area wage and
salary differential pay; fringe benefits; refund of SSS and premium not
remitted to the SSS; refund of withholding tax not remitted to the BIR;
penalties for committing prohibited practices; as well as the suspension of
the license of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo,
pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the
complaint and was given, together with BRII, up to July 5, 1984 to file its
answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII,
ordered the claimants to file a bill of particulars within ten days from
receipt of the order and the movants to file their answers within ten days
On October 17, 1985, the law firm of Florante M. de Castro & Associates
asked for the substitution of the original counsel of record and the
cancellation of the special powers of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim
to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA
Case No. 86-05-460) in behalf of 11 claimants including Bienvenido
Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on
February 27, 1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA
Administrator, it is not amiss to mention that two cases were filed in the
Supreme Court by the claimants, namely G.R. No. 72132 on September
26, 1985 and Administrative Case No. 2858 on March 18, 1986. On May 13,
1987, the Supreme Court issued a resolution in Administrative Case No.
2858 directing the POEA Administrator to resolve the issues raised in the
motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-8605-460 and to decide the labor cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489),
questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the amended
complaint in POEA Case No. L-84-06-555. In a resolution dated November
9, 1987, we dismissed the petition by informing AIBC that all its technical
objections may properly be resolved in the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on
September 22, 1988 by claimant Hermie Arguelles and 18 co-claimants
against the POEA Administrator and several NLRC Commissioners. The
Ombudsman merely referred the complaint to the Secretary of Labor and
Employment with a request for the early disposition of POEA Case No. L84-06-555. The second was filed on April 28, 1989 by claimants Emigdio P.
Bautista and Rolando R. Lobeta charging AIBC and BRII for violation of
labor and social legislations. The third was filed by Jose R. Santos,
Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of
violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC
Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its
motion for suspension of the period for filing an answer or motion for
extension of time to file the same until the resolution of its motion for
reconsideration of the order of the NLRC dismissing the two appeals. On
April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the
complaint. At the same hearing, the parties were given a period of 15 days
from said date within which to submit their respective position papers. On
June 24, 1987 claimants filed their "Urgent Motion to Strike Out Answer,"
alleging that the answer was filed out of time. On June 29, 1987, claimants
filed their "Supplement to Urgent Manifestational Motion" to comply with
the POEA Order of June 19, 1987. On February 24, 1988, AIBC and BRII
submitted their position paper. On March 4, 1988, claimants filed their
"Ex-Parte Motion to Expunge from the Records" the position paper of AIBC
and BRII, claiming that it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro filed
their memorandum in POEA Case No. L-86-05-460. On September 6, 1988,
AIBC and BRII submitted their Supplemental Memorandum. On September
12, 1988, BRII filed its "Reply to Complainant's Memorandum." On October
26, 1988, claimants submitted their "Ex-Parte Manifestational Motion and
Counter-Supplemental Motion," together with 446 individual contracts of
employments and service records. On October 27, 1988, AIBC and BRII
filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in
POEA Case No. L-84-06-555 and the other consolidated cases, which
awarded the amount of $824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum
For Partial Appeal" from the decision of the POEA. On the same day, AIBC
also filed its motion for reconsideration and/or appeal in addition to the
"Notice of Appeal" filed earlier on February 6, 1989 by another counsel for
AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying
for the dismissal of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants'
Appeal Memorandum," together with their "newly discovered evidence"
consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation,"
stating among other matters that there were only 728 named claimants.
On April 20, 1989, the claimants filed their "Counter-Manifestation,"
alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the
Decision dated January 30, 1989 on the grounds that BRII had failed to
appeal on time and AIBC had not posted the supersedeas bond in the
amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor
cases.
On August 21, 1990, claimants filed their "Manifestational Motion,"
praying that all the 1,767 claimants be awarded their monetary claims for
failure of private respondents to file their answers within the
reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as
follows:
WHEREFORE, premises considered, the Decision of the POEA in these
consolidated cases is modified to the extent and in accordance with the
following dispositions:
1. The claims of the 94 complainants identified and listed in Annex "A"
hereof are dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are hereby ordered, jointly and
severally, to pay the 149 complainants, identified and listed in Annex "B"
hereof, the peso equivalent, at the time of payment, of the total amount in
US dollars indicated opposite their respective names;
3. The awards given by the POEA to the 19 complainants classified and
listed in Annex "C" hereof, who appear to have worked elsewhere than in
Bahrain are hereby set aside.
4. All claims other than those indicated in Annex "B", including those for
overtime work and favorably granted by the POEA, are hereby dismissed
for lack of substantial evidence in support thereof or are beyond the
competence of this Commission to pass upon.
In addition, this Commission, in the exercise of its powers and authority
under Article 218(c) of the Labor Code, as amended by R.A. 6715, hereby
directs Labor Arbiter Fatima J. Franco of this Commission to summon
parties, conduct hearings and receive evidence, as expeditiously as
possible, and thereafter submit a written report to this Commission (First
Division) of the proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached and made an
integral part of this Resolution, whose claims were dismissed by the POEA
for lack of proof of employment in Bahrain (these complainants numbering
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254;
G.R. Nos. 104911-14,Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante C. Aceres and
37 co-claimants dated September 8, 1993 (G.R. No. 104776, Rollo, pp.
1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 10502932, Rollo, pp. 1280-1397);
14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 coclaimants dated January 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving Domingo B. Solano and six
co-claimants dated August 25, 1994 (G.R. Nos. 105029-32; G.R. No.
104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than fifty volumes
now comprising the records of these cases. From the records, it appears
that the complainants-appellants allege that they were recruited by
respondent-appellant AIBC for its accredited foreign principal, Brown &
Root, on various dates from 1975 to 1983. They were all deployed at
various projects undertaken by Brown & Root in several countries in the
Middle East, such as Saudi Arabia, Libya, United Arab Emirates and
Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.
Having been officially processed as overseas contract workers by the
Philippine Government, all the individual complainants signed standard
overseas employment contracts (Records, Vols. 25-32. Hereafter,
reference to the records would be sparingly made, considering their
chaotic arrangement) with AIBC before their departure from the
Philippines. These overseas employment contracts invariably contained
the following relevant terms and conditions.
PART B
(1)
Employment
(Code) :
(2)
(3)
(4)
(5)
(6)
(7)
Position
Classification
Company
Employment
Status
Date
of
Employment
to
Commence
on
Basic
Working
Hours
Per
Week
Basic
Working
Hours
Per
Month
Basic
Hourly
Rate
Overtime
Rate
Per
Hour
:
:
:
:
:
:
:
(8)
Projected
(Subject
to
C(1)
Months
Job Completion
of
Period
this
of
[sic])
Service
:
and/or
the amount of wages payable to the worker for the period of such notice
or the unexpired portion thereof.
Art. 111: . . . the employer concerned shall pay to such worker, upon
termination of employment, a leaving indemnity for the period of his
employment calculated on the basis of fifteen days' wages for each year
of the first three years of service and of one month's wages for each year
of service thereafter. Such worker shall be entitled to payment of leaving
indemnity upon a quantum meruit in proportion to the period of his
service completed within a year.
All the individual complainants-appellants have already been repatriated
to the Philippines at the time of the filing of these cases (R.R. No.
104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: Whether or not complainants are entitled to the benefits provided
by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have worked in Bahrain are
entitled to the above-mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a
more favorable treatment of alien employees) bars complainants from
enjoying its benefits.
Second: Assuming that Amiri Decree No. 23 of Bahrain is applicable in
these cases, whether or not complainants' claim for the benefits provided
therein have prescribed.
Third: Whether or not the instant cases qualify as a class suit.
Fourth: Whether or not the proceedings conducted by the POEA, as well
as the decision that is the subject of these appeals, conformed with the
requirements of due process;
(a) Whether or not the respondent-appellant was denied its right to due
process;
(b) Whether or not the admission of evidence by the POEA after these
cases were submitted for decision was valid;
(c) Whether or not the POEA acquired jurisdiction over Brown & Root
International, Inc.;
On the fifth issue, NLRC sustained the ruling of the POEA Administrator
that BRII and AIBC are solidarily liable for the claims of the complainants
and held that BRII was the actual employer of the complainants, or at the
very least, the indirect employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA
Administrator through the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in
denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based on the
Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the claims for
refund of the SSS premiums and refund of withholding taxes and the
claimants should file their claims for said refund with the appropriate
government agencies;
(2) the claimants failed to establish that they are entitled to the claims
which are not based on the overseas employment contracts nor the Amiri
Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for moral
and exemplary damages and nonetheless, the basis for granting said
damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion of
their contract may be allowed if filed within the three-year prescriptive
period;
(5) that the allegation that complainants were prematurely repatriated
prior to the expiration of their overseas contract was not established; and
(6) that the POEA Administrator has no jurisdiction over the complaint for
the suspension or cancellation of the AIBC's recruitment license and the
cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L)
86-65-460 should have been dismissed on the ground that the claimants in
said case were also claimants in POEA Case No. (L) 84-06-555. Instead of
dismissing POEA Case No. (L) 86-65-460, the POEA just resolved the
corresponding claims in POEA Case No. (L) 84-06-555. In other words, the
POEA did not pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the
following grounds:
(1) that they were deprived by NLRC and the POEA of their right to a
speedy disposition of their cases as guaranteed by Section 16, Article III of
the 1987 Constitution. The POEA Administrator allowed private
respondents to file their answers in two years (on June 19, 1987) after the
filing of the original complaint (on April 2, 1985) and NLRC, in total
disregard of its own rules, affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared AIBC and
BRII in default and should have rendered summary judgment on the basis
of the pleadings and evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred in not holding that the labor
cases filed by AIBC and BRII cannot be considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten years; and
(5) that NLRC and the POEA Administrator should have dismissed POEA
Case No. L-86-05-460, the case filed by Atty. Florante de Castro (Rollo, pp.
31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the disposition of the
labor cases, considering the great difficulty of getting all the records of
the more than 1,500 claimants, the piece-meal filing of the complaints and
the addition of hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants, it was
impossible to prepare the answers within the ten-day period provided in
the NLRC Rules, that when the motion to declare AIBC in default was filed
on July 19, 1987, said party had already filed its answer, and that
considering the staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the parties, the
ten-day rule to answer was not fair and reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter of the
controversy which was the applicability of the Amiri Decree No. 23.
Likewise, the nature of the claims varied, some being based on salaries
pertaining to the unexpired portion of the contracts while others being for
pure money claims. Each claimant demanded separate claims peculiar only
to himself and depending upon the particular circumstances obtaining in
his case;
(4) that the prescriptive period for filing the claims is that prescribed by
Article 291 of the Labor Code of the Philippines (three years) and not the
one prescribed by Article 1144 of the Civil Code of the Philippines (ten
years); and
(5) that they are not concerned with the issue of whether POEA Case No.
L-86-05-460 should be dismissed, this being a private quarrel between the
two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out
the joint manifestations and motions of AIBC and BRII dated September 2
and 11, 1992, claiming that all the claimants who entered into the
compromise agreements subject of said manifestations and motions were
his clients and that Atty. Florante M. de Castro had no right to represent
them in said agreements. He also claimed that the claimants were paid
less than the award given them by NLRC; that Atty. De Castro collected
additional attorney's fees on top of the 25% which he was entitled to
receive; and that the consent of the claimants to the compromise
agreements and quitclaims were procured by fraud (G.R. No.
104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992,
the Court denied the motion to strike out the Joint Manifestations and
Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp.
608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to
Enforce Attorney's Lien," alleging that the claimants who entered into
compromise agreements with AIBC and BRII with the assistance of Atty. De
Castro, had all signed a retainer agreement with his law firm (G.R. No.
104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to
cite Atty. De Castro and Atty. Katz Tierra for contempt of court and for
violation of Canons 1, 15 and 16 of the Code of Professional Responsibility.
The said lawyers allegedly misled this Court, by making it appear that the
claimants who entered into the compromise agreements were represented
by Atty. De Castro, when in fact they were represented by Atty. Del Mundo
(G.R. No. 104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against
Atty. De Castro for unethical practices and moved for the voiding of the
quitclaims submitted by some of the claimants.
All the petitions raise the common issue of prescription although they
disagreed as to the time that should be embraced within the prescriptive
period.
To the POEA Administrator, the prescriptive period was ten years, applying
Article 1144 of the Civil Code of the Philippines. NLRC believed otherwise,
fixing the prescriptive period at three years as provided in Article 291 of
the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking
different grounds, insisted that NLRC erred in ruling that the prescriptive
period applicable to the claims was three years, instead of ten years, as
found by the POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive
period was one year as prescribed by the Amiri Decree No. 23 of 1976 but
he deferred to the ruling of NLRC that Article 291 of the Labor Code of the
Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code) refer to those
arising from the employer's violation of the employee's right as provided
by the Labor Code.
In the instant case, what the respondents violated are not the rights of
the workers as provided by the Labor Code, but the provisions of the Amiri
Decree No. 23 issued in Bahrain, which ipso factoamended the worker's
contracts of employment. Respondents consciously failed to conform to
these provisions which specifically provide for the increase of the worker's
rate. It was only after June 30, 1983, four months after the brown builders
brought a suit against B & R in Bahrain for this same claim, when
respondent AIBC's contracts have undergone amendments in Bahrain for
the new hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this
instant case is Article 1144 of the Civil Code of the Philippines, which
provides:
Art. 1144. The following actions may be brought within ten years from the
time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Procedure and that where such kind of law exists, it takes precedence
over the common-law conflicts rule (G.R. No. 104776,Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription of
action based on the Amiri Decree No. 23 of 1976 or a Philippine law on
prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be actionable
after the lapse of one year from the date of the expiry of the contract.
(G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the
forum. Procedural matters, such as service of process, joinder of actions,
period and requisites for appeal, and so forth, are governed by the laws of
the forum. This is true even if the action is based upon a foreign
substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga,
Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the
sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court
applied the statute of limitations of New York, instead of the Panamanian
law, after finding that there was no showing that the Panamanian law on
prescription was intended to be substantive. Being considered merely a
procedural law even in Panama, it has to give way to the law of the forum
on prescription of actions.
However, the characterization of a statute into a procedural or substantive
law becomes irrelevant when the country of the forum has a "borrowing
statute." Said statute has the practical effect of treating the foreign
statute of limitation as one of substance (Goodrich, Conflict of Laws 152153 [1938]). A "borrowing statute" directs the state of the forum to apply
the foreign statute of limitations to the pending claims based on a foreign
law (Siegel, Conflicts, 183 [1975]). While there are several kinds of
"borrowing statutes," one form provides that an action barred by the laws
of the place where it accrued, will not be enforced in the forum even
though the local statute has not run against it (Goodrich and Scoles,
Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil
Procedure is of this kind. Said Section provides:
If by the laws of the state or country where the cause of action arose, the
action is barred, it is also barred in the Philippines Islands.
Section 48 has not been repealed or amended by the Civil Code of the
Philippines. Article 2270 of said Code repealed only those provisions of the
Code of Civil Procedures as to which were inconsistent with it. There is no
provision in the Civil Code of the Philippines, which is inconsistent with or
contradictory to Section 48 of the Code of Civil Procedure (Paras,
Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be
enforced ex proprio vigore insofar as it ordains the application in this
jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to the
forum's public policy (Canadian Northern Railway Co. v. Eggen, 252 U.S.
553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year
prescriptive period of the Amiri Decree No. 23 of 1976 as regards the
claims in question would contravene the public policy on the protection to
labor.
In the Declaration of Principles and State Policies, the 1987 Constitution
emphasized that:
The state shall promote
development. (Sec. 10).
social
justice
in
all
phases
of
national
The state affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare (Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987 Constitution
provides:
Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
Having determined that the applicable law on prescription is the
Philippine law, the next question is whether the prescriptive period
governing the filing of the claims is three years, as provided by the Labor
Code or ten years, as provided by the Civil Code of the Philippines.
The claimants are of the view that the applicable provision is Article 1144
of the Civil Code of the Philippines, which provides:
The following actions must be brought within ten years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
other hand, Article 291 of the Labor Code of the Philippines provides the
prescriptive period for filing "money claims arising from employeremployee relations." The claims in the cases at bench all arose from the
employer-employee relations, which is broader in scope than claims
arising from a specific law or from the collective bargaining agreement.
The contention of the POEA Administrator, that the three-year prescriptive
period under Article 291 of the Labor Code of the Philippines applies only
to money claims specifically recoverable under said Code, does not find
support in the plain language of the provision. Neither is the contention of
the claimants in G.R. Nos. 104911-14 that said Article refers only to claims
"arising from the employer's violation of the employee's right," as
provided by the Labor Code supported by the facial reading of the
provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776,
claimants aver: (1) that while their complaints were filed on June 6, 1984
with POEA, the case was decided only on January 30, 1989, a clear denial
of their right to a speedy disposition of the case; and (2) that NLRC and
the POEA Administrator should have declared AIBC and BRII in default
(Rollo,
pp.
31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution,
which provides:
Sec. 16. All persons shall have the right to a speedy disposition of their
cases before all judicial, quasi-judicial, or administrative bodies.
It is true that the constitutional right to "a speedy disposition of cases" is
not limited to the accused in criminal proceedings but extends to all
parties in all cases, including civil and administrative cases, and in all
proceedings, including judicial and quasi-judicial hearings. Hence, under
the Constitution, any party to a case may demand expeditious action on all
officials who are tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy
disposition of cases" is a relative term. Just like the constitutional
guarantee of "speedy trial" accorded to the accused in all criminal
proceedings, "speedy disposition of cases" is a flexible concept. It is
consistent with delays and depends upon the circumstances of each case.
arbitrary
and
Caballero laid down the factors that may be taken into consideration in
determining whether or not the right to a "speedy disposition of cases"
has been violated, thus:
In the determination of whether or not the right to a "speedy trial" has
been violated, certain factors may be considered and balanced against
each other. These are length of delay, reason for the delay, assertion of
the right or failure to assert it, and prejudice caused by the delay. The
same factors may also be considered in answering judicial inquiry whether
or not a person officially charged with the administration of justice has
violated the speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
It must be here emphasized that the right to a speedy disposition of a
case, like the right to speedy trial, is deemed violated only when the
proceeding is attended by vexatious, capricious, and oppressive delays; or
when unjustified postponements of the trial are asked for and secured, or
when without cause or justified motive a long period of time is allowed to
elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a copy
of the amended complaint, claimants had been asking that AIBC and BRII
be declared in default for failure to file their answers within the ten-day
period provided in Section 1, Rule III of Book VI of the Rules and
Regulations of the POEA. At that time, there was a pending motion of AIBC
and BRII to strike out of the records the amended complaint and the
"Compliance" of claimants to the order of the POEA, requiring them to
submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their
final disposition in the administrative level after seven years from their
inception, cannot be said to be attended by unreasonable, arbitrary and
oppressive delays as to violate the constitutional rights to a speedy
disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767
claimants. Said complaint had undergone several amendments, the first
being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They were
deployed in different areas, one group in and the other groups outside of,
Bahrain. The monetary claims totalling more than US$65 million according
to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security System;
10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue
(B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of Employees
Benefits consisting of 43 pages (Annex "Q" of Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license to recruit of
AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not excluding
reportorial requirements thereof (NLRC Resolution, September 2, 1991,
pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege with sufficient definiteness and
clarity of some facts, the claimants were ordered to comply with the
motion of AIBC for a bill of particulars. When claimants filed their
"Compliance and Manifestation," AIBC moved to strike out the complaint
from the records for failure of claimants to submit a proper bill of
particulars. While the POEA Administrator denied the motion to strike out
the complaint, he ordered the claimants "to correct the deficiencies"
pointed out by AIBC.
Before an intelligent answer could be filed in response to the complaint,
the records of employment of the more than 1,700 claimants had to be
retrieved from various countries in the Middle East. Some of the records
dated as far back as 1975.
The hearings on the merits of the claims before the POEA Administrator
were interrupted several times by the various appeals, first to NLRC and
then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases were filed
against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29,
1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted that the
exact number of claimants had never been completely established
(Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the three
new cases were consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating the
proceedings, thus:
These cases could have been spared the long and arduous route towards
resolution had the parties and their counsel been more interested in
pursuing the truth and the merits of the claims rather than exhibiting a
fanatical reliance on technicalities. Parties and counsel have made these
cases a litigation of emotion. The intransigence of parties and counsel is
remarkable. As late as last month, this Commission made a last and final
attempt to bring the counsel of all the parties (this Commission issued a
special order directing respondent Brown & Root's resident agent/s to
appear) to come to a more conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in the
disposition of the cases, to the lament of NLRC, which complained:
It is very evident from the records that the protagonists in these
consolidated cases appear to be not only the individual complainants, on
the one hand, and AIBC and Brown & Root, on the other hand. The two
lawyers for the complainants, Atty. Gerardo Del Mundo and Atty. Florante
De Castro, have yet to settle the right of representation, each one
persistently claiming to appear in behalf of most of the complainants. As a
result, there are two appeals by the complainants. Attempts by this
Commission to resolve counsels' conflicting claims of their respective
authority to represent the complainants prove futile. The bickerings by
these two counsels are reflected in their pleadings. In the charges and
countercharges of falsification of documents and signatures, and in the
disbarment proceedings by one against the other. All these have, to a
large extent, abetted in confounding the issues raised in these cases,
jumble the presentation of evidence, and even derailed the prospects of
if the
when
were
claim
C. The claimants in G.R. No. 104776 also urged that the POEA
Administrator and NLRC should have declared Atty. Florante De Castro
guilty of "forum shopping, ambulance chasing activities, falsification,
duplicity and other unprofessional activities" and his appearances as
counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to
put a stop to the practice of some parties of filing multiple petitions and
complaints involving the same issues, with the result that the courts or
agencies have to resolve the same issues. Said Rule, however, applies only
to petitions filed with the Supreme Court and the Court of Appeals. It is
entitled "Additional Requirements For Petitions Filed with the Supreme
Court and the Court of Appeals To Prevent Forum Shopping or Multiple
Filing of Petitioners and Complainants." The first sentence of the circular
expressly states that said circular applies to an governs the filing of
petitions in the Supreme Court and the Court of Appeals.
While Administrative Circular No. 04-94 extended the application of the
anti-forum shopping rule to the lower courts and administrative agencies,
said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical
conduct against Atty. De Castro because NLRC and POEA have no
jurisdiction to investigate charges of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14,
1992 was filed by Atty. Gerardo A. Del Mundo to protect his claim for
attorney's fees for legal services rendered in favor of the claimants (G.R.
No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court or
administrative agency which renders and executes the money judgment
secured by the lawyer for his clients. The lawyer shall cause written notice
thereof to be delivered to his clients and to the adverse party (Revised
Rules of Court, Rule 138, Sec. 37). The statement of the claim for the
charging lien of Atty. Del Mundo should have been filed with the
administrative agency that rendered and executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De
Castro and Atty. Katz Tierra for violation of the Code of Professional
Responsibility should be filed in a separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting
their formula of "Three Hours Average Daily Overtime" in computing the
overtime payments. They claim that it was BRII itself which proposed the
formula during the negotiations for the settlement of their claims in
Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 2122).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain
dated April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President and the Area
Manager, Middle East, of Brown & Root Co. and the Summary of the
compensation offered by the Company to the employees in respect of the
difference of pay of the wages of the overtime and the difference of
vacation leave and the perusal of the documents attached thereto i.e.,
minutes of the meetings between the Representative of the employees
and the management of the Company, the complaint filed by the
employees on 14/2/83 where they have claimed as hereinabove stated,
sample of the Service Contract executed between one of the employees
and the company through its agent in (sic)Philippines, Asia International
Builders Corporation where it has been provided for 48 hours of work per
week and an annual leave of 12 days and an overtime wage of 1 & 1/4 of
the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following averages:
A. 1. The average duration of the actual service of the employee is 35
months for the Philippino (sic) employees . . . .
2. The average wage per hour for the Philippino (sic) employee is
US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all public holidays
and weekends.
4. Payment of US$8.72 per months (sic) of service as compensation for the
difference of the wages of the overtime done for each Philippino (sic)
employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by
them but by a subordinate official in the Bahrain Department of Labor; (2)
that there was no showing that the Bahrain Minister of Labor had
approved said memorandum; and (3) that the offer was made in the
course of the negotiation for an amicable settlement of the claims and
therefore it was not admissible in evidence to prove that anything is due
to the claimants.
While said document was presented to the POEA without observing the
rule on presenting official documents of a foreign government as provided
in Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be
admitted in evidence in proceedings before an administrative body. The
opposing parties have a copy of the said memorandum, and they could
easily verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as contained in
the memorandum is another matter. Under Section 27, Rule 130 of the
1989 Revised Rules on Evidence, an offer to settle a claim is not an
admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. In civil cases, an offer of
compromise is not an admission of any liability, and is not admissible in
evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the
record with unwanted evidence but a statement of public policy. There is
great public interest in having the protagonists settle their differences
amicable before these ripen into litigation. Every effort must be taken to
encourage them to arrive at a settlement. The submission of offers and
counter-offers in the negotiation table is a step in the right direction. But
to bind a party to his offers, as what claimants would make this Court do,
would defeat the salutary purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for
greater benefits than those stipulated in the overseas-employment
contracts of the claimants. It was of the belief that "where the laws of the
host country are more favorable and beneficial to the workers, then the
laws of the host country shall form part of the overseas employment
contract." It quoted with approval the observation of the POEA
Administrator that ". . . in labor proceedings, all doubts in the
implementation of the provisions of the Labor Code and its implementing
regulations shall be resolved in favor of labor" (Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically when it
refused to enforce the overseas-employment contracts, which became the
law of the parties. They contend that the principle that a law is deemed to
be a part of a contract applies only to provisions of Philippine law in
relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and
BRII themselves, provided that the laws of the host country became
applicable to said contracts if they offer terms and conditions more
favorable that those stipulated therein. It was stipulated in said contracts
that:
The Employee agrees that while in the employ of the Employer, he will not
engage in any other business or occupation, nor seek employment with
anyone other than the Employer; that he shall devote his entire time and
attention and his best energies, and abilities to the performance of such
duties as may be assigned to him by the Employer; that he shall at all
times be subject to the direction and control of the Employer; and that the
benefits provided to Employee hereunder are substituted for and in lieu of
all other benefits provided by any applicable law, provided of course, that
total remuneration and benefits do not fall below that of the host country
regulation or custom, it being understood that should applicable laws
establish that fringe benefits, or other such benefits additional to the
compensation herein agreed cannot be waived, Employee agrees that such
presented by AIBC and BRII, that some findings of fact of the POEA
Administrator were not supported by the evidence, and that some of the
evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107).
But instead of remanding the case to the POEA Administrator for a new
hearing, which means further delay in the termination of the case, NLRC
decided to pass upon the validity of the claims itself. It is this procedure
that AIBC and BRII complain of as being irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence submitted on
appeal, the same evidence which NLRC found to have been "unilaterally
submitted by the claimants and not disclosed to the adverse parties"
(Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted to
the POEA administrator by the claimants after the cases were deemed
submitted for resolution and which were taken cognizance of by the POEA
Administrator in resolving the cases. While AIBC and BRII had no
opportunity to refute said evidence of the claimants before the POEA
Administrator, they had all the opportunity to rebut said evidence and to
present
their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII
themselves were able to present before NLRC additional evidence which
they failed to present before the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to
"use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the
evidence of both parties submitted before the POEA Administrator and
NLRC, the latter considered that it was not expedient to remand the cases
to the POEA Administrator for that would only prolong the already
protracted legal controversies.
Even the Supreme Court has decided appealed cases on the merits instead
of remanding them to the trial court for the reception of evidence, where
the same can be readily determined from the uncontroverted facts on
record (Development Bank of the Philippines v. Intermediate Appellate
Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations
Commission, 127 SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion when it
ordered the POEA Administrator to hold new hearings for 683 claimants
listed in Annex D of the Resolution dated September 2, 1991 whose claims
had been denied by the POEA Administrator "for lack of proof" and for 69
claimants listed in Annex E of the same Resolution, whose claims had been
found by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of the
Philippines, which empowers it "[to] conduct investigation for the
determination of a question, matter or controversy, within its
jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC has no authority under Article
218(c) to remand a case involving claims which had already been
dismissed because such provision contemplates only situations where
there is still a question or controversy to be resolved (Rollo, pp. 41-42).
A principle well embedded in Administrative Law is that the technical rules
of procedure and evidence do not apply to the proceedings conducted by
administrative agencies (First Asian Transport & Shipping Agency, Inc. v.
Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House, Inc. v. Ople, 152
SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor
Code of the Philippines and is now the bedrock of proceedings before
NLRC.
Notwithstanding the non-applicability of technical rules of procedure and
evidence in administrative proceedings, there are cardinal rules which
must be observed by the hearing officers in order to comply with the due
process requirements of the Constitution. These cardinal rules are collated
in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).
VIII
The three petitions were filed under Rule 65 of the Revised Rules of Court
on the grounds that NLRC had committed grave abuse of discretion
amounting to lack of jurisdiction in issuing the questioned orders. We find
no such abuse of discretion.
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED.
SO ORDERED.
G.R. No. 61594 September 28, 1990
PAKISTAN
INTERNATIONAL
AIRLINES
CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE
LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B.
FARRALES and MARIA MOONYEEN MAMASIG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"),
a foreign corporation licensed to do business in the Philippines, executed in Manila
two (2) separate contracts of employment, one with private respondent Ethelynne
B. Farrales and the other with private respondent Ma. M.C. Mamasig. 1 The
contracts, which became effective on 9 January 1979, provided in pertinent portion
as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended by the mutual
consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA reserves the right to
terminate this agreement at any time by giving the EMPLOYEE notice in writing in
advance one month before the intended termination or in lieu thereof, by paying the
EMPLOYEE wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the laws of Pakistan,
and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any
matter arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their training period, they
began discharging their job functions as flight attendants, with base station in
Manila and flying assignments to different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration
of the contracts of employment, PIA through Mr. Oscar Benares, counsel for and
official of the local branch of PIA, sent separate letters both dated 1 August 1980 to
private respondents Farrales and Mamasig advising both that their services as flight
stewardesses would be terminated "effective 1 September 1980, conformably to
clause 6 (b) of the employment agreement [they had) executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a
complaint, docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of
company benefits and bonuses, against PIA with the then Ministry of Labor and
Employment ("MOLE"). After several unfruitful attempts at conciliation, the MOLE
hearing officer Atty. Jose M. Pascual ordered the parties to submit their position
papers and evidence supporting their respective positions. The PIA submitted its
position paper, 3 but no evidence, and there claimed that both private respondents
were habitual absentees; that both were in the habit of bringing in from abroad
sizeable quantities of "personal effects"; and that PIA personnel at the Manila
International Airport had been discreetly warned by customs officials to advise
private respondents to discontinue that practice. PIA further claimed that the
services of both private respondents were terminated pursuant to the provisions of
the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered
the reinstatement of private respondents with full backwages or, in the alternative,
the payment to them of the amounts equivalent to their salaries for the remainder
of the fixed three-year period of their employment contracts; the payment to private
respondent Mamasig of an amount equivalent to the value of a round trip ticket
Manila-USA Manila; and payment of a bonus to each of the private respondents
equivalent to their one-month salary. 4 The Order stated that private respondents
had attained the status of regular employees after they had rendered more than a
year of continued service; that the stipulation limiting the period of the employment
contract to three (3) years was null and void as violative of the provisions of the
Labor Code and its implementing rules and regulations on regular and casual
employment; and that the dismissal, having been carried out without the requisite
clearance from the MOLE, was illegal and entitled private respondents to
reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy
Minister, MOLE, adopted the findings of fact and conclusions of the Regional
Director and affirmed the latter's award save for the portion thereof giving PIA the
option, in lieu of reinstatement, "to pay each of the complainants [private
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was
similarly very explicit about the jurisdiction of the Regional Director over
termination of employment cases:
Under PD 850, termination cases with or without CBA are now placed under
the original jurisdiction of the Regional Director. Preventive suspension cases, now
made cognizable for the first time, are also placed under the Regional Director.
Before PD 850, termination cases where there was a CBA were under the jurisdiction
of the grievance machinery and voluntary arbitration, while termination cases
where there was no CBA were under the jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its implementing
rules and regulations with respect to termination and preventive suspension cases
are:
1. The Regional Director is now required to rule on every application for clearance,
whether there is opposition or not, within ten days from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional Director had
jurisdiction, still his order was null and void because it had been issued in violation
of petitioner's right to procedural due process . 6 This claim, however, cannot be
given serious consideration. Petitioner was ordered by the Regional Director to
submit not only its position paper but also such evidence in its favor as it might
have. Petitioner opted to rely solely upon its position paper; we must assume it had
no evidence to sustain its assertions. Thus, even if no formal or oral hearing was
conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner
PIA was able to appeal his case to the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due process must be
rejected. At the time the complaint was filed by private respondents on 21
September 1980 and at the time the Regional Director issued his questioned order
on 22 January 1981, applicable regulation, as noted above, specified that a
"dismissal without prior clearance shall be conclusively presumed to be
termination of employment without a cause", and the Regional Director was
required in such case to" order the immediate reinstatement of the employee and
the payment of his wages from the time of the shutdown or dismiss until . . .
reinstatement." In other words, under the then applicable rule, the Regional Director
did not even have to require submission of position papers by the parties in view of
the conclusive (juris et de jure) character of the presumption created by such
applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor
and Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the
Implementing Rules and Regulations, the termination of [an employee] which was
Art. 281. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreements of the parties,
an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: provided, that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered as
regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists. (Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion
to examine in detail the question of whether employment for a fixed term has been
outlawed under the above quoted provisions of the Labor Code. After an extensive
examination of the history and development of Articles 280 and 281, the Court
reached the conclusion that a contract providing for employment with a fixed period
was not necessarily unlawful:
There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc. But where no such intent to
circumvent the law is shown, or stated otherwise, where the reason for the law does
not exist e.g. where it is indeed the employee himself who insists upon a period or
where the nature of the engagement is such that, without being seasonal or for a
specific project, a definite date of termination is a sine qua non would an agreement
fixing a period be essentially evil or illicit, therefore anathema Would such an
agreement come within the scope of Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the employee to be secured in . . . (his)
employment?"
As it is evident from even only the three examples already given that Article 280 of
the Labor Code, under a narrow and literal interpretation, not only fails to exhaust
the gamut of employment contracts to which the lack of a fixed period would be an
anomaly, but would also appear to restrict, without reasonable distinctions, the
right of an employee to freely stipulate with his employer the duration of his
engagement, it logically follows that such a literal interpretation should be
eschewed or avoided. The law must be given reasonable interpretation, to preclude
absurdity in its application. Outlawing the whole concept of term employment and
subverting to boot the principle of freedom of contract to remedy the evil of
tenure from accruing in favor of private respondents even during the limited period
of three (3) years, 13 and thus to escape completely the thrust of Articles 280 and
281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement
which specifies, firstly, the law of Pakistan as the applicable law of the agreement
and, secondly, lays the venue for settlement of any dispute arising out of or in
connection with the agreement "only [in] courts of Karachi Pakistan". The first
clause of paragraph 10 cannot be invoked to prevent the application of Philippine
labor laws and regulations to the subject matter of this case, i.e., the employeremployee relationship between petitioner PIA and private respondents. We have
already pointed out that the relationship is much affected with public interest and
that the otherwise applicable Philippine laws and regulations cannot be rendered
illusory by the parties agreeing upon some other law to govern their relationship.
Neither may petitioner invoke the second clause of paragraph 10, specifying the
Karachi courts as the sole venue for the settlement of dispute; between the
contracting parties. Even a cursory scrutiny of the relevant circumstances of this
case will show the multiple and substantive contacts between Philippine law and
Philippine courts, on the one hand, and the relationship between the parties, upon
the other: the contract was not only executed in the Philippines, it was also
performed here, at least partially; private respondents are Philippine citizens and
respondents, while petitioner, although a foreign corporation, is licensed to do
business (and actually doing business) and hence resident in the Philippines; lastly,
private respondents were based in the Philippines in between their assigned flights
to the Middle East and Europe. All the above contacts point to the Philippine courts
and administrative agencies as a proper forum for the resolution of contractual
disputes between the parties. Under these circumstances, paragraph 10 of the
employment agreement cannot be given effect so as to oust Philippine agencies
and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any
event, the petitioner PIA did not undertake to plead and prove the contents of
Pakistan law on the matter; it must therefore be presumed that the applicable
provisions of the law of Pakistan are the same as the applicable provisions of
Philippine law. 14
We conclude that private respondents Farrales and Mamasig were illegally
dismissed and that public respondent Deputy Minister, MOLE, had not committed
any grave abuse of discretion nor any act without or in excess of jurisdiction in
ordering their reinstatement with backwages. Private respondents are entitled to
three (3) years backwages without qualification or deduction. Should their
reinstatement to their former or other substantially equivalent positions not be
feasible in view of the length of time which has gone by since their services were
unlawfully terminated, petitioner should be required to pay separation pay to
private respondents amounting to one (1) month's salary for every year of service
rendered by them, including the three (3) years service putatively rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and
the Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except
that (1) private respondents are entitled to three (3) years backwages, without
deduction or qualification; and (2) should reinstatement of private respondents to
their former positions or to substantially equivalent positions not be feasible, then
petitioner shall, in lieu thereof, pay to private respondents separation pay
amounting to one (1)-month's salary for every year of service actually rendered by
them and for the three (3) years putative service by private respondents. The
Temporary Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs
against petitioner.
SO ORDERED.
REALTY
DECISION
BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage
constituted over a third party mortgagors property situated in the Philippines by
filing an action for the collection of the principal loan before foreign courts?
Sought to be reversed in the instant petition for review on certiorari under Rule 45
of the Rules of Court are the decision [1] of public respondent Court of Appeals in CA
G.R. CV No. 51094, promulgated on 30 September 1997 and its resolution, [2] dated
22 May 1998, denying petitioners motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international banking and
financing institution duly licensed to do business in the Philippines, organized and
existing under and by virtue of the laws of the State of California, United States of
America while private respondent American Realty Corporation (ARC) is a domestic
corporation.
Bank of America International Limited (BAIL), on the other hand, is a limited liability
company organized and existing under the laws of England.
As borne by the records, BANTSA and BAIL on several occasions granted three
major multi-million United States (US) Dollar loans to the following corporate
borrowers: (1) Liberian Transport Navigation, S.A.; (2) El Challenger S.A. and (3)
Eshley Compania Naviera S.A. (hereinafter collectively referred to as borrowers),
all of which are existing under and by virtue of the laws of the Republic of Panama
and are foreign affiliates of private respondent. [3]
Due to the default in the payment of the loan amortizations, BANTSA and the
corporate borrowers signed and entered into restructuring agreements. As
additional security for the restructured loans, private respondent ARC as third party
mortgagor executed two real estate mortgages, [4] dated 17 February 1983 and 20
July 1984, over its parcels of land including improvements thereon, located at Barrio
Sto. Cristo, San Jose Del Monte, Bulacan, and which are covered by Transfer
Certificate of Title Nos. T-78759, T-78760, T-78761, T-78762 and T-78763.
Eventually, the corporate borrowers defaulted in the payment of the restructured
loans prompting petitioner BANTSA to file civil actions [5] before foreign courts for the
collection of the principal loan, to wit:
a) In England, in its High Court of Justice, Queens Bench Division, Commercial
Court (1992-Folio No. 2098) against Liberian Transport Navigation S.A., Eshley
Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A., Eddie
Navigation Corp., S.A., Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua
on June 17, 1992.
b) In England, in its High Court of Justice, Queens Bench Division, Commercial Court
(1992-Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A.,
Eduardo Katipuan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of
1992) against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping
Company S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A.,
Litonjua Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo
Katipunan Litonjua on November 19, 1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of
1992) against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping
Company, S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A.,
Litonjua Chartering (Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November
21, 1992.
In the civil suits instituted before the foreign courts, private respondent ARC, being
a third party mortgagor, was not impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial
Sheriff of Bulacan, Philippines, an application for extrajudicial foreclosure [6] of real
estate mortgage.
On 22 January 1993, after due publication and notice, the mortgaged real properties
were sold at public auction in an extrajudicial foreclosure sale, with Integrated
Credit and Corporation Services Co. (ICCS) as the highest bidder for the sum of
Twenty Four Million Pesos (P24,000,000.00).[7]
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court,
Branch 159, an action for damages [8] against the petitioner, for the latters act of
foreclosing extrajudicially the real estate mortgages despite the pendency of civil
suits before foreign courts for the collection of the principal loan.
In its answer[9] petitioner alleged that the rule prohibiting the mortgagee from
foreclosing the mortgage after an ordinary suit for collection has been filed, is not
applicable in the present case, claiming that:
a) The plaintiff, being a mere third party mortgagor and not a party to the
principal restructuring agreements, was never made a party defendant in the civil
cases filed in Hongkong and England;
b) There is actually no civil suit for sum of money filed in the Philippines since the
civil actions were filed in Hongkong and England. As such, any decisions (sic) which
may be rendered in the abovementioned courts are not (sic) enforceable in the
Philippines unless a separate action to enforce the foreign judgments is first filed in
the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules of Court.
c) Under English Law, which is the governing law under the principal agreements,
the mortgagee does not lose its security interest by filing civil actions for sums of
money.
On 14 December 1993, private respondent filed a motion for suspension [10] of the
redemption period on the ground that it cannot exercise said right of redemption
without at the same time waiving or contradicting its contentions in the case that
the foreclosure of the mortgage on its properties is legally improper and therefore
invalid.
In an order[11] dated 28 January 1994, the trial court granted the private
respondents motion for suspension after which a copy of said order was duly
received by the Register of Deeds of Meycauayan, Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the
foreclosure sale, consolidated its ownership over the real properties, resulting to the
issuance of Transfer Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471
and T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the
real properties to Stateland Investment Corporation for the amount of Thirty Nine
Million Pesos (P39,000,000.00).[12] Accordingly, Transfer Certificate of Title Nos. T187781(m), T-187782(m), T-187783(m), T-16653P(m) and T-16652P(m) were issued
in the latters name.
After trial, the lower court rendered a decision [13] in favor of private respondent ARC
dated 12 May 1993, the decretal portion of which reads:
2. Whether or not the award by the lower court of actual and exemplary damages
in favor of private respondent ARC, as third-party mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that a waiver of
the remedy of foreclosure requires the concurrence of two requisites: an ordinary
civil action for collection should be filed and subsequently a final judgment be
correspondingly rendered therein.
According to petitioner, the mere filing of a personal action to collect the principal
loan does not suffice; a final judgment must be secured and obtained in the
personal action so that waiver of the remedy of foreclosure may be appreciated. To
put it differently, absent any of the two requisites, the mortgagee-creditor is
deemed not to have waived the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioners arguments untenable and upholds the
jurisprudence laid down in Bachrach[15] and similar cases adjudicated thereafter,
thus:
In the absence of express statutory provisions, a mortgage creditor may institute
against the mortgage debtor either a personal action for debt or a real action to
foreclose the mortgage. In other words, he may pursue either of the two remedies,
but not both. By such election, his cause of action can by no means be impaired,
for each of the two remedies is complete in itself. Thus, an election to bring a
personal action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property itself. And, if he
waives such personal action and pursues his remedy against the mortgaged
property, an unsatisfied judgment thereon would still give him the right to sue for a
deficiency judgment, in which case, all the properties of the defendant, other than
the mortgaged property, are again open to him for the satisfaction of the
deficiency. In either case, his remedy is complete, his cause of action undiminished,
and any advantages attendant to the pursuit of one or the other remedy are purely
accidental and are all under his right of election. On the other hand, a rule that
would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property,
would result not only in multiplicity of suits so offensive to justice (Soriano vs.
Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio vs. San Agustin, 25
Phil., 404), but also in subjecting the defendant to the vexation of being sued in the
place of his residence or of the residence of the plaintiff, and then again in the place
where the property lies.
A mortgagee who files a suit for collection abandons the remedy of foreclosure of
the chattel mortgage constituted over the personal property as security for the debt
or value of the promissory note when he seeks to recover in the said collection
suit.
x x x When the mortgagee elects to file a suit for collection, not foreclosure,
thereby abandoning the chattel mortgage as basis for relief, he clearly manifests his
lack of desire and interest to go after the mortgaged property as security for the
promissory note x x x.
Contrary to petitioners arguments, we therefore reiterate the rule, for clarity and
emphasis, that the mere act of filing of an ordinary action for collection operates as
a waiver of the mortgage-creditors remedy to foreclose the mortgage. By the mere
filing of the ordinary action for collection against the principal debtors, the
petitioner in the present case is deemed to have elected a remedy, as a result of
which a waiver of the other necessarily must arise. Corollarily, no final judgment in
the collection suit is required for the rule on waiver to apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate Appellate Court,[23] a case
relied upon by petitioner, supposedly to buttress its contention, this Court had
occasion to rule that the mere act of filing a collection suit for the recovery of a
debt secured by a mortgage constitutes waiver of the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is nonpayment of the debt. Nevertheless, alternative remedies are available for its
enjoyment and exercise. Petitioner then may opt to exercise only one of two
remedies so as not to violate the rule against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. vs.
Icarangal.[24]
For non-payment of a note secured by mortgage, the creditor has a single cause of
action against the debtor. This single cause of action consists in the recovery of the
credit with execution of the security. In other words, the creditor in his action may
make two demands, the payment of the debt and the foreclosure of his
mortgage. But both demands arise from the same cause, the non-payment of the
debt, and for that reason, they constitute a single cause of action. Though the debt
and the mortgage constitute separate agreements, the latter is subsidiary to the
former, and both refer to one and the same obligation. Consequently, there exists
only one cause of action for a single breach of that obligation. Plaintiff, then, by
applying the rules above stated, cannot split up his single cause of action by filing a
complaint for payment of the debt, and thereafter another complaint for foreclosure
of the mortgage. If he does so, the filing of the first complaint will bar the
subsequent complaint. By allowing the creditor to file two separate complaints
simultaneously or successively, one to recover his credit and another to foreclose
his mortgage, we will, in effect, be authorizing him plural redress for a single breach
of contract at so much cost to the courts and with so much vexation and oppression
to the debtor.
Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine
enunciated in Caltex, wherein this High Court relaxed the application of the general
rules to wit:
In the present case, however, we shall not follow this rule to the letter but declare
that it is the collection suit which was waived and/or abandoned. This ruling is more
in harmony with the principles underlying our judicial system. It is of no moment
that the collection suit was filed ahead, what is determinative is the fact that the
foreclosure proceedings ended even before the decision in the collection suit was
rendered. x x x
Notably, though, petitioner took the Caltex ruling out of context. We must stress
that the Caltex case was never intended to overrule the well-entrenched doctrine
enunciated in Bachrach, which to our mind still finds applicability in cases of this
sort. To reiterate, Bachrach is still good law.
We then quote the decision[25]of the trial court, in the present case, thus:
The aforequoted ruling in Caltex is the exception rather than the rule, dictated by
the peculiar circumstances obtaining therein. In the said case, the Supreme Court
chastised Caltex for making x x x a mockery of our judicial system when it initially
filed a collection suit then, during the pendency thereof, foreclosed extrajudicially
the mortgaged property which secured the indebtedness, and still pursued the
collection suit to the end. Thus, to prevent a mockery of our judicial system, the
collection suit had to be nullified because the foreclosure proceedings have already
been pursued to their end and can no longer be undone.
xxx
xxx
xxx
In the case at bar, it has not been shown whether the defendant pursued to the
end or are still pursuing the collection suits filed in foreign courts. There is no
occasion, therefore, for this court to apply the exception laid down by the Supreme
Court in Caltex, by nullifying the collection suits. Quite obviously, too, the aforesaid
collection suits are beyond the reach of this Court. Thus the only way the court may
prevent the spector of a creditor having plural redress for a single breach of
contract is by holding, as the Court hereby holds, that the defendant has waived
the right to foreclose the mortgages constituted by the plaintiff on its properties
originally covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78760
and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism, to say the
least.[26]
Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs.
IAC.[27] Again, petitioner tried to fit a square peg in a round hole. It must be
stressed that far from overturning the doctrine laid down in Bachrach, this Court in
PCIB buttressed its firm stand on this issue by declaring:
While the law allows a mortgage creditor to either institute a personal action for
the debt or a real action to foreclosure the mortgage, he cannot pursue both
remedies simultaneously or successively as was done by PCIB in this case.
xxx
xxx
xxx
Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3
million promissory note secured by real estate mortgages and subsequently filed a
petition for extrajudicial foreclosure, it violates the rule against splitting a cause of
action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency
of filing four civil suits before foreign courts, necessarily abandoned the remedy to
foreclose the real estate mortgages constituted over the properties of third-party
mortgagor and herein private respondent ARC. Moreover, by filing the four civil
actions and by eventually foreclosing extrajudicially the mortgages, petitioner in
effect transgressed the rules against splitting a cause of action well-enshrined in
jurisprudence and our statute books.
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after
the collection suit was filed, considering that the creditor should not be
afforded plural redress for a single breach of contract. For cause of action should
not be confused with the remedy created for its enforcement. [28]
Notably, it is not the nature of the redress which is crucial but the efficacy of the
remedy chosen in addressing the creditors cause. Hence, a suit brought before a
foreign court having competence and jurisdiction to entertain the action is deemed,
for this purpose, to be within the contemplation of the remedy available to the
mortgagee-creditor. This pronouncement would best serve the interest of justice
and fair play and further discourage the noxious practice of splitting up a lone cause
of action.
Incidentally, BANTSA alleges that under English Law, which according to petitioner
is the governing law with regard to the principal agreements, the mortgagee does
not lose its security interest by simply filing civil actions for sums of money. [29]
We rule in the negative.
This argument shows desperation on the part of petitioner to rivet its crumbling
cause. In the case at bench, Philippine law shall apply notwithstanding the
evidence presented by petitioner to prove the English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded principle in our
jurisdiction that there is no judicial notice of any foreign law. A foreign law must be
properly pleaded and proved as a fact. [30] Thus, if the foreign law involved is not
properly pleaded and proved, our courts will presume that the foreign law is the
same as our local or domestic or internal law. [31] This is what we refer to as the
doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter were
properly pleaded and proved in accordance with Section 24, Rule 132 of the Rules of
Court and the jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales,[32] said
foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and
established public policy of the forum, the said foreign law, judgment or order shall
not be applied.[33]
Additionally, prohibitive laws concerning persons, their acts or property, and those
which have for their object public order, public policy and good customs shall not be
rendered ineffective by laws or judgments promulgated, or by determinations or
conventions agreed upon in a foreign country. [34]
The public policy sought to be protected in the instant case is the principle
imbedded in our jurisdiction proscribing the splitting up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent If two or more suits are instituted on the basis of the same cause of action, the
filing of one or a judgment upon the merits in any one is available as a ground for
the dismissal of the others.
Moreover, foreign law should not be applied when its application would work
undeniable injustice to the citizens or residents of the forum. To give justice is the
most important function of law; hence, a law, or judgment or contract that is
obviously unjust negates the fundamental principles of Conflict of Laws. [35]
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is entitled to the
award of actual or compensatory damages inasmuch as the act of petitioner
BANTSA in extrajudicially foreclosing the real estate mortgages constituted a clear
violation of the rights of herein private respondent ARC, as third-party mortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss
in business, trade, property, profession, job or occupation and the same must be
proved, otherwise if the proof is flimsy and non-substantial, no damages will be
given.[36] Indeed, the question of the value of property is always a difficult one to
settle as valuation of real property is an imprecise process since real estate has no
inherent value readily ascertainable by an appraiser or by the court. [37] The opinions
of men vary so much concerning the real value of property that the best the courts
can do is hear all of the witnesses which the respective parties desire to present,
and then, by carefully weighing that testimony, arrive at a conclusion which is just
and equitable.[38]
In the instant case, petitioner assails the Court of Appeals for relying heavily on the
valuation made by Philippine Appraisal Company. In effect, BANTSA questions the
act of the appellate court in giving due weight to the appraisal report composed of
twenty three pages, signed by Mr. Lauro Marquez and submitted as evidence by
private respondent. The appraisal report, as the records would readily show, was
corroborated by the testimony of Mr. Reynaldo Flores, witness for private
respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally offered as evidence the
appraisal report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of
twenty three (23) pages which set out in detail the valuation of the property to
determine its fair market value (TSN, April 22, 1994, p. 4), in the amount of
P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one
Mr. Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company,
Inc. (TSN, ibid., p. 3). The latters testimony was subjected to extensive crossexamination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-22). [39]
In the matter of credibility of witnesses, the Court reiterates the familiar and wellentrenched rule that the factual findings of the trial court should be respected.
[40]
The time-tested jurisprudence is that the findings and conclusions of the trial
court on the credibility of witnesses enjoy a badge of respect for the reason that
trial courts have the advantage of observing the demeanor of witnesses as they
testify.[41]
This Court will not alter the findings of the trial court on the credibility of witnesses,
principally because they are in a better position to assess the same than the
appellate court.[42] Besides, trial courts are in a better position to examine real
evidence as well as observe the demeanor of witnesses. [43]
Similarly, the appreciation of evidence and the assessment of the credibility of
witnesses rest primarily with the trial court. [44] In the case at bar, we see no reason
that would justify this Court to disturb the factual findings of the trial court, as
affirmed by the Court of Appeals, with regard to the award of actual damages.
In arriving at the amount of actual damages, the trial court justified the award by
presenting the following ratiocination in its assailed decision [45], to wit:
Indeed, the Court has its own mind in the matter of valuation. The size of the
subject real properties are (sic) set forth in their individual titles, and the Court itself
has seen the character and nature of said properties during the ocular inspection it
conducted. Based principally on the foregoing, the Court makes the following
observations:
1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del
Monte, Bulacan, which is (sic) not distant from Metro Manila the biggest urban
center in the Philippines and are easily accessible through well-paved roads;
2. The properties are suitable for development into a subdivision for low cost
housing, as admitted by defendants own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been
demolished. Houses of strong materials are found in the vicinity of the property
(Exhs. 2, 2-1 to 2-7), and the vicinity is a growing community. It has even been
shown that the house of the Barangay Chairman is located adjacent to the property
in question (Exh. 27), and the only remaining piggery (named Cherry Farm) in the
vicinity is about 2 kilometers away from the western boundary of the property in
question (TSN, November 19, p. 3);
4. It will not be hard to find interested buyers of the property, as indubitably
shown by the fact that on March 18, 1994, ICCS (the buyer during the foreclosure
sale) sold the consolidated real estate properties to Stateland Investment
Corporation, in whose favor new titles were issued, i.e., TCT Nos. T-187781(m); T187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the Register of Deeds
of Meycauayan (sic), Bulacan;
5. The fact that ICCS was able to sell the subject properties to Stateland
Investment Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is
more than triple defendants appraisal (Exh. 2) clearly shows that the Court cannot
rely on defendants aforesaid estimate (Decision, Records, p. 603).
It is a fundamental legal aphorism that the conclusions of the trial judge on the
credibility of witnesses command great respect and consideration especially when
the conclusions are supported by the evidence on record. [46] Applying the foregoing
principle, we therefore hold that the trial court committed no palpable error in
giving credence to the testimony of Reynaldo Flores, who according to the records,
is a licensed real estate broker, appraiser and director of Philippine Appraisal
Company, Inc. since 1990.[47] As the records show, Flores had been with the
company for 26 years at the time of his testimony.
Of equal importance is the fact that the trial court did not confine itself to the
appraisal report dated 29 March 1993, and the testimony given by Mr. Reynaldo
Flores, in determining the fair market value of the real property. Above all these,
the record would likewise show that the trial judge in order to appraise himself of
offered by private respondent, the rudiments of fair play are deemed satisfied. In
fact, the testimony of Reynaldo Flores was put under scrutiny during the course of
the cross-examination. Under these circumstances, the court acted within the
bounds of its jurisdiction and committed no reversible error in awarding actual
damages the amount of which is higher than that prayed for. Verily, the lower
courts actuations are sanctioned by the Rules and supported by jurisprudence.
Similarly, we affirm the grant of exemplary damages although the amount of Five
Million Pesos (P5,000,000.00) awarded, being excessive, is subject to
reduction. Exemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.[51] Considering its purpose, it must be fair and reasonable
in every case and should not be awarded to unjustly enrich a prevailing party. [52] In
our view, an award of P50,000.00 as exemplary damages in the present case
qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for lack of
merit. The decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION
of the amount awarded as exemplary damages. Accordingly, petitioner is hereby
ordered to pay private respondent the sum of P99,000,000.00 as actual or
compensatory damages; P50,000.00 as exemplary damage and the costs of suit.
SO ORDERED.
FORUM NON CONVENIENS
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J.
DIOSANA AND MARCELO G. SANTOS, respondents.
DECISION
PARDO, J.:
The case before the Court is a petition for certiorari[1] to annul the following orders of
the National Labor Relations Commission (hereinafter referred to as NLRC) for
having been issued without or with excess jurisdiction and with grave abuse of
discretion:[2]
(1) Order of May 31, 1993.[3] Reversing and setting aside its earlier resolution of
August 28, 1992.[4] The questioned order declared that the NLRC, not the Philippine
Overseas Employment Administration (hereinafter referred to as POEA), had
jurisdiction over private respondents complaint;
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign
employment contract to respondent Santos. Mr. Henk advised respondent Santos
that if the contract was acceptable, to return the same to Mr. Henk in Manila,
together with his passport and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press,
effective June 30, 1988, under the pretext that he was needed at home to help with
the familys piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr.
Henks letter. Respondent Santos enclosed four (4) signed copies of the employment
contract (dated June 4, 1988) and notified them that he was going to arrive in
Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would
commence September 1, 1988 for a period of two years. [12] It provided for a monthly
salary of nine hundred dollars (US$900.00) net of taxes, payable fourteen (14) times
a year.[13]
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon
Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work
at the Palace Hotel.[14]
Subsequently, respondent Santos signed an amended employment agreement
with the Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt
represented the Palace Hotel. The Vice President (Operations and Development) of
petitioner MHICL Miguel D. Cergueda signed the employment agreement under the
word noted.
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation
leave. He returned to China and reassumed his post on July 17, 1989.
On July 22, 1989, Mr. Shmidts Executive Secretary, a certain Joanna suggested in a
handwritten note that respondent Santos be given one (1) month notice of his
release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed
by Mr. Shmidt that his employment at the Palace Hotel print shop would be
terminated due to business reverses brought about by the political upheaval in
China.[15] We quote the letter:[16]
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against
petitioners, thus:[19]
WHEREFORE, judgment is hereby rendered:
1. directing all the respondents to pay complainant jointly and severally;
a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;
b) P50,000.00 as moral damages;
c) P40,000.00 as exemplary damages; and
d) Ten (10) percent of the total award as attorneys fees.
SO ORDERED.
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the
NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating: [20]
WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void
for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the
POEA.
SO ORDERED.
On September 18, 1992, respondent Santos moved for reconsideration of the aforequoted resolution. He argued that the case was not cognizable by the POEA as he
was not an overseas contract worker. [21]
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC
directed Labor Arbiter Emerson Tumanon to hear the case on the question of
whether private respondent was retrenched or dismissed. [22]
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on
the testimonial and documentary evidence presented to and heard by him. [23]
Subsequently, Labor Arbiter Tumanon was re-assigned as trial arbiter of the National
Capital Region, Arbitration Branch, and the case was transferred to Labor Arbiter
Jose G. de Vera.[24]
On November 25, 1994, Labor Arbiter de Vera submitted his report. [25] He found that
respondent Santos was illegally dismissed from employment and recommended that
he be paid actual damages equivalent to his salaries for the unexpired portion of his
contract.[26]
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit: [27]
WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the
respondents to jointly and severally pay complainant the following computed
contractual benefits: (1) US$12,600.00 as salaries for the un-expired portion of the
parties contract; (2) US$3,600.00 as extra four (4) months salary for the two (2)
years period (sic) of the parties contract; (3) US$3,600.00 as 14th month pay for
the aforesaid two (2) years contract stipulated by the parties or a total of
US$19,800.00 or its peso equivalent, plus (4) attorneys fees of 10% of
complainants total award.
SO ORDERED.
On February 2, 1995, petitioners filed a motion for reconsideration arguing that
Labor Arbiter de Veras recommendation had no basis in law and in fact. [28]
On March 30, 1995, the NLRC denied the motion for reconsideration. [29]
Hence, this petition.[30]
On October 9, 1995, petitioners filed with this Court an urgent motion for the
issuance of a temporary restraining order and/or writ of preliminary injunction and a
motion for the annulment of the entry of judgment of the NLRC dated July 31, 1995.
[31]
On November 20, 1995, the Court denied petitioners urgent motion. The Court
required respondents to file their respective comments, without giving due course
to the petition.[32]
On March 8, 1996, the Solicitor General filed a manifestation stating that after going
over the petition and its annexes, they can not defend and sustain the position
taken by the NLRC in its assailed decision and orders. The Solicitor General prayed
that he be excused from filing a comment on behalf of the NLRC [33]
On April 30,1996, private respondent Santos filed his comment. [34]
On June 26, 1996, the Court granted the manifestation of the Solicitor General and
required the NLRC to file its own comment to the petition. [35]
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and
the case involves purely foreign elements. The only link that the Philippines has with
the case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL
are foreign corporations. Not all cases involving our citizens can be tried here.
The employment contract.-- Respondent Santos was hired directly by the Palace
Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman,
where respondent Santos was then employed. He was hired without the intervention
of the POEA or any authorized recruitment agency of the government. [36]
Under the rule of forum non conveniens, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court
is one to which the parties may conveniently resort to; (2) that the Philippine court
is in a position to make an intelligent decision as to the law and the facts; and (3)
that the Philippine court has or is likely to have power to enforce its decision. [37] The
conditions are unavailing in the case at bar.
Not Convenient.-- We fail to see how the NLRC is a convenient forum given that all
the incidents of the case - from the time of recruitment, to employment to dismissal
occurred outside the Philippines. The inconvenience is compounded by the fact that
the proper defendants, the Palace Hotel and MHICL are not nationals of the
Philippines. Neither are they doing business in the Philippines. Likewise, the main
witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law.-- Neither can an intelligent decision be
made as to the law governing the employment contract as such was perfected in
foreign soil. This calls to fore the application of the principle of lex loci
contractus (the law of the place where the contract was made). [38]
The employment contract was not perfected in the Philippines. Respondent Santos
signified his acceptance by writing a letter while he was in the Republic of
Oman. This letter was sent to the Palace Hotel in the Peoples Republic of China.
No power to determine the facts.-- Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all acts complained of took place in
Beijing, Peoples Republic of China. The NLRC was not in a position to determine
whether the Tiannamen Square incident truly adversely affected operations of the
Palace Hotel as to justify respondent Santos retrenchment.
Principle of effectiveness, no power to execute decision.-- Even assuming
that a proper decision could be reached by the NLRC, such would not have any
binding effect against the employer, the Palace Hotel. The Palace Hotel is a
corporation incorporated under the laws of China and was not even served with
summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve
controversies involving foreign employers. Neither are we saying that we do not
have power over an employment contract executed in a foreign country. If Santos
First, we note that the Vice President (Operations and Development) of MHICL,
Miguel D. Cergueda signed the employment contract as a mere witness.He merely
signed under the word noted.
When one notes a contract, one is not expressing his agreement or approval, as a
party would.[46] In Sichangco v. Board of Commissioners of Immigration,[47] the Court
recognized that the term noted means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the witnessing part of the document. The witnessing
part of the document is that which, in a deed or other formal instrument is that
part which comes after the recitals, or where there are no recitals, after the
parties (emphasis ours).[48] As opposed to a party to a contract, a witness is simply
one who, being present, personally sees or perceives a thing; a beholder, a
spectator, or eyewitness.[49] One who notes something just makes a brief written
statement[50] a memorandum or observation.
Second, and more importantly, there was no existing employer-employee
relationship between Santos and MHICL. In determining the existence of an
employer-employee relationship, the following elements are considered: [51]
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power to dismiss; and
(4) the power to control employees conduct.
MHICL did not have and did not exercise any of the aforementioned powers. It
did not select respondent Santos as an employee for the Palace Hotel. He was
referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage
respondent Santos to work. The terms of employment were negotiated and finalized
through correspondence between respondent Santos, Mr. Schmidt and Mr. Henk,
who were officers and representatives of the Palace Hotel andnot 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.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering further that
no employer-employee relationship existed between MHICL, MHC and respondent
Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over
respondents claim in NLRC NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over the following: [53]
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is
limited to disputes arising from an employer-employee relationship which can be
resolved by reference to the Labor Code, or other labor statutes, or their collective
bargaining agreements.[54]
To determine which body has jurisdiction over the present controversy, we rely on
the sound judicial principle that jurisdiction over the subject matter is conferred by
law and is determined by the allegations of the complaint irrespective of whether
the plaintiff is entitled to all or some of the claims asserted therein. [55]
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the
complaint. His failure to dismiss the case amounts to grave abuse of discretion. [56]
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the
orders and resolutions of the National Labor Relations Commission dated May 31,
1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91
(NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.
GIL MIGUEL T. PUYAT, petitioner, vs. RON ZABARTE, respondent.
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no genuine issue as to
any material fact, other than the amount of damages. If this verity is evident from
the pleadings and the supporting affidavits, depositions and admissions on file with
the court, the moving party is entitled to such remedy as a matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the August 31, 1999 Decision [1] of the Court of Appeals (CA), which
affirmed the Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil Case No.
64107; and the January 20, 2000 CA Resolution [2] which denied reconsideration.
The assailed CA Decision disposed as follows:
WHEREFORE, finding no error in the judgment appealed from, the same is
AFFIRMED."[3]
The Facts
The facts of this case, as narrated by the Court of Appeals, are as follows: [4]
It appears that on 24 January 1994, [Respondent] Ron Zabarte commenced [an
action] to enforce the money judgment rendered by the Superior Court for the State
of California, County of Contra Costa, U.S.A. On 18 March 1994, [petitioner] filed his
Answer with the following special and affirmative defenses:
x x x
x x x
x x x
8)
The Superior Court for the State of California, County of Contra Costa[,] did
not properly acquire jurisdiction over the subject matter of and over the persons
involved in [C]ase #C21-00265.
9)
The Judgment on Stipulations for Entry in Judgment in Case #C21-00265
dated December 12, 1991 was obtained without the assistance of counsel for
[petitioner] and without sufficient notice to him and therefore, was rendered in clear
violation of [petitioners] constitutional rights to substantial and procedural due
process.
10)
The Judgment on Stipulation for Entry in Judgment in Case #C21-00265
dated December 12, 1991 was procured by means of fraud or collusion or undue
influence and/or based on a clear mistake of fact and law.
11)
The Judgment on Stipulation for Entry in Judgment in Case #C21-00265
dated December 12, 1991 is contrary to the laws, public policy and canons of
morality obtaining in the Philippines and the enforcement of such judgment in the
Philippines would result in the unjust enrichment of [respondent] at the expense of
[petitioner] in this case.
12)
The Judgment on Stipulation for Entry in Judgment in Case #C21-00265
dated December 12, 1991 is null and void and unenforceable in the Philippines.
13)
In the transaction, which is the subject matter in Case #C21-00265,
[petitioner] is not in any way liable, in fact and in law, to [respondent] in this case,
as contained in [petitioners] Answer to Complaint in Case #C21-00265 dated April
1, 1991, Annex B of [respondents] Complaint dated December 6, 1993.
14)
[Respondent] is guilty of misrepresentation or falsification in the filing of his
Complaint in this case dated December 6, 1993. Worse, [respondent] has no
capacity to sue in the Philippines.
15)
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 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.
Exhibit D - [W]rit of [E]xecution
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. 166-170). 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.
The RTC[5] eventually rendered its February 21, 1997 Decision, [6] which disposed as
follows:
WHEREFORE, judgment is hereby
[respondent] the following amounts:
rendered,
ordering
[petitioner]
to
pay
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;
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
For summary judgment to be valid, Rule 34, Section 3 of the Rules of Court, requires
(a) that there must be no genuine issue as to any material fact, except for the
amount of damages; and (b) that the party presenting the motion for summary
judgment must be entitled to a judgment as a matter of law. [17] As mentioned
earlier, petitioner admitted that a foreign judgment had been rendered against him
and in favor of respondent, and that he had paid $5,000 to the latter in partial
compliance therewith. Hence, respondent, as the party presenting the Motion for
Summary Judgment, was shown to be entitled to the judgment.
The CA made short shrift of the first requirement. To show that petitioner had raised
no genuine issue, it relied instead on the finality of the foreign judgment which was,
in fact, partially executed. Hence, we shall show in the following discussion how the
defenses presented by petitioner failed to tender any genuine issue of fact, and why
a full-blown trial was not necessary for the resolution of the issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265, which involved
partnership interest, was vested in the Securities and Exchange Commission, not in
the Superior Court of California, County of Contra Costa.
We disagree. In the absence of proof of California law on the jurisdiction of courts,
we presume that such law, if any, is similar to Philippine law. We base this
conclusion on the presumption of identity or similarity, also known as processual
presumption.[18] The Complaint,[19] which respondent filed with the trial court, was
for the enforcement of a foreign judgment. He alleged therein that the action of the
foreign court was for the collection of a sum of money, breach of promissory notes,
and damages.[20]
In our jurisdiction, such a case falls under the jurisdiction of civil courts, not of the
Securities and Exchange Commission (SEC). The jurisdiction of the latter is
exclusively over matters enumerated in Section 5, PD 902-A, [21] prior to its latest
amendment. If the foreign court did not really have jurisdiction over the case, as
petitioner claims, it would have been very easy for him to show this. Since
jurisdiction is determined by the allegations in a complaint, he only had to submit a
copy of the complaint filed with the foreign court. Clearly, this issue did not warrant
trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the form of a
Compromise Agreement, cannot be executed without the parties being assisted by
their chosen lawyers. The reason for this, he points out, is to eliminate collusion,
undue influence and/or improper exertion of ascendancy by one party over the
other. He alleges that he discharged his counsel during the proceedings, because
he felt that the latter was not properly attending to the case. The judge, however,
did not allow him to secure the services of another counsel. Insisting that petitioner
settle the case with respondent, the judge practically imposed the settlement
agreement on him. In his Opposing Affidavit, petitioner states:
It is true that I was initially represented by a counsel in the proceedings in #C2100625. I discharged him because I then felt that he was not properly attending to
my case or was not competent enough to represent my interest. I asked the Judge
for time to secure another counsel but I was practically discouraged from engaging
one as the Judge was insistent that I settle the case at once with the
[respondent]. Being a foreigner and not a lawyer at that I did not know what to
do. I felt helpless and the Judge and [respondents] lawyer were the ones telling me
what to do. Under ordinary circumstances, their directives should have been taken
with a grain of salt especially so [since respondents] counsel, who was telling me
what to do, had an interest adverse to mine. But [because] time constraints and
undue influence exerted by the Judge and [respondents] counsel on me disturbed
and seriously affected my freedom to act according to my best judgment and
belief. In point of fact, the terms of the settlement were practically imposed on me
by the Judge seconded all the time by [respondents] counsel. I was then helpless
as I had no counsel to assist me and the collusion between the Judge and
[respondents] counsel was becoming more evident by the way I was treated in the
Superior Court of [t]he State of California. I signed the Judgment on Stipulation for
Entry in Judgment without any lawyer assisting me at the time and without being
fully aware of its terms and stipulations. [22]
The manifestation of petitioner that the judge and the counsel for the opposing
party had pressured him would gain credibility only if he had not been given
sufficient time to engage the services of a new lawyer. Respondents
Affidavit[23] dated May 23, 1994, clarified, however, that petitioner had sufficient
time, but he failed to retain a counsel. Having dismissed his lawyer as early as June
19, 1991, petitioner directly handled his own defense and negotiated a settlement
with respondent and his counsel in December 1991. Respondent also stated that
petitioner, ignoring the judges reminder of the importance of having a lawyer,
argued that he would be the one to settle the case and pay anyway. Eventually,
the Compromise Agreement was presented in court and signed before Judge Ellen
James on January 3, 1992. Hence, petitioners rights to counsel and to due process
were not violated.
Unjust Enrichment
Petitioner avers that the Compromise Agreement violated the norm against unjust
enrichment because the judge made him shoulder all the liabilities in the case, even
if there were two other defendants, G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the foreign judgment,
even if there are other defendants who are not being held liable together with
him. First, the foreign judgment itself does not mention these other defendants,
their participation or their liability to respondent. Second, petitioners undated
Opposing Affidavit states: [A]lthough myself and these entities were initially
represented by Atty. Lawrence L. Severson of the Law Firm Kouns, Quinlivan &
Severson, x x x I discharged x x x said lawyer. Subsequently, I assumed the
representation for myself and these firms and this was allowed by the Superior
Court of the State of California without any authorization from G.G.P. & Sons, Inc.
and the Genesis Group. [24] Clearly, it was petitioner who chose to represent the
other defendants; hence, he cannot now be allowed to impugn a decision based on
this ground.
In any event, contrary to petitioners contention, unjust enrichment or solutio
indebiti does not apply to this case. This doctrine contemplates payment when
there is no duty to pay, and the person who receives the payment has no right to
receive it.[25] In this case, petitioner merely argues that the other two defendants
whom he represented were liable together with him. This is not a case of unjust
enrichment.
We do not see, either, how the foreign judgment could be contrary to law, morals,
public policy or the canons of morality obtaining in the country. Petitioner owed
money, and the judgment required him to pay it. That is the long and the short of
this case.
In addition, the maneuverings of petitioner before the trial court reinforce our belief
that his claims are unfounded. Instead of filing opposing affidavits to support his
affirmative defenses, he filed a Motion for Reconsideration of the Order allowing
summary judgment, as well as a Motion to Dismiss the action on the ground
of forum non conveniens. His opposing affidavits were filed only after the Order of
November 29, 1995 had denied both Motions. [26] Such actuation was considered by
the trial court as a dilatory ploy which justified the resolution of the action by
summary judgment. According to the CA, petitioners allegations sought to delay
the full effects of the judgment; hence, summary judgment was proper. On this
point, we concur with both courts.
Second Question: Forum Non Conveniens
Petitioner argues that the RTC should have refused to entertain the Complaint for
enforcement of the foreign judgment on the principle of forum non conveniens. He
claims that the trial court had no jurisdiction, because the case involved partnership
interest, and there was difficulty in ascertaining the applicable law in California. All
the aspects of the transaction took place in a foreign country, and respondent is not
even Filipino.
We disagree. Under the principle of forum non conveniens, even if the exercise of
jurisdiction is authorized by law, courts may nonetheless refuse to entertain a case
for any of the following practical reasons:
1) The belief that the matter can be better tried and decided elsewhere, either
because the main aspects of the case transpired in a foreign jurisdiction or the
material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known
as forum shopping[,] merely to secure procedural advantages or to convey or
harass the defendant;
3) The unwillingness to extend local judicial facilities to non-residents or aliens
when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought
to be maintained; and
The difficulty of ascertaining foreign law. [27]
None of the aforementioned reasons barred the RTC from exercising its
jurisdiction. In the present action, there was no more need for material witnesses,
no forum shopping or harassment of petitioner, no inadequacy in the local
machinery to enforce the foreign judgment, and no question raised as to the
application of any foreign law.
Authorities agree that the issue of whether a suit should be entertained or
dismissed on the basis of the above-mentioned principle depends largely upon the
facts of each case and on the sound discretion of the trial court. [28] Since the present
action lodged in the RTC was for the enforcement of a foreign judgment, there was
no need to ascertain the rights and the obligations of the parties based on foreign
laws or contracts. The parties needed only to perform their obligations under the
Compromise Agreement they had entered into.
Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a judgment in an
action in personam rendered by a foreign tribunal clothed with jurisdiction is
presumptive evidence of a right as between the parties and their successors-ininterest by a subsequent title.[29]
Also, under Section 5(n) of Rule 131, a court -- whether in the Philippines or
elsewhere -- enjoys the presumption that it is acting in the lawful exercise of its
jurisdiction, and that it is regularly performing its official duty. [30] Its judgment may,
however, be assailed if there is evidence of want of jurisdiction, want of notice to
the party, collusion, fraud or clear mistake of law or fact. But precisely, this
possibility signals the need for a local trial court to exercise jurisdiction. Clearly, the
application of forum non coveniens is not called for.
The grounds relied upon by petitioner are contradictory. On the one hand, he insists
that the RTC take jurisdiction over the enforcement case in order to invalidate the
foreign judgment; yet, he avers that the trial court should not exercise jurisdiction
over the same case on the basis of forum non conveniens. Not only do these
defenses weaken each other, but they bolster the finding of the lower courts that he
was merely maneuvering to avoid or delay payment of his obligation.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision and
Resolution AFFIRMED. Double costs against petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.
PIONEER INTERNATIONAL, LTD.,
Petitioner,
Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
CARPIO MORALES,
- versus -
TINGA, and
VELASCO, JR., JJ.
Promulgated:
Respondents.
x-------------------------------------------------- x
DECISION
CARPIO, J.:
The Case
The Facts
Todaro alleged that PIL is a corporation duly organized under Australian laws,
while PCPI and PPHI are corporations duly organized under Philippine laws. PIL is
engaged in the ready-mix and concrete aggregates business and has established a
presence worldwide. PIL established PPHI as the holding company of the stocks of
its operating company in the Philippines, PCPI. McDonald is the Chief Executive
Officer of PILsHong Kong office while Klepzig is the President and Managing Director
of PPHI and PCPI. For his part, Todaro further alleged that he was the managing
Todaro attached
nine
letters,
marked
as
Annexes
A
to
I,
[8]
to his complaint. Annex A shows that on 15 July 1996, Todaro, under the
letterhead of Ital Tech Distributors, Inc., sent a letter to Max Lindsay (Lindsay)
of Pioneer Concrete (Hong Kong) Limited. Todaro wrote that [m]y aim is to run
again a ready-mix concrete company in thePhilippines and not to be a part-time
consultant. Otherwise, I could have charged your company with a much higher
fee.
Annex B[9] shows that on 4 September 1996, Lindsay, under the letterhead
of Pioneer Concrete (Hong Kong) Limited, responded by fax to Todaros faxed letter
to McDonald and proposed that Todaro join Pioneer on a retainer basis for 2 to 3
months on the understanding that [Todaro] would become a permanent employee if
as we expect, our entry proceeds. The faxed letter to McDonald referred to by
Lindsay is not found in the rollo and was not attached to Todaros complaint.
Annex C[10] shows that on the same date as that of Annex B, Todaro, under
the letterhead of Ital Tech Distributors, Inc., faxed another letter to Lindsay
of Pioneer Concrete (Hong Kong) Limited. Todaro asked for a formal letter
addressed to him about the proposed retainer. Todaro requested that the letter
contain a statement on his remuneration package and on his permanent
employment with PIONEER once it has established itself on a permanent basis in
the Philippines.
Annex D[11] shows that Todaro, under the letterhead of Ital Tech Distributors,
Inc., sent a letter to McDonald of PIL. Todaro confirmed the following to McDonald:
1.
That I am accepting the proposal of PIONEER INTL. as a consultant for
three (3) months, starting October 1, 1996, with a retainer fee of U.S. $15,000.00
per month;
2.
That after three (3) months consultancy, I should be employed by
PIONEER INTL., on a permanent basis, as its Managing Director or CEO in
thePhilippines. Remuneration package will be mutually agreed upon by PIONEER
and the undersigned;
3.
That Gino Martinel and the Sales Manager Jun Ong, will be hired as
well, on a permanent basis, by PIONEER as soon as the company is
established. Salary, likewise, will be accepted by both PIONEER and the respective
parties.
Further to our recent meeting in Hong Kong, I am now able to confirm my offer to
engage you as a consultant to Pioneer International Ltd. Should Pioneer proceed
with an investment in the Philippines, then Pioneer would offer you a position to
manage the premixed concrete operations.
Pioneer will probably be in a position to make a decision on proceeding with an
investment by mid January 97.
The basis for your consultancy would be:
n
Monthly fee USD 15,000 per month billed on monthly basis and
payable 15 days from billing date.
n
n
agreed.
n
Arrangement to commence from 1st November 96, reflecting your
contributions so far and to continue until Pioneer makes a decision.
Annex F[13] shows Todaros faxed reply, under the letterhead of Ital Tech
Distributors, Inc., to McDonald of Pioneer Concrete Group HK dated 19 November
Annex G[14] shows Todaros faxed reply, under the letterhead of Ital Tech
Distributors, Inc., to McDonald of PIL dated 8 April 1997. Todaro informed McDonald
that he was willing to extend assistance to the Pioneer representative
from Queensland. The tenor of the letter revealed that Todaro had not yet occupied
his expected position.
of
PPHI,
It has not proven possible for this company to meet with your expectations
regarding the conditions of your providing Pioneer with consultancy services. This,
and your refusal to consider my terms of offer of permanent employment, leave me
no alternative but to withdraw these offers of employment with this company.
As you provided services under your previous agreement with our Pioneer Hong
Kong office during the month of August, I will see that they pay you at the previous
rates until the end of August. They have authorized me on behalf of Pioneer
International Ltd. to formally advise you that the agreement will cease from August
31st as per our previous discussions.
Annex
I[16] shows
the
letter
dated
20
October
1997
of
K.M. Folwell (Folwell), PILs Executive General Manager of Australia and Asia,
to Todaro. Folwell confirmed
the
contents
of Klepzigs 18
September
1997 letter. Folwells message reads:
Thank you for your letter to Dr. Schubert dated 29th September 1997 regarding the
alleged breach of contract with you. Dr. Schubert has asked me to investigate this
matter.
I have discussed and examined the material regarding your association with Pioneer
over the period from mid 1996 through to September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well documented and
have been appropriately rewarded. However, in regard to your request and
expectation to be given permanent employment with Pioneer Philippines
Holdings, Inc. I am informed that negotiations to reach agreement on appropriate
terms and conditions have not been successful.
The employment conditions you specified in your letter to John McDonald dated
11th September are well beyond our expectations.
Mr. Todaro, I regret that we do not wish to pursue our association with you any
further. Mr. Klepzig was authorized to terminate this association and the letter he
sent to you dated 18th September has my support.
Thank you for your involvement with Pioneer. I wish you all the best for the future.
(Emphasis added)
PIL
filed,
by
special
appearance,
a
motion
to
dismiss Todaros complaint. PILs co-defendants, PCPI, PPHI, and Klepzig, filed a
separate motion to dismiss.[17] PIL asserted that the trial court has no jurisdiction
over PIL because PIL is a foreign corporation not doing business in
thePhilippines. PIL
also
questioned
the
service
of
summons
on
it.
Assuming arguendo that Klepzig is PILs agent
in
the Philippines,
it
was
notKlepzig but De Leon who received the summons for PIL. PIL further stated that
the National Labor Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that assuming that the
trial court has jurisdiction over the subject matter of the action, the complaint
should be dismissed on the ground of forum non-conveniens. Finally, PIL
maintained that the complaint does not state a cause of action because there was
no perfected contract, and no personal judgment could be rendered by the trial
court against PIL because PIL is a foreign corporation not doing business in
the Philippines and there was improper service of summons on PIL.
Todaro filed
a
Consolidated
Opposition
dated 26
August
1998 to
refute PILs assertions. PIL filed, still by special appearance, a Reply on 2 October
1998.
On 4 January 1999, the trial court issued an order [18] which ruled in favor
of Todaro. The trial court denied the motions to dismiss filed by PIL, PCPI, PPHI,
and Klepzig.
The trial court stated that the merits of a motion to dismiss a complaint for
lack of cause of action are tested on the strength of the allegation of facts in the
complaint. The trial court found that the allegations in the complaint sufficiently
establish a cause of action. The trial court declared that Todaros cause of action is
based on an alleged breach of a contractual obligation and an alleged violation of
Articles 19 and 21 of the Civil Code. Therefore, the cause of action does not lie
within the jurisdiction of the NLRC but with the trial court.
The trial court also asserted its jurisdiction over PIL, holding that PIL did
business in the Philippines when it entered into a contract withTodaro. Although PIL
questions the service of summons on Klepzig, whom PIL claims is not its agent, the
trial court ruled that PIL failed to adduce evidence to prove its contention. Finally,
on the issue of forum non-conveniens, the trial court found that it is more
convenient to hear and decide the case in the Philippines because Todaro resides in
the Philippines and the contract allegedly breached involves employment in
thePhilippines.
PIL filed an urgent omnibus motion for the reconsideration of the trial
courts 4 January 1999 order and for the deferment of filing its answer. PCPI, PPHI,
and Klepzig likewise filed an urgent omnibus motion. Todaro filed a consolidated
opposition, to which PIL, PCPI, PPHI, and Klepzig filed a joint reply. The trial court
issued an order[19] on 3 June 1999 denying the motions of PIL, PCPI, PPHI,
and Klepzig. The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days within which
to file their respective answers.
PIL did not file an answer before the trial court and instead filed a petition for
certiorari before the appellate court.
The appellate court denied PILs petition and affirmed the trial courts
ruling in toto. The dispositive portion of the appellate courts decision reads:
dated January 4, 1999 and June 3, 1999 of the Regional Trial Court of Makati City,
Branch 147, in Civil Case No, 98-124 are hereby AFFIRMED intoto.
SO ORDERED.[20]
On 14 January 2003, the appellate court dismissed [21] PILs motion for
reconsideration for lack of merit. The appellate court stated thatPILs motion raised
no new substantial or weighty arguments that could impel the appellate court from
departing or overturning its previous decision. PIL then filed a petition for review on
certiorari before this Court.
The Issues
A.
[The trial court] did not and cannot acquire jurisdiction over the person of [PIL]
considering that:
A.1.
A.2.
Moreover, the complaint does not contain appropriate allegations of
ultimate facts showing that [PIL] is doing or transacting business in
thePhilippines.
A.3.
Assuming arguendo that jurisdiction may be acquired over
the person of
[PIL], [the trial court] still failed to acquire
jurisdiction since summons
was improperly served on [PIL].
B.
[Todaro] does not have a cause of action and the complaint fails to state a
cause of action. Jurisprudence is settled in that in resolving a motion to dismiss, a
court can consider all the pleadings filed in the case, including annexes, motions
and all evidence on record.
C.
[The trial court] did not and cannot acquire jurisdiction over the subject matter
of the complaint since the allegations contained therein indubitably show that
[Todaro] bases his claims on an alleged breach of an employment contract. Thus,
exclusive jurisdiction is vested with the [NLRC].
The petition has partial merit. We affirm with modification the rulings of the
trial and appellate courts. Apart from the issue on service of summons, the rulings
of the trial and appellate courts on the issues raised by PIL are correct.
Cause of Action
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a cause of
action is the act or omission by which a party violates a right of another.
In the present case, the summary of Todaros allegations states that PIL, PCPI,
PPHI, McDonald, and Klepzig did not fulfill their contractual obligation to
employ Todaro on a permanent basis in PILs Philippine office. Todaros allegations
are thus sufficient to establish a cause of action. We quote with approval the trial
courts ruling on this matter:
court is limited to the four corners of the complaint and its annexes. It is not yet
necessary for the trial court to examine the truthfulness of the allegations in the
complaint. Such examination is proper during the trial on the merits.
Forum Non-Conveniens
As to the first sub-issue, PIL insists that its sole act of transacting or doing
business in the Philippines consisted of its investment in PPHI. Under Philippine
law, PILs mere investment in PPHI does not constitute doing business. However,
we affirm the lower courts ruling and declare that, based on the allegations
in Todaros complaint, PIL was doing business in the Philippines when it
negotiated Todarosemployment with PPHI. Section 3(d) of Republic Act No. 7042,
Foreign Investments Act of 1991, states:
PILs alleged acts in actively negotiating to employ Todaro to run its pre-mixed
concrete operations in the Philippines, which acts are hypothetically admitted
in PILs motion to dismiss, are not mere acts of a passive investor in a domestic
corporation. Such are managerial and operational acts in directing and establishing
commercial operations in the Philippines. The annexes that Todaro attached to his
complaint give us an idea on the extent of PILs involvement in the negotiations
regarding Todaros employment. In Annex E, McDonald of Pioneer Concrete Group
HK confirmed his offer to engage Todaro as a consultant of PIL. In Annex
F, Todaro accepted the consultancy. In Annex H, Klepzigof PPHI stated that PIL
authorized him to tell Todaro about the cessation of his consultancy. Finally, in
Annex I, Folwell of PIL wrote to Todaroto confirm that Pioneer no longer wishes
to be associated with Todaro and that Klepzig is authorized to terminate this
association.
Folwellfurther referred to a Dr. Schubert and to Pioneer Hong
Kong. These confirmations and references tell us that, in this instance, the various
officers and companies under the Pioneer brand name do not work independently of
each other. It cannot be denied that PIL had knowledge of and even authorized the
non-implementation of Todaros alleged permanent employment. In fact, in the
letters to Todaro, the word Pioneer was used to refer not just to PIL alone but also
to all corporations negotiating with Todaro under the Pioneer name.
Finally, the phrase doing business in the Philippines in the former version of
Section 12, Rule 14 now reads has transacted business in the Philippines. The
scope is thus broader in that it is enough for the application of the Rule that the
foreign private juridical entity has transacted business in the Philippines.[26]
In the present case, service of summons on PIL failed to follow any of the
prescribed processes. PIL had no resident agent in thePhilippines. Summons was
not served on the Securities and Exchange Commission (SEC), the designated
government agency,[31] since PIL is not registered with the SEC. Summons for PIL
was served on De Leon, Klepzigs Executive Assistant. Klepzig is PILs agent within
thePhilippines because PIL authorized Klepzig to notify Todaro of the cessation of
his consultancy (Annexes H and I).[32] The authority given by PIL to Klepzig to
Thus, we rule that PIL transacted business in the Philippines and Klepzig was
its agent within the Philippines. However, there was improper service of summons
on PIL since summons was not served personally on Klepzig.
NLRC Jurisdiction
As to the second level, Todaro prays for payment of damages due him
because of PILs non-implementation of Todaros alleged employment agreement
with PPHI. The appellate court stated its ruling on this matter, thus:
It could not be denied that there was no existing contract yet to speak of
between PIONEER INTL. and [Todaro]. Since there was an absence of an
employment contract between the two parties, this Court is of the opinion and so
holds that no employer-employee relationship actually exists. Record reveals that
all that was agreed upon by [Todaro] and the Pioneer Concrete, acting in behalf of
PIONEER INTL., was the confirmation of the offer to engage the services of the
former as consultant of PIONEER INTL. (Rollo, p. 132). The failure on the part of
PIONEER INTL. to abide by the said agreement, which was duly confirmed by
PIONEER INTL., brought about a breach of an obligation on a valid and perfected
agreement. There being no employer-employee relationship established between
[PIL] and [Todaro], it could be said that the instant case falls within the jurisdiction
of the regular courts of justice as the money claim of [Todaro] did not arise out of or
in connection with [an] employer-employee relationship. [34]
Todaros employment in the Philippines would not be with PIL but with PPHI as
stated in the 20 October 1997 letter of Folwell. Assuming the existence of the
employment agreement, the employer-employee relationship would be between
PPHI and Todaro, not between PIL andTodaro. PILs liability for the nonimplementation of the alleged employment agreement is a civil dispute properly
belonging to the regular courts. Todaros causes of action as stated in his
complaint are, in addition to breach of contract, based on violation of Articles 19
and 21 of the New Civil Code for the clear and evident bad faith and malice [35] on
the part of defendants. The NLRCs jurisdiction is limited to those enumerated under
Article 217 of the Labor Code.[36]
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated 27
September 2001 and the Resolution dated 14 January 2003 of the appellate court
are AFFIRMED with the MODIFICATION that there was improper service of
summons on Pioneer International, Ltd. The case is remanded to the trial court for
proper service of summons and trial. No costs.
SO ORDERED.
G.R. No. 162894
RAYTHEON
INTERNATIONAL,
vs.
STOCKTON W. ROUZIE, JR., respondent.
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 Decision 1 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 dismissed in a Resolution dated 26 November 1997. The Resolution became
final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for
damages before the Regional Trial Court (RTC) of Bauang, La Union. The
Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein
petitioner Raytheon International, Inc. as well as BMSI and RUST, the two
corporations impleaded in the earlier labor case. The complaint essentially
reiterated the allegations in the labor case that BMSI verbally employed respondent
to negotiate the sale of services in government projects and that respondent was
not paid the commissions due him from the Pinatubo dredging project which he
secured on behalf of BMSI. The complaint also averred that BMSI and RUST as well
as petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondents claim, it was a
foreign corporation duly licensed to do business in the Philippines and denied
entering into any arrangement with respondent or paying the latter any sum of
money. Petitioner also denied combining with BMSI and RUST for the purpose of
assuming the alleged obligation of the said companies. 9 Petitioner also referred to
the NLRC decision which disclosed that per the written agreement between
respondent and BMSI and RUST, denominated as "Special Sales Representative
Agreement," the rights and obligations of the parties shall be governed by the laws
of the State of Connecticut.10Petitioner sought the dismissal of the complaint on
grounds of failure to state a cause of action and forum non conveniens and prayed
for damages by way of compulsory counterclaim. 11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based
on Affirmative Defenses and for Summary Judgment 12 seeking the dismissal of the
complaint on grounds of forum non conveniens and failure to state a cause of
action. Respondent opposed the same. Pending the resolution of the omnibus
motion, the deposition of Walter Browning was taken before the Philippine Consulate
General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioners omnibus
motion. The trial court held that the factual allegations in the complaint, assuming
the same to be admitted, were sufficient for the trial court to render a valid
judgment thereon. It also ruled that the principle of forum non conveniens was
inapplicable because the trial court could enforce judgment on petitioner, it being a
foreign corporation licensed to do business in the Philippines. 15
Petitioner filed a Motion for Reconsideration 16 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 Petition 19 with the Court of Appeals
praying for the issuance of a writ of certiorari and a writ of injunction to set aside
the twin orders of the trial court dated 13 September 2000 and 31 July 2001 and to
enjoin the trial court from conducting further proceedings. 20
On 28 August 2003, the Court of Appeals rendered the assailed Decision 21 denying
the petition for certiorari for lack of merit. It also denied petitioners motion for
reconsideration in the assailed Resolution issued on 10 March 2004. 22
The appellate court held that although the trial court should not have confined itself
to the allegations in the complaint and should have also considered
evidence aliunde in resolving petitioners omnibus motion, it found the evidence
presented by petitioner, that is, the deposition of Walter Browning, insufficient for
purposes of determining whether the complaint failed to state a cause of action.
The appellate court also stated that it could not rule one way or the other on the
issue of whether the corporations, including petitioner, named as defendants in the
case had indeed merged together based solely on the evidence presented by
respondent. Thus, it held that the issue should be threshed out during
trial.23 Moreover, the appellate court deferred to the discretion of the trial court
when the latter decided not to desist from assuming jurisdiction on the ground of
the inapplicability of the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE
COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The
Ceferino Padua Law Office, counsel on record for respondent, manifested that the
lawyer handling the case, Atty. Rogelio Karagdag, had severed relations with the law
firm even before the filing of the instant petition and that it could no longer find the
whereabouts of Atty. Karagdag or of respondent despite diligent efforts. In a
Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing
of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI
included a valid choice of law clause, that is, that the contract shall be governed by
the laws of the State of Connecticut. It also mentions the presence of foreign
elements in the dispute namely, the parties and witnesses involved are American
corporations and citizens and the evidence to be presented is located outside the
Philippines that renders our local courts inconvenient forums. Petitioner theorizes
that the foreign elements of the dispute necessitate the immediate application of
the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases
involved in judicial resolution of conflicts-of-laws problems, namely: jurisdiction,
choice of law, and recognition and enforcement of judgments. Thus, in the
instances27 where the Court held that the local judicial machinery was adequate to
resolve controversies with a foreign element, the following requisites had to be
proved: (1) that the Philippine Court is one to which the parties may conveniently
resort; (2) that the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine Court has or is likely to have the
power to enforce its decision.28
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed
in a Philippine court and where the court has jurisdiction over the subject matter,
the parties and the res, it may or can proceed to try the case even if the rules of
conflict-of-laws or the convenience of the parties point to a foreign forum. This is an
exercise of sovereign prerogative of the country where the case is filed. 29
Jurisdiction over the nature and subject matter of an action is conferred by the
Constitution and the law30 and by the material allegations in the complaint,
irrespective of whether or not the plaintiff is entitled to recover all or some of the
claims or reliefs sought therein. 31 Civil Case No. 1192-BG is an action for damages
arising from an alleged breach of contract. Undoubtedly, the nature of the action
and the amount of damages prayed are within the jurisdiction of the RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over
herein respondent (as party plaintiff) upon the filing of the complaint. On the other
hand, jurisdiction over the person of petitioner (as party defendant) was acquired by
its voluntary appearance in court. 32
That the subject contract included a stipulation that the same shall be governed by
the laws of the State of Connecticut does not suggest that the Philippine courts, or
any other foreign tribunal for that matter, are precluded from hearing the civil
action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the
further question whether the application of a substantive law which will determine
the merits of the case is fair to both parties. 33The choice of law stipulation will
become relevant only when the substantive issues of the instant case develop, that
is, after hearing on the merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may
refuse impositions on its jurisdiction where it is not the most "convenient" or
available forum and the parties are not precluded from seeking remedies
elsewhere.34 Petitioners averments of the foreign elements in the instant case are
not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG
and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly considered
as a matter of defense. While it is within the discretion of the trial court to abstain
from assuming jurisdiction on this ground, it should do so only after vital facts are
established, to determine whether special circumstances require the courts
desistance.35
Finding no grave abuse of discretion on the trial court, the Court of Appeals
respected its conclusion that it can assume jurisdiction over the dispute
notwithstanding its foreign elements. In the same manner, the Court defers to the
sound discretion of the lower courts because their findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state
a cause of action against petitioner. Failure to state a cause of action refers to the
insufficiency of allegation in the pleading. 36 As a general rule, the elementary test
for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded.37
The complaint alleged that petitioner had combined with BMSI and RUST to function
as one company. Petitioner contends that the deposition of Walter Browning
rebutted this allegation. On this score, the resolution of the Court of Appeals is
instructive, thus:
x x x Our examination of the deposition of Mr. Walter Browning as well as other
documents produced in the hearing shows that these evidence aliunde are not quite
sufficient for us to mete a ruling that the complaint fails to state a cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and conclusive
proofs that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty
obligations of defendant Rust International in the Makar Port Project in General
Santos City, after Rust International ceased to exist after being absorbed by REC.
Other documents already submitted in evidence are likewise meager to
preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc.
and Brand Marine Service, Inc. have combined into one company, so much so that
Raytheon International, Inc., the surviving company (if at all) may be held liable for
the obligation of BMSI to respondent Rouzie for unpaid commissions. Neither these
documents clearly speak otherwise.38
As correctly pointed out by the Court of Appeals, the question of whether petitioner,
BMSI and RUST merged together requires the presentation of further evidence,
which only a full-blown trial on the merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision
and Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
THIRD DIVISION
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus -
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
MINORU KITAMURA,
Promulgated:
Respondent.
November 23, 2007
x------------------------------------------------------------------------------------x
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 Resolution [2] denying the motion for
reconsideration thereof.
When the STAR Project was near completion, the Department of Public Works
and Highways (DPWH) engaged the consultancy services ofNippon, 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]
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]
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 pretermination 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.
Frank[14] 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 forCertiorari 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]
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[22] finding 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]
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 CAG.R. SP No. 60827 (fundamentally raising the same issues as those in the first one)
and the instant petition for review thereof.
Necessarily, because the said dismissal is without prejudice and has no res
judicata effect, and even if petitioners still indicated in the verification and
certification of the second certiorari petition that the first had already been
dismissed on procedural grounds,[33] petitioners are no longer required by the Rules
to indicate in their certification of non-forum shopping in the instant petition for
review of the second certiorari petition, the status of the aforesaid first petition
before the CA. In any case, an omission in the certificate of non-forum shopping
about any event that will not constitute res judicata and litis pendentia, as in the
present case, is not a fatal defect. It will not warrant the dismissal and nullification
of the entire proceedings, considering that the evils sought to be prevented by the
said certificate are no longer present.[34]
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.[40] Considering that Hasegawa verified and certified the petition only on his
behalf and not on behalf of the other petitioner, the petition has to be denied
pursuant to Loquias v. Office of the Ombudsman.[41]Substantial compliance will not
suffice in a matter that demands strict observance of the Rules. [42] While technical
rules of procedure are designed not to frustrate the ends of justice, nonetheless,
they are intended to effect the proper and orderly disposition of cases and
effectively prevent the clogging of court dockets. [43]
Further, the Court has observed that petitioners incorrectly filed a Rule 65
petition to question the trial court's denial of their motion to dismiss. It is a wellestablished rule that an order denying a motion to dismiss is interlocutory,
and cannot be the subject of the extraordinarypetition for certiorari or mandamus.
The appropriate recourse is to file an answer and to interpose as defenses the
objections raised in themotion, 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.
The Court notes that petitioners adopted an additional but different theory
when they elevated the case to the appellate court. In the Motion to Dismiss[48] filed
with the trial court, petitioners never contended that the RTC is an inconvenient
forum. They merely argued that the applicable law which will determine the validity
or invalidity of 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 certiorarisignificantly 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.
[54]
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 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. [62] What they rather raise as grounds to question subject
matter jurisdiction are the principles of lex loci celebrationis and lex contractus, and
the state of the most significant relationship rule.
Lex loci celebrationis relates to the law of the place of the ceremony [63] or
the law of the place where a contract is made. [64] The doctrine of lex
contractus or lex loci contractus means the law of the place where a contract is
executed or to be performed. [65] It controls the nature, construction, and validity of
the contract[66] and it may pertain to the law voluntarily agreed upon by the parties
or the law intended by them either expressly or implicitly. [67] Under the state of the
most significant relationship rule, to ascertain what state law to apply to a dispute,
the court should determine which state has the most substantial connection to the
occurrence and the parties. In a case involving a contract, the court should consider
where the contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the parties. [68] This rule
takes into account several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved. [69]
Since these three principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the second phase, the choice of
law.[70] They determine which 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.
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.
SO ORDERED.
PIONEER
INTERNATIONAL,
LTD., petitioner,
vs.
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding Judge of Regional
Trial Court, Branch 147, Makati City, and ANTONIO D. TODARO, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 of the Decision2 dated 27 September 2001
and of the Resolution3 dated 14 January 2003 of the Court of Appeals (appellate
court) in CA-G.R. SP No. 54062. The Decision affirmed the Orders 4 dated 4 January
19995 and 3 June 19996 of Branch 147 of the Regional Trial Court of Makati City (trial
court) in Civil Case No. 98-124. The trial court denied the motion to dismiss filed by
Pioneer International, Ltd. (PIL)7 in its special appearance.
The Facts
On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint for sum of money
and damages with preliminary attachment against PIL, Pioneer Concrete Philippines,
Inc. (PCPI), Pioneer Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald),
and Philip J. Klepzig (Klepzig). PIL and its co-defendants were served copies of the
summons and of the complaint at PPHI and PCPIs office in Alabang, Muntinlupa,
through Cecille L. De Leon (De Leon), who was Klepzigs Executive Assistant.
Todaro alleged that PIL is a corporation duly organized under Australian laws, while
PCPI and PPHI are corporations duly organized under Philippine laws. PIL is engaged
in the ready-mix and concrete aggregates business and has established a presence
worldwide. PIL established PPHI as the holding company of the stocks of its
operating company in the Philippines, PCPI. McDonald is the Chief Executive Officer
of PILs Hong Kong office while Klepzig is the President and Managing Director of
PPHI and PCPI. For his part, Todaro further alleged that he was the managing
director of Betonval Readyconcrete, Inc. (Betonval) from June 1975 up to his
resignation in February 1996.
Before Todaro filed his complaint, there were several meetings and exchanges of
letters between Todaro and the officers of Pioneer Concrete (Hong Kong) Limited,
Pioneer Concrete Group HK, PPHI, and PIL. According to Todaro, PIL contacted him in
May 1996 and asked if he could join it in establishing a pre-mixed concrete plant
and in overseeing its operations in the Philippines. Todaro confirmed his availability
and expressed interest in joining PIL. Todaro met with several of PILs
representatives and even gave PIL the names of three of his subordinates in
Betonval whom he would like to join him in PIL.
Todaro attached nine letters, marked as Annexes "A" to "I," to his complaint. Annex
"A"8 shows that on 15 July 1996, Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to Max Lindsay (Lindsay) of Pioneer Concrete (Hong
Kong) Limited. Todaro wrote that "[m]y aim is to run again a ready-mix concrete
company in the Philippines and not to be a part-time consultant. Otherwise, I could
have charged your company with a much higher fee."
Annex "B"9 shows that on 4 September 1996, Lindsay, under the letterhead of
Pioneer Concrete (Hong Kong) Limited, responded by fax to Todaros faxed letter to
McDonald and proposed that Todaro "join Pioneer on a retainer basis for 2 to 3
months on the understanding that [Todaro] would become a permanent employee if
as we expect, our entry proceeds." The faxed letter to McDonald referred to by
Lindsay is not found in the rollo and was not attached to Todaros complaint.
Annex "C"10 shows that on the same date as that of Annex "B," Todaro, under the
letterhead of Ital Tech Distributors, Inc., faxed another letter to Lindsay of Pioneer
Concrete (Hong Kong) Limited. Todaro asked for a formal letter addressed to him
about the proposed retainer. Todaro requested that the letter contain a statement
on his remuneration package and on his permanent employment "with PIONEER
once it has established itself on a permanent basis in the Philippines."
Annex "D"11 shows that Todaro, under the letterhead of Ital Tech Distributors, Inc.,
sent a letter to McDonald of PIL. Todaro confirmed the following to McDonald:
1. That I am accepting the proposal of PIONEER INTL. as a consultant for three (3)
months, starting October 1, 1996, with a retainer fee of U.S. $15,000.00 per month;
2. That after three (3) months consultancy, I should be employed by PIONEER INTL.,
on a permanent basis, as its Managing Director or CEO in the Philippines.
Remuneration package will be mutually agreed upon by PIONEER and the
undersigned;
3. That Gino Martinel and the Sales Manager Jun Ong, will be hired as well, on a
permanent basis, by PIONEER as soon as the company is established. Salary,
likewise, will be accepted by both PIONEER and the respective parties.
Annex "E"12 is a faxed letter dated 18 November 1996 of McDonald, under the
letterhead of Pioneer Concrete Group HK, to Todaro of Ital Tech Distributors, Inc. The
first three paragraphs of McDonalds letter read:
Further to our recent meeting in Hong Kong, I am now able to confirm my offer to
engage you as a consultant to Pioneer International Ltd. Should Pioneer proceed
with an investment in the Philippines, then Pioneer would offer you a position to
manage the premixed concrete operations.
Pioneer will probably be in a position to make a decision on proceeding with an
investment by mid January 97.
The basis for your consultancy would be:
Monthly fee USD 15,000 per month billed on monthly basis and payable 15
days from billing date.
your
Annex "F"13 shows Todaros faxed reply, under the letterhead of Ital Tech
Distributors, Inc., to McDonald of Pioneer Concrete Group HK dated 19 November
1996. Todaro confirmed McDonalds package concerning the consultancy and
reiterated his desire to be the manager of Pioneers Philippine business venture.
Annex "G"14 shows Todaros faxed reply, under the letterhead of Ital Tech
Distributors, Inc., to McDonald of PIL dated 8 April 1997. Todaro informed McDonald
that he was willing to extend assistance to the Pioneer representative from
Queensland. The tenor of the letter revealed that Todaro had not yet occupied his
expected position.
Annex "H"15 shows Klepzigs letter, under the letterhead of PPHI, to Todaro dated 18
September 1997. Klepzigs message reads:
It has not proven possible for this company to meet with your expectations
regarding the conditions of your providing Pioneer with consultancy services. This,
and your refusal to consider my terms of offer of permanent employment, leave me
no alternative but to withdraw these offers of employment with this company.
As you provided services under your previous agreement with our Pioneer Hong
Kong office during the month of August, I will see that they pay you at the previous
rates until the end of August. They have authorized me on behalf of Pioneer
International Ltd. to formally advise you that the agreement will cease from August
31st as per our previous discussions.
Annex "I"16 shows the letter dated 20 October 1997 of K.M. Folwell (Folwell), PILs
Executive General Manager of Australia and Asia, to Todaro. Folwell confirmed the
contents of Klepzigs 18 September 1997 letter. Folwells message reads:
Thank you for your letter to Dr. Schubert dated 29 th September 1997 regarding the
alleged breach of contract with you. Dr. Schubert has asked me to investigate this
matter.
I have discussed and examined the material regarding your association with Pioneer
over the period from mid 1996 through to September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well documented and
have been appropriately rewarded. However, in regard to your request and
expectation to be given permanent employment with Pioneer Philippines
Holdings, Inc. I am informed that negotiations to reach agreement on appropriate
terms and conditions have not been successful.
The employment conditions you specified in your letter to John McDonald dated
11th September are well beyond our expectations.
Mr. Todaro, I regret that we do not wish to pursue our association with you any
further. Mr. Klepzig was authorized to terminate this association and the letter he
sent to you dated 18th September has my support.
Thank you for your involvement with Pioneer. I wish you all the best for the future.
(Emphasis added)
PIL filed, by special appearance, a motion to dismiss Todaros complaint. PILs codefendants, PCPI, PPHI, and Klepzig, filed a separate motion to dismiss. 17 PIL
asserted that the trial court has no jurisdiction over PIL because PIL is a foreign
corporation not doing business in the Philippines. PIL also questioned the service of
summons on it. Assuming arguendo that Klepzig is PILs agent in the Philippines, it
was not Klepzig but De Leon who received the summons for PIL. PIL further stated
that the National Labor Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that assuming that the
trial court has jurisdiction over the subject matter of the action, the complaint
should be dismissed on the ground of forum non-conveniens. Finally, PIL maintained
that the complaint does not state a cause of action because there was no perfected
contract, and no personal judgment could be rendered by the trial court against PIL
because PIL is a foreign corporation not doing business in the Philippines and there
was improper service of summons on PIL.
Todaro filed a Consolidated Opposition dated 26 August 1998 to refute PILs
assertions. PIL filed, still by special appearance, a Reply on 2 October 1998.
The Ruling of the Trial Court
On 4 January 1999, the trial court issued an order 18 which ruled in favor of Todaro.
The trial court denied the motions to dismiss filed by PIL, PCPI, PPHI, and Klepzig.
The trial court stated that the merits of a motion to dismiss a complaint for lack of
cause of action are tested on the strength of the allegation of facts in the complaint.
The trial court found that the allegations in the complaint sufficiently establish a
cause of action. The trial court declared that Todaros cause of action is based on an
alleged breach of a contractual obligation and an alleged violation of Articles 19 and
21 of the Civil Code. Therefore, the cause of action does not lie within the
jurisdiction of the NLRC but with the trial court.
The trial court also asserted its jurisdiction over PIL, holding that PIL did business in
the Philippines when it entered into a contract with Todaro. Although PIL questions
the service of summons on Klepzig, whom PIL claims is not its agent, the trial court
ruled that PIL failed to adduce evidence to prove its contention. Finally, on the issue
of forum non-conveniens, the trial court found that it is more convenient to hear and
decide the case in the Philippines because Todaro resides in the Philippines and the
contract allegedly breached involves employment in the Philippines.
PIL filed an urgent omnibus motion for the reconsideration of the trial courts 4
January 1999 order and for the deferment of filing its answer. PCPI, PPHI, and
Klepzig likewise filed an urgent omnibus motion. Todaro filed a consolidated
opposition, to which PIL, PCPI, PPHI, and Klepzig filed a joint reply. The trial court
issued an order19on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and Klepzig.
The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days within which to file their
respective answers.
PIL did not file an answer before the trial court and instead filed a petition for
certiorari before the appellate court.
The Ruling of the Appellate Court
The appellate court denied PILs petition and affirmed the trial courts ruling in toto.
The dispositive portion of the appellate courts decision reads:
WHEREFORE, premises considered, the present petition for certiorari is hereby
DENIED DUE COURSE and accordingly DISMISSED. The assailed Orders dated
January 4, 1999 and June 3, 1999 of the Regional Trial Court of Makati City, Branch
147, in Civil Case No, 98-124 are hereby AFFIRMED in toto.
SO ORDERED.20
On 14 January 2003, the appellate court dismissed 21 PILs motion for reconsideration
for lack of merit. The appellate court stated that PILs motion raised no new
substantial or weighty arguments that could impel the appellate court from
departing or overturning its previous decision. PIL then filed a petition for review on
certiorari before this Court.
The Issues
In the present case, the summary of Todaros allegations states that PIL, PCPI, PPHI,
McDonald, and Klepzig did not fulfill their contractual obligation to employ Todaro on
a permanent basis in PILs Philippine office. Todaros allegations are thus sufficient
to establish a cause of action. We quote with approval the trial courts ruling on this
matter:
On the issue of lack of cause of action It is well-settled that the merits of a motion
to dismiss a complaint for lack of cause of action is tested on the strength of the
allegations of fact contained in the complaint and no other (De Jesus, et al. vs.
Belarmino, et al., 95 Phil. 366 [1954]). This Court finds that the allegations of the
complaint, specifically paragraphs 13-33 thereof, paragraphs 30-33 alleging as
follows:
"30. All of the acts set forth in the foregoing have been done with the knowledge,
consent and/or approval of the defendants who acted in concert and/or in
conspiracy with one another.
31. Under the circumstances, there is a valid contract entered into between [Todaro]
and the Pioneer Group, whereby, among others, the Pioneer Group would employ
[Todaro], on a permanent basis, to manage and operate the ready-mix concrete
operations, if the Pioneer Group decides to invest in the Philippines.
32. The Pioneer Group has decided to invest in the Philippines. The refusal of the
defendants to comply with the Pioneer Groups undertaking to employ [Todaro] to
manage their Philippine ready-mix operations, on a permanent basis, is a direct
breach of an obligation under a valid and perfected contract.
33. Alternatively, assuming without conceding, that there was no contractual
obligation on the part of the Pioneer Group to employ [Todaro] on a permanent
basis, in their Philippine operations, the Pioneer Group and the other defendants did
not act with justice, give [Todaro] his due and observe honesty and good faith
and/or they have willfully caused injury to [Todaro] in a manner that is contrary to
morals, good customs, and public policy, as mandated under Arts. 19 and 21 of the
New Civil Code."
sufficiently establish a cause of action for breach of contract and/or violation of
Articles 19 and 21 of the New Civil Code. Whether or not these allegations are true
is immaterial for the court cannot inquire into the truth thereof, the test being
whether, given the allegations of fact in the complaint, a valid judgment could be
rendered in accordance with the prayer in the complaint. 24
It should be emphasized that the presence of a cause of action rests on the
sufficiency, and not on the veracity, of the allegations in the complaint. The veracity
of the allegations will have to be examined during the trial on the merits. In
resolving a motion to dismiss based on lack of cause of action, the trial court is
limited to the four corners of the complaint and its annexes. It is not yet necessary
for the trial court to examine the truthfulness of the allegations in the complaint.
Such examination is proper during the trial on the merits.
Forum Non-Conveniens
The doctrine of forum non-conveniens requires an examination of the truthfulness of
the allegations in the complaint. Section 1, Rule 16 of the 1997 Rules of Civil
Procedure does not mention forum non-conveniens as a ground for filing a motion to
dismiss. The propriety of dismissing a case based on forum non-conveniens requires
a factual determination; hence, it is more properly considered a matter of defense.
While it is within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, the trial court should do so only after vital facts are
established to determine whether special circumstances require the courts
desistance.25
Jurisdiction over PIL
PIL questions the trial courts exercise of jurisdiction over it on two levels. First, that
PIL is a foreign corporation not doing business in the Philippines and because of this,
the service of summons on PIL did not follow the mandated procedure. Second, that
Todaros claims are based on an alleged breach of an employment contract so
Todaro should have filed his complaint before the NLRC and not before the trial
court.
Transacting
Business
Service of Summons
in
the
Philippines
and
The first level has two sub-issues: PILs transaction of business in the Philippines
and the service of summons on PIL. Section 12, Rule 14 of the 1997 Rules of Civil
Procedure provides the manner by which summons may be served upon a foreign
juridical entity which has transacted business in the Philippines. Thus:
Service upon foreign private juridical entity. When the defendant is a foreign
juridical entity which has transacted business in the Philippines, service may be
made on its resident agent designated in accordance with law for that purpose, or, if
there be no such agent, on the government official designated by law to that effect,
or any of its officers or agents within the Philippines.
As to the first sub-issue, PIL insists that its sole act of "transacting" or "doing
business" in the Philippines consisted of its investment in PPHI. Under Philippine
law, PILs mere investment in PPHI does not constitute "doing business." However,
we affirm the lower courts ruling and declare that, based on the allegations in
Todaros complaint, PIL was doing business in the Philippines when it negotiated
Todaros employment with PPHI. Section 3(d) of Republic Act No. 7042, Foreign
Investments Act of 1991, states:
summons if the corporation does not have a resident agent, and (3) service on any
of the corporations officers or agents within the Philippines. 30
In the present case, service of summons on PIL failed to follow any of the prescribed
processes. PIL had no resident agent in the Philippines. Summons was not served on
the Securities and Exchange Commission (SEC), the designated government
agency,31 since PIL is not registered with the SEC. Summons for PIL was served on
De Leon, Klepzigs Executive Assistant. Klepzig is PILs "agent within the Philippines"
because PIL authorized Klepzig to notify Todaro of the cessation of his consultancy
(Annexes "H" and "I").32 The authority given by PIL to Klepzig to notify Todaro implies
that Klepzig was likewise authorized to receive Todaros response to PILs notice.
Todaro responded to PILs notice by filing a complaint before the trial court.
However, summons was not served personally on Klepzig as agent of PIL. Instead,
summons was served on De Leon, Klepzigs Executive Assistant. In this instance, De
Leon was not PILs agent but a mere employee of Klepzig. In effect, the
sheriff33 resorted to substituted service. For symmetry, we apply the rule on
substituted service of summons on a natural person and we find that no reason was
given to justify the service of PILs summons on De Leon.
Thus, we rule that PIL transacted business in the Philippines and Klepzig was its
agent within the Philippines. However, there was improper service of summons on
PIL since summons was not served personally on Klepzig.
NLRC Jurisdiction
As to the second level, Todaro prays for payment of damages due him because of
PILs non-implementation of Todaros alleged employment agreement with PPHI. The
appellate court stated its ruling on this matter, thus:
It could not be denied that there was no existing contract yet to speak of between
PIONEER INTL. and [Todaro]. Since there was an absence of an employment contract
between the two parties, this Court is of the opinion and so holds that no employeremployee relationship actually exists. Record reveals that all that was agreed upon
by [Todaro] and the Pioneer Concrete, acting in behalf of PIONEER INTL., was the
confirmation of the offer to engage the services of the former as consultant of
PIONEER INTL. (Rollo, p. 132). The failure on the part of PIONEER INTL. to abide by
the said agreement, which was duly confirmed by PIONEER INTL., brought about a
breach of an obligation on a valid and perfected agreement. There being no
employer-employee relationship established between [PIL] and [Todaro], it could be
said that the instant case falls within the jurisdiction of the regular courts of justice
as the money claim of [Todaro] did not arise out of or in connection with [an]
employer-employee relationship.34
Todaros employment in the Philippines would not be with PIL but with PPHI as
stated in the 20 October 1997 letter of Folwell. Assuming the existence of 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 attorneys 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]
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 OF FORUM 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. Gilbert[21] 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 of an offshore fleet, not based in the Philippines;
iv)
All the loans involved
foreign CORPORATIONS;
v)
were
granted
to
the
Private
Respondents
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, Queens 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, Queens 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 by litis 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 wholly-owned by the private respondents who
are Filipinos and therefore under Philippine laws, aside from the said corporate
borrowers 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 judicataalso 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
to certiorari 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 plaintiffs
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]
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.
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]
Second Issue. Should the complaint be dismissed on the ground of forum nonconveniens?
No. The doctrine of forum non-conveniens, literally meaning the forum is
inconvenient, emerged in private international law to deter the practice of global
forum shopping,[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
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans
from petitioners Ayala International Finance Limited (hereafter called AYALA) [1] and
Philsec Investment Corporation (hereafter called PHILSEC) in the sum of
US$2,500,000.00, secured by shares of stock owned by Ducat with a market value
of P14,088,995.00. In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago Daic,
assumed Ducats obligation under an Agreement, dated January 27, 1983, whereby
1488, Inc. executed a Warranty Deed with Vendors Lien by which it sold to
petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris
County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA extended a
loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the
purchase price. The balance of US$307,209.02 was to be paid by means of
a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon
their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released
Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in
their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire
amount covered by the note became due and demandable. Accordingly, on October
17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and
ATHONA in the United States for payment of the balance of US$307,209.02 and for
damages for breach of contract and for fraud allegedly perpetrated by petitioners in
misrepresenting the marketability of the shares of stock delivered to 1488, Inc.
under the Agreement. Originally instituted in the United States District Court of
Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the
venue of the action was later transferred to the United States District Court for the
Southern District of Texas, where 1488, Inc. filed an amended complaint, reiterating
its allegations in the original complaint. ATHONA filed an answer with counterclaim,
impleading private respondents herein as counterdefendants, for allegedly
conspiring in selling the property at a price over its market value. Private
respondent Perlas, who had allegedly appraised the property, was later dropped as
counterdefendant. ATHONA sought the recovery of damages and excess payment
allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the
property. For their part, PHILSEC and AYALA filed a motion to dismiss on the ground
of lack of jurisdiction over their person, but, as their motion was denied, they later
filed a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSECs own former president, for the rescission of the sale on the
ground that the property had been overvalued. On March 13, 1990, the United
States District Court for the Southern District of Texas dismissed the counterclaim
against Edgardo V. Guevarra on the ground that it was frivolous and [was] brought
against him simply to humiliate and embarrass him. For this reason, the U.S. court
imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to
pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States,
petitioners filed a complaint For Sum of Money with Damages and Writ of
Preliminary Attachment against private respondents in the Regional Trial Court of
Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated the
allegation of petitioners in their respective counterclaims in Civil Action No. H-86440 of the United States District Court of Southern Texas that private respondents
committed fraud by selling the property at a price 400 percent more than its true
value of US$800,000.00. Petitioners claimed that, as a result of private respondents
fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter
into the Agreement and to purchase the Houston property. Petitioners prayed that
private respondents be ordered to return to ATHONA the excess payment of
US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a
writ of preliminary attachment against the real and personal properties of private
respondents.[2]
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of
(1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in
the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPIIFL to state a cause of action. Ducat contended that the alleged overpricing of the
property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL
which were not parties to the sale and whose only participation was to extend
financial accommodation to ATHONA under a separate loan agreement. On the
other hand, private respondents 1488, Inc. and its president Daic filed a joint
Special Appearance and Qualified Motion to Dismiss, contending that the action
being in personam, extraterritorial service of summons by publication was
ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a
non-resident foreign corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducats motion to dismiss, stating that
the evidentiary requirements of the controversy may be more suitably tried before
the forum of the litis pendentia in the U.S., under the principle in private
international law of forum non conveniens, even as it noted that Ducat was not a
party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daics motion to
dismiss. On March 9, 1988, the trial court[3] granted the motion to dismiss filed by
1488, Inc. and Daic on the ground of litis pendentia considering that
the main factual element of the cause of action in this case which is the validity of
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or fluctuations of
the fair market value of real estate situated in Houston, Texas, U.S.A. from the date
of the transaction in 1983 up to the present and verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because
they were non-residents and the action was not an action in rem or quasi in rem, so
that extraterritorial service of summons was ineffective. The trial court
subsequently lifted the writ of attachment it had earlier issued against the shares of
stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in
applying the principle of litis pendentia and forum non conveniens and in ruling that
it had no jurisdiction over the defendants, despite the previous attachment of
shares of stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals [4] affirmed the dismissal of Civil Case No.
16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants
are Philsec, the Ayala International Finance Ltd. (BPI-IFLs former name) and the
Athona Holdings, NV. The case at bar involves the same parties. The transaction
sued upon by the parties, in both cases is the Warranty Deed executed by and
between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed
by herein appellants, on the marketability of Ducats securities given in exchange
for the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the same Warranty
Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in personam
for the recovery of a sum of money for alleged tortious acts, so that service of
summons by publication did not vest the trial court with jurisdiction over 1488, Inc.
and Drago Daic. The dismissal of Civil Case No. 16563 on the ground of forum non
conveniens was likewise affirmed by the Court of Appeals on the ground that the
case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main transaction, and involve
foreign elements, to wit: 1) the property subject matter of the sale is situated in
Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3)
although the buyer, Athona Holdings, a foreign corporation which does not claim to
be doing business in the Philippines, is wholly owned by Philsec, a domestic
corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4)
the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES
FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence
of a right as between the parties and their successors in interest by a subsequent
title; but the judgment may be repelled by evidence of a want of jurisdiction, want
of notice to the party, collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union Insurance
Society of Canton, Ltd.,[10] which private respondents invoke for claiming conclusive
effect for the foreign judgment in their favor, the foreign judgment was
considered res judicata because this Court found from the evidence as well as from
appellants own pleadings[11] that the foreign court did not make a clear mistake of
law or fact or that its judgment was void for want of jurisdiction or because of fraud
or collusion by the defendants. Trial had been previously held in the lower court and
only afterward was a decision rendered, declaring the judgment of the Supreme
Court of the State of Washington to have the effect of res judicata in the case before
the lower court. In the same vein, in Philippine International Shipping Corp. v. Court
of Appeals,[12] this Court held that the foreign judgment was valid and enforceable in
the Philippines there being no showing that it was vitiated by want of notice to the
party, collusion, fraud or clear mistake of law or fact. The prima facie presumption
under the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to
challenge the judgment of the U.S. court as basis for declaring it res judicata or
conclusive of the rights of private respondents. The proceedings in the trial court
were summary. Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence presented
thereat, to assure a proper determination of whether the issues then being litigated
in the U.S. court were exactly the issues raised in this case such that the judgment
that might be rendered would constitute res judicata. As the trial court stated in its
disputed order dated March 9, 1988:
On the plaintiffs claim in its Opposition that the causes of action of this case and
the pending case in the United States are not identical, precisely the Order of
January 26, 1988 never found that the causes of action of this case and the case
pending before the USA Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners
action is barred by the principle of res judicata. Petitioners in fact questioned the
jurisdiction of the U.S. court over their persons, but their claim was brushed aside
by both the trial court and the Court of Appeals. [13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition
for the enforcement of judgment in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the
proceedings were suspended because of the pendency of this case. To sustain the
appellate courts ruling that the foreign judgment constitutes res judicata and is a
bar to the claim of petitioners would effectively preclude petitioners from repelling
the judgment in the case for enforcement. An absurdity could then arise: a foreign
judgment is not subject to challenge by the plaintiff against whom it is invoked, if it
is pleaded to resist a claim as in this case, but it may be opposed by the defendant
if the foreign judgment is sought to be enforced against him in a separate
proceeding. This is plainly untenable. It has been held therefore that:
[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the
Hongkong judgment under Section 50 (b), Rule 39 of the Rules of Court in order
that the defendant, private respondent herein, may present evidence of lack of
jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable. [14]
Accordingly, to insure the orderly administration of justice, this case and Civil Case
No. 92-1070 should be consolidated.[15] After all, the two have been filed in the
Regional Trial Court of Makati, albeit in different salas, this case being assigned to
Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in
Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should
have the burden of impeaching the foreign judgment and only in the event they
succeed in doing so may they proceed with their action against private respondents.
Second. Nor is the trial courts refusal to take cognizance of the case justifiable
under the principle of forum non conveniens. First, a motion to dismiss is limited to
the grounds under Rule 16, 1, which does not include forum non conveniens.[16] The
propriety of dismissing a case based on this principle requires a factual
determination, hence, it is more properly considered a matter of defense. Second,
while it is within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the courts desistance. [17]
In this case, the trial court abstained from taking jurisdiction solely on the basis of
the pleadings filed by private respondents in connection with the motion to
dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic
corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was
the extinguishment of the latters debt which was the object of the transaction
under litigation. The trial court arbitrarily dismissed the case even after finding that
Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that
jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action
in personam and summons were served by extraterritorial service. Rule 14, 17 on
extraterritorial service provides that service of summons on a non-resident
defendant may be effected out of the Philippines by leave of Court where, among
others, the property of the defendant has been attached within the
Philippines.[18] It is not disputed that the properties, real and personal, of the
private respondents had been attached prior to service of summons under the
Order of the trial court dated April 20, 1987. [19]
Fourth. As for the temporary restraining order issued by the Court on June 29, 1994,
to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra
to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court,
the Court finds that the judgment sought to be enforced is severable from the main
judgment under consideration in Civil Case No. 16563. The separability of
Guevarras claim is not only admitted by petitioners, [20] it appears from the
pleadings that petitioners only belatedly impleaded Guevarra as defendant in Civil
Case No. 16563.[21] Hence, the TRO should be lifted and Civil Case No. 92-1445
allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No.
16563 is REMANDED to the Regional Trial Court of Makati for consolidation with Civil
Case No. 92-1070 and for further proceedings in accordance with this decision. The
temporary restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.