CONFLICT OF LAWS PART 2

Forum Non Conveniens

G.R. No. 102223 August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC.,
ASPAC MULTI-TRADE, INC., (formerly ASPAC-ITEC
PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE,
petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL,
INC., and ITEC, INC., respondents.

By virtue of said contracts, ASPAC sold electronic

products, exported by ITEC, to their sole customer,
the Philippine Long Distance Telephone Company,
(PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under
its new appellation, and PLDT executed a document
entitled "PLDT-ASPAC/ITEC PROTOCOL" 4 which
defined the project details for the supply of ITEC's
Interface Equipment in connection with the Fifth
Expansion Program of PLDT.
One year into the second term of the parties'
Representative Agreement, ITEC decided to
terminate the same, because petitioner ASPAC
allegedly violated its contractual commitment as
stipulated in their agreements. 5

TORRES, JR., J.:p

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

Contested in this petition for review on Certiorari is

the Decision of the Court of Appeals on June 7, 1991,
sustaining the RTC Order dated February 22, 1991,
denying the petitioners' Motion to Dismiss, and
directing the issuance of a writ of preliminary
injunction, and its companion Resolution of October
9, 1991, denying the petitioners' Motion for
Reconsideration.
Petitioners COMMUNICATION MATERIALS AND
DESIGN, INC., (CMDI, for brevity) and ASPAC
MULTI-TRADE INC., (ASPAC, for brevity) are both
domestic corporations, while petitioner Francisco S.
Aguirre is their President and majority stockholder.
Private Respondents ITEC, INC. and/or ITEC,
INTERNATIONAL, INC. (ITEC, for brevity) are
corporations duly organized and existing under the
laws of the State of Alabama, United States of
America. There is no dispute that ITEC is a foreign
corporation not licensed to do business in the
Philippines.
On August 14, 1987, ITEC entered into a contract
with petitioner ASPAC referred to as "Representative
Agreement". 1 Pursuant to the contract, ITEC engaged
ASPAC as its "exclusive representative" in the
Philippines for the sale of ITEC's products, in
consideration of which, ASPAC was paid a stipulated
commission. The agreement was signed by G.A.
Clark and Francisco S. Aguirre, presidents of ITEC
and ASPAC respectively, for and in behalf of their
companies. 2 The said agreement was initially for a
term of twenty-four months. After the lapse of the
agreed period, the agreement was renewed for
another twenty-four months.
Through a "License Agreement" 3 entered into by the
same parties on November 10, 1988, ASPAC was
able to incorporate and use the name "ITEC" in its
own name. Thus , ASPAC Multi-Trade, Inc. became
legally and publicly known as ASPAC-ITEC
(Philippines).

ITEC charges the petitioners and another Philippine

Corporation,
DIGITAL
BASE
COMMUNICATIONS, INC. (DIGITAL, for brevity),
the President of which is likewise petitioner Aguirre,
of using knowledge and information of ITEC's
products specifications to develop their own line of
equipment and product support, which are similar, if
not identical to ITEC's own, and offering them to
ITEC's former customer.
On January 31, 1991, the complaint 6 in Civil Case
No. 91-294, was filed with the Regional Trial Court
of Makati, Branch 134 by ITEC, INC. Plaintiff
sought to enjoin, first, preliminarily and then, after
trial, permanently; (1) defendants DIGITAL, CMDI,
and Francisco Aguirre and their agents and business
associates, to cease and desist from selling or
attempting to sell to PLDT and to any other party,
products which have been copied or manufactured "in
like manner, similar or identical to the products,
wares and equipment of plaintiff," and (2) defendant
ASPAC, to cease and desist from using in its
corporate name, letter heads, envelopes, sign boards
and business dealings, plaintiff's trademark,
internationally known as ITEC; and the recovery
from defendants in solidum, damages of at least
P500,000.00, attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss 7 the
complaint on the following grounds:
(1) That plaintiff has no legal capacity to sue as it is a
foreign corporation doing business in the Philippines
without the required BOI authority and SEC license,
and (2) that plaintiff is simply engaged in forum
shopping which justifies the application against it of
the principle of "forum non conveniens".
On February 8, 1991, the complaint was amended by
virtue of which ITEC INTERNATIONAL, INC. was
substituted as plaintiff instead of ITEC, INC. 8
In their Supplemental Motion to Dismiss, 9
defendants took note of the amendment of the
complaint and asked the court to consider in toto their
motion to dismiss and their supplemental motion as
their answer to the amended complaint.
After conducting hearings on the prayer for
preliminary injunction, the court a quo on February
22, 1991, issued its Order: 10 (1) denying the motion
to dismiss for being devoid of legal merit with a

rejection of both grounds relied upon by the

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

Petitioners filed a motion for reconsideration 13 on

June 7, 1991, which was likewise denied by the
respondent court.
WHEREFORE, the present motion for
reconsideration should be, as it is hereby,
denied for lack of merit. For the same
reason, the motion to have the motion for
reconsideration set for oral argument
likewise should be and is hereby denied.
SO ORDERED. 14
Petitioners are now before us via Petition for Review
on Certiorari 15 under Rule 45 of the Revised Rules
of Court.
It is the petitioners' submission that private
respondents are foreign corporations actually doing
business in the Philippines without the requisite
authority and license from the Board of Investments
and the Securities and Exchange Commission, and
thus, disqualified from instituting the present action
in our courts. It is their contention that the provisions
of the Representative Agreement, petitioner ASPAC
executed with private respondent ITEC, are similarly
"highly restrictive" in nature as those found in the
agreements which confronted the Court in the case of
Top-Weld Manufacturing, Inc. vs. ECED S.A. et al., 16
as to reduce petitioner ASPAC to a mere conduit or
extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign
corporations are doing business in the Philippines
because when the respondents entered into the
disputed contracts with the petitioner, they were
carrying out the purposes for which they were

created, i.e., to manufacture and market welding

products and equipment. The terms and conditions of
the contracts as well as the respondents' conduct
indicate that they established within our country a
continuous business, and not merely one of a
temporary character. The respondents could be
exempted from the requirements of Republic Act
5455 if the petitioner is an independent entity which
buys and distributes products not only of the
petitioner, but also of other manufacturers or
transacts business in its name and for its account and
not in the name or for the account of the foreign
principal. A reading of the agreements between the
petitioner and the respondents shows that they are
highly restrictive in nature, thus making the petitioner
a mere conduit or extension of the respondents.
It is alleged that certain provisions of the
"Representative Agreement" executed by the parties
are similar to those found in the License Agreement
of the parties in the Top-Weld case which were
considered as "highly restrictive" by this Court. The
provisions in point are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the
purchase price set by ITEC from time to
time. Unless otherwise expressly agreed to
in writing by ITEC the purchase price is net
to ITEC and does not include any
transportation charges, import charges or
taxes into or within the Territory. All orders
from customers are subject to formal
acceptance by ITEC at its Huntsville,
Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within
the Territory any product which competes
with an existing ITEC product or any
product which ITEC has under active
development.
3.1.2. Actively solicit all potential customers
within the Territory in a systematic and
business like manner.
3.1.3. Inform ITEC of all request for
proposals, requests for bids, invitations to
bid and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the
Territory established by ITEC. The Sales
Goals for the first 24 months is set forth on
Attachment two (2) hereto. The Sales Goal
for additional twelve month periods, if any,
shall be sent to the Sales Agent by ITEC at
the beginning of each period. These Sales
Goals shall be incorporated into this
Agreement and made a part hereof.
xxx xxx xxx
6.0.
Representative
Contractor

as

Independent

xxx xxx xxx

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

c. The document denominated as "PLDTASPAC/ITEC PROTOCOL (Annex C of the

original and amended complaints) which
defined the responsibilities of the parties
thereto as to the supply, installation and
maintenance of the ITEC equipment sold
under said Contract No. 1 is, as its very title
indicates, in the names jointly of the
petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price
of US $ 15 Million, private respondent
ITEC, Inc. issued in its letter head, a
Confirmation of payment dated November
13, 1989 and its Invoice dated November
22, 1989 (Annexes 1 and 2 of the Motion to
Dismiss and marked as Exhibits 2 and 3 for
the petitioners), both of which were
identified by private respondent's sole
witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991). 18
Petitioners contend that the above acts or activities
belie the supposed independence of petitioner
ASPAC from private respondents. "The unrebutted
evidence on record below for the petitioners likewise
reveal the continuous character of doing business in
the Philippines by private respondents based on the
standards laid down by this Court in Wang
Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al.
19
and again in TOP-WELD. (supra)" It thus appears
that as the respondent Court of Appeals and the trial
court's failure to give credence on the grounds relied
upon in support of their Motion to Dismiss that
petitioners ascribe grave abuse of discretion
amounting to an excess of jurisdiction of said courts.
Petitioners likewise argue that since private
respondents have no capacity to bring suit here, the

Philippines is not the "most convenient forum"

because the trial court is devoid of any power to
enforce its orders issued or decisions rendered in a
case that could not have been commenced to begin
with, such that in insisting to assume and exercise
jurisdiction over the case below, the trial court had
gravely abused its discretion and even actually
exceeded its jurisdiction.
As against petitioner's insistence that private respondent is
"doing business" in the Philippines, the latter maintains that it
is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2)
of the Rules and Regulations Implementing the Omnibus
Investments Code of 1987, the following:
(1) A foreign firm is deemed not engaged in
business in the Philippines if it transacts
business through middlemen, acting in their
own names, such as indebtors, commercial
bookers commercial merchants.
(2) A foreign corporation is deemed not
"doing business" if its representative
domiciled in the Philippines has an
independent status in that it transacts
business in its name and for its account. 20
Private respondent argues that a scrutiny of its
Representative Agreement with the Petitioners will
show that although ASPAC was named as
representative of ITEC., ASPAC actually acted in its
own name and for its own account. The following
provisions are particularly mentioned:
3.1.7.1.
In
the
event
that
REPRESENTATIVE imports directly from
ITEC, REPRESENTATIVE will pay for its
own account; all customs duties and import
fees imposed on any ITEC products; all
import expediting or handling charges and
expenses imposed on ITEC products; and
any stamp tax fees imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment
for acting as representative under this
Agreement,
REPRESENTATIVE
shall
receive a sales commission equivalent to a
per centum of the FOB value of all ITEC
equipment sold to customers within the
territory
as
a
direct
result
of
REPRESENTATIVE's sales efforts. 21
More importantly, private respondent charges ASPAC
of admitting its independence from ITEC by entering
and ascribing to provision No. 6 of the
Representative Agreement.
6.0
Representative
Contractor

as

Independent

6.1. When performing any of its duties

under this Agreement, REPRESENTATIVE
shall act as an independent contractor and
not as an employee, worker, laborer, partner,
joint venturer of ITEC as these terms are
defined by the laws, regulations, decrees or
the like of any jurisdiction, including the

jurisdiction of the United States, the state of

Alabama and the Territory. 22
Although it admits that the Representative Agreement
contains provisions which both support and belie the
independence of ASPAC, private respondent echoes
the respondent court's finding that the lower court did
not commit grave abuse of discretion nor acted in
excess of jurisdiction when it found that the ground
relied upon by the petitioners in their motion to
dismiss does not appear to be indubitable. 23
The issues before us now are whether or not private
respondent ITEC is an unlicensed corporation doing
business in the Philippines, and if it is, whether or not
this fact bars it from invoking the injunctive authority
of our courts.
Considering the above, it is necessary to state what is
meant by "doing business" in the Philippines. Section
133 of the Corporation Code, provides that "No
foreign corporation, transacting business in the
Philippines without a license, or its successors or
assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or
administrative agency of the Philippines; but such
corporation may be sued or proceeded against before
Philippine Courts or administrative tribunals on any
valid cause of action recognized under Philippine
laws." 24

Generally, a "foreign corporation" has no legal

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

business from the Philippines, and thus, in effect, to

permit persons to avoid their contracts made with
such foreign corporations. 29
There is no exact rule or governing principle as to
what constitutes "doing" or "engaging" or
"transacting" business. Indeed, such case must be
judged in the light of its peculiar circumstances, upon
its peculiar facts and upon the language of the statute
applicable. The true test, however, seems to be
whether the foreign corporation is continuing the
body or substance of the business or enterprise for
which it was organized. 30
Article 44 of the Omnibus Investments Code of 1987
defines the phrase to include:
soliciting orders, purchases,
service
contracts, opening offices, whether called
"liaison" offices or branches; appointing
representatives or distributors who are
domiciled in the Philippines or who in any
calendar year stay in the Philippines for a
period or periods totalling one hundred
eighty (180) days or more; participating in
the management, supervision or control of
any domestic business firm, entity or
corporation in the Philippines, and any other
act or acts that imply a continuity or
commercial dealings or arrangements and
contemplate to that extent the performance
of acts or works, or the exercise of some of
the functions normally incident to, and in
progressive prosecution of, commercial gain
or of the purpose and object of the business
organization.
Thus, a foreign corporation with a settling agent in
the Philippines which issued twelve marine policies
covering different shipments to the Philippines 31 and
a foreign corporation which had been collecting
premiums on outstanding policies 32 were regarded as
doing business here.
The same rule was observed relating to a foreign
corporation with an "exclusive distributing agent" in
the Philippines, and which has been selling its
products here since 1929, 33 and a foreign corporation
engaged in the business of manufacturing and selling
computers worldwide, and had installed at least 26
different products in several corporations in the
Philippines, and allowed its registered logo and
trademark to be used and made it known that there
exists a designated distributor in the Philippines. 34
In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it
was held that the uninterrupted performance by a
foreign corporation of acts pursuant to its primary
purposes and functions as a regional area
headquarters for its home office, qualifies such
corporation as one doing business in the country.
These foregoing instances should be distinguished
from a single or isolated transaction or occasional,
incidental, or casual transactions, which do not come
within the meaning of the law, 36 for in such case, the
foreign corporation is deemed not engaged in
business in the Philippines.
Where a single act or transaction, however, is not
merely incidental or casual but indicates the foreign
corporation's intention to do other business in the

Philippines, said single act or transaction constitutes

"doing" or "engaging in" or "transacting" business in
the Philippines. 37

Representative and no other, and then only to specific

customers and on terms and conditions expressly
authorized by ITEC in writing."

In determining whether a corporation does business

in the Philippines or not, aside from their activities
within the forum, reference may be made to the
contractual agreements entered into by it with other
entities in the country. Thus, in the Top-Weld case
(supra), the foreign corporation's LICENSE AND
TECHNICAL AGREEMENT and DISTRIBUTOR
AGREEMENT with their local contacts were made
the basis of their being regarded by this Tribunal as
corporations doing business in the country. Likewise,
in Merill Lynch Futures, Inc. vs. Court of Appeals,
etc. 38 the FUTURES CONTRACT entered into by
the petitioner foreign corporation weighed heavily in
the court's ruling.

When ITEC entered into the disputed contracts with

ASPAC and TESSI, they were carrying out the
purposes for which it was created, i.e., to market
electronics and communications products. The terms
and conditions of the contracts as well as ITEC's
conduct indicate that they established within our
country a continuous business, and not merely one of
a temporary character. 40

With the abovestated precedents in mind, we are

persuaded to conclude that private respondent had
been "engaged in" or "doing business" in the
Philippines for some time now. This is the inevitable
result after a scrutiny of the different contracts and
agreements entered into by ITEC with its various
business contacts in the country, particularly ASPAC
and Telephone Equipment Sales and Services, Inc.
(TESSI, for brevity). The latter is a local electronics
firm engaged by ITEC to be its local technical
representative, and to create a service center for ITEC
products sold locally. Its arrangements, with these
entities indicate convincingly ITEC's purpose to
bring about the situation among its customers and the
general public that they are dealing directly with
ITEC, and that ITEC is actively engaging in business
in the country.
In its Master Service Agreement 39 with TESSI,
private respondent required its local technical
representative to provide the employees of the
technical and service center with ITEC identification
cards and business cards, and to correspond only on
ITEC, Inc., letterhead. TESSI personnel are
instructed to answer the telephone with "ITEC
Technical Assistance Center.", such telephone being
listed in the telephone book under the heading of
ITEC Technical Assistance Center, and all calls being
recorded and forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC
with a monthly report detailing the failure and repair
of ITEC products, and to requisition monthly the
materials and components needed to replace stock
consumed in the warranty repairs of the prior month.
A perusal of the agreements between petitioner
ASPAC and the respondents shows that there are
provisions which are highly restrictive in nature, such
as to reduce petitioner ASPAC to a mere extension or
instrument of the private respondent.
The "No Competing Product" provision of the
Representative Agreement between ITEC and
ASPAC provides: "The Representative shall not
represent or offer for sale within the Territory any
product which competes with an existing ITEC
product or any product which ITEC has under active
development." Likewise pertinent is the following
provision: "When acting under this Agreement,
REPRESENTATIVE is authorized to solicit sales
within the Territory on ITEC's behalf but is
authorized to bind ITEC only in its capacity as

Notwithstanding such finding that ITEC is doing

business in the country, petitioner is nonetheless
estopped from raising this fact to bar ITEC from
instituting this injunction case against it.
A foreign corporation doing business in the
Philippines may sue in Philippine Courts although
not authorized to do business here against a
Philippine citizen or entity who had contracted with
and benefited by said corporation. 41 To put it in
another way, a party is estopped to challenge the
personality of a corporation after having
acknowledged the same by entering into a contract
with it. And the doctrine of estoppel to deny
corporate existence applies to a foreign as well as to
domestic corporations. 42 One who has dealt with a
corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity:
The principle will be applied to prevent a person
contracting with a foreign corporation from later
taking advantage of its noncompliance with the
statutes chiefly in cases where such person has
received the benefits of the contract. 43
The rule is deeply rooted in the time-honored axiom
of Commodum ex injuria sua non habere debet no
person ought to derive any advantage of his own
wrong. This is as it should be for as mandated by law,
"every person must in the exercise of his rights and in
the performance of his duties, act with justice, give
everyone his due, and observe honesty and good
faith." 44
Concededly, corporations act through agents, like
directors and officers. Corporate dealings must be
characterized by utmost good faith and fairness.
Corporations cannot just feign ignorance of the legal
rules as in most cases, they are manned by
sophisticated officers with tried management skills
and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is
expected to act with utmost candor and fairness and,
thereby allow a reasonable proportion between
benefits and expected burdens. This is a norm which
should be observed where one or the other is a
foreign entity venturing in a global market.
As observed by this Court in TOP-WELD (supra),
viz:
The parties are charged with knowledge of the
existing law at the time they enter into a contract and
at the time it is to become operative. (Twiehaus v.
Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d
98). Moreover, a person is presumed to be more
knowledgeable about his own state law than his alien
or foreign contemporary. In this case, the record
shows that, at least, petitioner had actual knowledge
of the applicability of R.A. No. 5455 at the time the

contract was executed and at all times thereafter. This

conclusion is compelled by the fact that the same
statute is now being propounded by the petitioner to
bolster its claim. We, therefore sustain the appellate
court's view that "it was incumbent upon TOPWELD to know whether or not IRTI and ECED were
properly authorized to engage in business in the
Philippines when they entered into the licensing and
distributorship agreements." The very purpose of the
law was circumvented and evaded when the
petitioner entered into said agreements despite the
prohibition of R.A. No. 5455. The parties in this case
being equally guilty of violating R.A. No. 5455, they
are in pari delicto, in which case it follows as a
consequence that petitioner is not entitled to the relief
prayed for in this case.
The doctrine of lack of capacity to sue based on the
failure to acquire a local license is based on
considerations of sound public policy. The license
requirement was imposed to subject the foreign
corporation doing business in the Philippines to the
jurisdiction of its courts. It was never intended to
favor domestic corporations who enter into solitary
transactions with unwary foreign firms and then
repudiate their obligations simply because the latter
are not licensed to do business in this country. 45

In Antam Consolidated Inc. vs. Court of Appeals, et

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

question plaintiff's standing to sue, having already

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

G.R. No. 120135

March 31, 2003

BANK OF AMERICA NT & SA, BANK OF AMERICA

INTERNATIONAL, LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA,
EDUARDO LITONJUA, SR., and AURELIO K.
LITONJUA, JR., respondents.
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the November 29, 1994 decision of
the Court of Appeals1 and the April 28, 1995 resolution
denying petitioners' motion for reconsideration.

"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:

The factual background of the case is as follows:

On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J.
Litonjua (Litonjuas, for brevity) filed a Complaint 2 before the
Regional Trial Court of Pasig against the Bank of America
NT&SA and Bank of America International, Ltd. (defendant
banks for brevity) alleging that: they were engaged in the
shipping business; they owned two vessels: Don Aurelio and
El Champion, through their wholly-owned corporations; they
deposited their revenues from said business together with
other funds with the branches of said banks in the United
Kingdom and Hongkong up to 1979; with their business doing
well, the defendant banks induced them to increase the
number of their ships in operation, offering them easy loans to
acquire said vessels;3 thereafter, the defendant banks acquired,
through their (Litonjuas') corporations as the borrowers: (a) El
Carrier4; (b) El General5; (c) El Challenger6; and (d) El
Conqueror7; the vessels were registered in the names of their
7
corporations;
the operation and the funds derived therefrom
were placed under the complete and exclusive control and
disposition of the petitioners;8 and the possession the vessels
was also placed by defendant banks in the hands of persons
selected and designated by them (defendant banks).9
The Litonjuas claimed that defendant banks as trustees did not
fully render an account of all the income derived from the
operation of the vessels as well as of the proceeds of the
subsequent foreclosure sale;10 because of the breach of their
fiduciary duties and/or negligence of the petitioners and/or the
persons designated by them in the operation of private
respondents' six vessels, the revenues derived from the
operation of all the vessels declined drastically; the loans
acquired for the purchase of the four additional vessels then
matured and remained unpaid, prompting defendant banks to
have all the six vessels, including the two vessels originally
owned by the private respondents, foreclosed and sold at
public auction to answer for the obligations incurred for and in
behalf of the operation of the vessels; they (Litonjuas) lost
sizeable amounts of their own personal funds equivalent to ten
percent (10%) of the acquisition cost of the four vessels and
were left with the unpaid balance of their loans with defendant
banks.11 The Litonjuas prayed for the accounting of the
revenues derived in the operation of the six vessels and of the
proceeds of the sale thereof at the foreclosure proceedings
instituted by petitioners; damages for breach of trust;
exemplary damages and attorney's fees.12
Defendant banks filed a Motion to Dismiss on grounds of
forum non conveniens and lack of cause of action against
them.13
On December 3, 1993, the trial court issued an Order denying
the Motion to Dismiss, thus:

"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.
Gilbert21 and Piper Aircraft Co. vs. Reyno,22 to wit:
"Private interest factors include: (a) the relative ease
of access to sources of proof; (b) the availability of
compulsory process for the attendance of unwilling
witnesses; (c) the cost of obtaining attendance of
willing witnesses; or (d) all other practical problems
that make trial of a case easy, expeditious and
inexpensive. Public interest factors include: (a) the
administrative difficulties flowing from court
congestion; (b) the local interest in having localized
controversies decided at home; (c) the avoidance of
unnecessary problems in conflict of laws or in the
application of foreign law; or (d) the unfairness of
burdening citizens in an unrelated forum with jury
duty."23
In support of their claim that the local court is not the proper
forum, petitioners allege the following:
"i) The Bank of America Branches involved, as
clearly mentioned in the Complaint, are based in
Hongkong and England. As such, the evidence and
the witnesses are not readily available in the
Philippines;
"ii) The loan transactions were obtained, perfected,
performed, consummated and partially paid outside
the Philippines;

"iii) The monies were advanced outside the

Philippines. Furthermore, the mortgaged vessels were
part of an offshore fleet, not based in the Philippines;
"iv) All the loans involved were granted to the Private
Respondents' foreign CORPORATIONS;
"v) The Restructuring Agreements were
governed by the laws of England;

ALL

"vi) The subsequent sales of the mortgaged vessels

and the application of the sales proceeds occurred
and transpired outside the Philippines, and the
deliveries of the sold mortgaged vessels were
likewise made outside the Philippines;
"vii) The revenues of the vessels and the proceeds of
the sales of these vessels were ALL deposited to the
Accounts of the foreign CORPORATIONS abroad;
and
"viii) Bank of America International Ltd. is not
licensed nor engaged in trade or business in the
Philippines."24
Petitioners argue further that the loan agreements, security
documentation and all subsequent restructuring agreements
uniformly, unconditionally and expressly provided that they
will be governed by the laws of England; 25 that Philippine
Courts would then have to apply English law in resolving
whatever issues may be presented to it in the event it
recognizes and accepts herein case; that it would then be
imposing a significant and unnecessary expense and burden
not only upon the parties to the transaction but also to the local
court. Petitioners insist that the inconvenience and difficulty of
applying English law with respect to a wholly foreign
transaction in a case pending in the Philippines may be

avoided by its dismissal on the ground of forum non

conveniens. 26
Finally, petitioners claim that private respondents have already
waived their alleged causes of action in the case at bar for
their refusal to contest the foreign civil cases earlier filed by
the petitioners against them in Hongkong and England, to wit:
"1.) Civil action in England in its High Court of
Justice, Queen's Bench Division Commercial Court
(1992-Folio No. 2098) against (a) LIBERIAN
TRANSPORT NAVIGATION. SA.; (b) ESHLEY
COMPANIA NAVIERA SA., (c) EL CHALLENGER
SA; (d) ESPRIONA SHIPPING CO. SA; (e)
PACIFIC NAVIGATOS CORP. SA; (f) EDDIE
NAVIGATION CORP. SA; (g) EDUARDO K.
LITONJUA & (h) AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of
Justice, Queen's Bench Division, Commercial Court
(1992-Folio
No.
2245)
against
(a)
EL
CHALLENGER S.A., (b) ESPRIONA SHIPPING
COMPANY S.A., (c) EDUARDO KATIPUNAN
LITONJUA and (d) AURELIO KATIPUNAN
LITONJUA.
"3.) Civil action in the Supreme Court of Hongkong
High Court (Action No. 4039 of 1992), against (a)
ESHLEY COMPANIA NAVIERA S.A., (b) EL
CHALLENGER S.A., (c) ESPRIONA SHIPPING
COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION
CORPORATION
S.A.,
(f)
LITONJUA
CHARTERING (EDYSHIP) CO., INC., (g)
AURELIO KATIPUNAN LITONJUA, JR., and (h)
EDUARDO KATIPUNAN LITONJUA.
"4.) A civil action in the Supreme Court of Hong
Kong High Court (Action No. 4040 of 1992), against
(a) ESHLEY COMPANIA NAVIERA S.A., (b) EL
CHALLENGER S.A., (c) ESPRIONA SHIPPING
COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION
CORPORATION
S.A.,
(f)
LITONJUA
CHARTERING (EDYSHIP) CO., INC., (g)
AURELIO KATIPUNAN LITONJUA, RJ., and (h)
EDUARDO KATIPUNAN LITONJUA."
and that private respondents' alleged cause of action is already
barred by the pendency of another action or 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 judicata also
applies to foreign judgment is merely an opinion advanced by
them and not based on a categorical ruling of this Court; 32 and
that herein private respondents did not actually participate in
the proceedings in the foreign courts.33

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

We deny the petition for lack of merit.

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.

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 plaintiff's baseless action and
compelling the defendant needlessly to go through a
protracted trial and clogging the court dockets by
another futile case."34

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

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 non-conveniens?
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 overcrowded dockets, or to select a more
friendly venue. Under this doctrine, a court, in conflicts of law
cases, may refuse impositions on its jurisdiction where it is not
the most "convenient" or available forum and the parties are
not precluded from seeking remedies elsewhere.43
Whether a suit should be entertained or dismissed on the basis
of said doctrine depends largely upon the facts of the
particular case and is addressed to the sound discretion of the
trial court.44 In the case of Communication Materials and
Design, Inc. vs. Court of Appeals,45 this Court held that "xxx
[a Philippine Court may assume jurisdiction over the case if it
chooses to do so; provided, that the following requisites are
met: (1) that the Philippine Court is one to which the parties
may conveniently resort to; (2) that the Philippine Court is in a
position to make an intelligent decision as to the law and the
facts; and, (3) that the Philippine Court has or is likely to have

power to enforce its decision."46 Evidently, all these requisites

are present in the instant case.
Moreover, this Court enunciated in Philsec. Investment
Corporation vs. Court of Appeals,47 that the doctrine of forum
non conveniens should not be used as a ground for a motion to
dismiss because Sec. 1, Rule 16 of the Rules of Court does not
include said doctrine as a ground. This Court further ruled that
while it is within the discretion of the trial court to abstain
from assuming jurisdiction on this ground, it should do so only
after vital facts are established, to determine whether special
circumstances require the court's desistance; and that the
propriety of dismissing a case based on this principle of forum
non conveniens requires a factual determination, hence it is
more properly considered a matter of defense.48
Third issue. Are private respondents guilty of forum shopping
because of the pendency of foreign action?
No. Forum shopping exists where the elements of litis
pendentia are present and where a final judgment in one case
will amount to res judicata in the other.49 Parenthetically, for
litis pendentia to be a ground for the dismissal of an action
there must be: (a) identity of the parties or at least such as to
represent the same interest in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded
on the same acts; and (c) the identity in the two cases should
be such that the judgment which may be rendered in one
would, regardless of which party is successful, amount to res
judicata in the other.50
In case at bar, not all the requirements for litis pendentia are
present. While there may be identity of parties,
notwithstanding the presence of other respondents, 51 as well as
the reversal in positions of plaintiffs and defendants 52, still the
other
10requirements necessary for litis pendentia were not
shown by petitioner. It merely mentioned that civil cases were
filed in Hongkong and England without however showing the
identity of rights asserted and the reliefs sought for as well as
the presence of the elements of res judicata should one of the
cases be adjudged.
As the Court of Appeals aptly observed:
"xxx [T]he petitioners, by simply enumerating the
civil actions instituted abroad involving the parties
herein xxx, failed to provide this Court with relevant
and clear specifications that would show the presence
of the above-quoted elements or requisites for res
judicata. While it is true that the petitioners in their
motion for reconsideration (CA Rollo, p. 72), after
enumerating the various civil actions instituted
abroad, did aver that "Copies of the foreign
judgments are hereto attached and made integral parts
hereof as Annexes 'B', 'C', 'D' and 'E'", they failed,
wittingly or inadvertently, to include a single foreign
judgment in their pleadings submitted to this Court as
annexes to their petition. How then could We have
been expected to rule on this issue even if We were to
hold that foreign judgments could be the basis for the
application of the aforementioned principle of res
judicata?"53
Consequently, both courts correctly denied the dismissal of
herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.

G.R. No. 154830

June 8, 2007

PIONEER CONCRETE PHILIPPINES, INC., PIONEER

PHILIPPINES HOLDINGS, and PHILIP J. KLEPZIG,
petitioners,
vs.
ANTONIO D. TODARO, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari
seeking to annul and set aside the Decision 1 of the Court of
Appeals (CA) dated October 31, 2000 in CA-G.R. SP No.
54155 and its Resolution2 of August 21, 2002 denying
petitioners Motion for Reconsideration.
The factual and procedural antecedents of the case are as
follows:
On January 16, 1998, herein respondent Antonio D. Todaro
(Todaro) filed with the Regional Trial Court (RTC) of Makati
City, a complaint for Sum of Money and Damages with
Preliminary Attachment against Pioneer International Limited
(PIL), Pioneer Concrete Philippines, Inc. (PCPI), Pioneer
Philippines Holdings, Inc. (PPHI), John G. McDonald
(McDonald) and Philip J. Klepzig (Klepzig).3
In his complaint, Todaro alleged that PIL is a corporation duly
organized and existing under the laws of Australia and is
principally engaged in the ready-mix concrete and concrete
aggregates business; PPHI is the company established by PIL
11 and hold the stocks of its operating company in the
to own
Philippines; PCPI is the company established by PIL to
undertake its business of ready-mix concrete, concrete
aggregates and quarrying operations in the Philippines;
McDonald is the Chief Executive of the Hongkong office of
PIL; and, Klepzig is the President and Managing Director of
PPHI and PCPI; Todaro has been the managing director of
Betonval Readyconcrete, Inc. (Betonval), a company engaged
in pre-mixed concrete and concrete aggregate production; he
resigned from Betonval in February 1996; in May 1996, PIL
contacted Todaro and asked him if he was available to join
them in connection with their intention to establish a readymix concrete plant and other related operations in the
Philippines; Todaro informed PIL of his availability and
interest to join them; subsequently, PIL and Todaro came to an
agreement wherein the former consented to engage the
services of the latter as a consultant for two to three months,
after which, he would be employed as the manager of PIL's
ready-mix concrete operations should the company decide to
invest in the Philippines; subsequently, PIL started its
operations in the Philippines; however, it refused to comply
with its undertaking to employ Todaro on a permanent basis.4
Instead of filing an Answer, PPHI, PCPI and Klepzig
separately moved to dismiss the complaint on the grounds that
the complaint states no cause of action, that the RTC has no
jurisdiction over the subject matter of the complaint, as the
same is within the jurisdiction of the NLRC, and that the
complaint should be dismissed on the basis of the doctrine of
forum non conveniens.5
In its Order dated January 4, 1999, the RTC of Makati, Branch
147, denied herein petitioners' respective motions to dismiss. 6
Herein petitioners, as defendants, filed an Urgent Omnibus
Motion7 for the reconsideration of the trial court's Order of

January 4, 1999 but the trial court denied it via its Order 8
dated June 3, 1999.
On August 3, 1999, herein petitioners filed a Petition for
Certiorari with the CA.9 On October 31, 2000, the CA
rendered its presently assailed Decision denying herein
petitioners' Petition for Certiorari. Petitioners filed a Motion
for Reconsideration but the CA denied it in its Resolution
dated August 21, 2002.
Hence, herein Petition for Review on Certiorari based on the
following assignment of errors:
A.
THE COURT OF APPEALS' CONCLUSION THAT
THE COMPLAINT STATES A CAUSE OF
ACTION AGAINST PETITIONERS IS WITHOUT
ANY LEGAL BASIS. THE ANNEXES TO THE
COMPLAINT
CLEARLY
BELIE
THE
ALLEGATION OF EXISTENCE OF AN
EMPLOYMENT
CONTRACT
BETWEEN
PRIVATE RESPONDENT AND PETITIONERS.
B.
THE COURT OF APPEALS DECIDED A
QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND WITH APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN
IT UPHELD THE JURISDICTION OF THE TRIAL
COURT DESPITE THE FACT THAT THE
COMPLAINT INDUBITABLY SHOWS THAT IT IS
AN ACTION FOR AN ALLEGED BREACH OF
EMPLOYMENT CONTRACT, AND HENCE,
FALLS
WITHIN
THE
EXLCUSIVE
JURISDICTION OF THE NATIONAL LABOR
RELATIONS COMMISSION.
C
THE COURT OF APPEALS DISREGARDED AND
FAILED TO CONSIDER THE PRINCIPLE OF
"FORUM NON CONVENIENS" AS A VALID
GROUND FOR DISMISSING A COMPLAINT.10
In their first assigned error, petitioners contend that there was
no perfected employment contract between PIL and herein
respondent. Petitioners assert that the annexes to respondent's
complaint show that PIL's offer was for respondent to be
employed as the manager only of its pre-mixed concrete
operations and not as the company's managing director or
CEO. Petitioners argue that when respondent reiterated his
intention to become the manager of PIL's overall business
venture in the Philippines, he, in effect did not accept PIL's
offer of employment and instead made a counter-offer, which,
however, was not accepted by PIL. Petitioners also contend
that under Article 1318 of the Civil Code, one of the requisites
for a contract to be perfected is the consent of the contracting
parties; that under Article 1319 of the same Code, consent is
manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the
contract; that the offer must be certain and the acceptance
absolute; that a qualified acceptance constitutes a counteroffer. Petitioners assert that since PIL did not accept
respondent's counter-offer, there never was any employment
contract that was perfected between them.

Petitioners further argue that respondent's claim for damages

based on the provisions of Articles 19 and 21 of the Civil
Code is baseless because it was shown that there was no
perfected employment contract.
Assuming, for the sake of argument, that PIL may be held
liable for breach of employment contract, petitioners contend
that PCPI and PPHI, may not also be held liable because they
are juridical entities with personalities which are separate and
distinct from PIL, even if they are subsidiary corporations of
the latter. Petitioners also aver that the annexes to respondent's
complaint show that the negotiations on the alleged
employment contract took place between respondent and PIL
through its office in Hongkong. In other words, PCPI and
PPHI were not privy to the negotiations between PIL and
respondent for the possible employment of the latter; and
under Article 1311 of the Civil Code, a contract is not binding
upon and cannot be enforced against one who was not a party
to it even if he be aware of such contract and has acted with
knowledge thereof.

As to the question of jurisdiction, respondent contends that the

complaint he filed was not based on a contract of employment.
Rather, it was based on petitioners' unwarranted breach of
their contractual obligation to employ respondent. This breach,
respondent argues, gave rise to an action for damages which is
cognizable by the regular courts.
Even assuming that there was an employment contract,
respondent asserts that for the NLRC to acquire jurisdiction,
the claim for damages must have a reasonable causal
connection with the employer-employee relationship of
petitioners and respondent.
Respondent further argues that there is a perfected contract
between him and petitioners as they both agreed that the latter
shall employ him to manage and operate their ready-mix
concrete operations in the Philippines. Even assuming that
there was no perfected contract, respondent contends that his
complaint alleges an alternative cause of action which is based
on the provisions of Articles 19 and 21 of the Civil Code.

Petitioners further assert that petitioner Klepzig may not be

held liable because he is simply acting in his capacity as
president of PCPI and PPHI and settled is the rule that an
officer of a corporation is not personally liable for acts done in
the performance of his duties and within the bounds of the
authority conferred on him. Furthermore, petitioners argue that
even if PCPI and PPHI are held liable, respondent still has no
cause of action against Klepzig because PCPI and PPHI have
personalities which are separate and distinct from those acting
in their behalf, such as Klepzig.

As to the applicability of the doctrine of forum non

conveniens, respondent avers that the question of whether a
suit should be entertained or dismissed on the basis of the
principle of forum non conveniens depends largely upon the
facts of the particular case and is addressed to the sound
discretion of the trial judge, who is in the best position to
determine whether special circumstances require that the court
desist from assuming jurisdiction over the suit.

As to their second assigned error, petitioners contend that

since herein respondent's claims for actual, moral and
12
exemplary damages are solely premised on the alleged breach
of employment contract, the present case should be considered
as falling within the exclusive jurisdiction of the NLRC.

Section 2, Rule 2 of the Rules of Court, as amended, defines a

cause of action as the act or omission by which a party
violates a right of another. A cause of action exists if the
following elements are present: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises
or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and, (3) an act
or omission on the part of such defendant violative of the right
of the plaintiff or constituting a breach of the obligation of the
defendant to the plaintiff for which the latter may maintain an
action for recovery of damages.11

With respect to the third assigned error, petitioners assert that

the principle of forum non conveniens dictates that even where
exercise of jurisidiction is authorized by law, courts may
refuse to entertain a case involving a foreign element where
the matter can be better tried and decided elsewhere, either
because the main aspects of the case transpired in a foreign
jurisdiction or the material witnesses have their residence
there and the plaintiff sought the forum merely to secure
procedural advantage or to annoy or harass the defendant.
Petitioners also argue that one of the factors in determining the
most convenient forum for conflicts problem is the power of
the court to enforce its decision. Petitioners contend that since
the majority of the defendants in the present case are not
residents of the Philippines, they are not subject to compulsory
processes of the Philippine court handling the case for
purposes of requiring their attendance during trial. Even
assuming that they can be summoned, their appearance would
entail excessive costs. Petitioners further assert that there is no
allegation in the complaint from which one can conclude that
the evidence to be presented during the trial can be better
obtained in the Philippines. Moreover, the events which led to
the present controversy occurred outside the Philippines.
Petitioners conclude that based on the foregoing factual
circumstances, the case should be dismissed under the
principle of forum non conveniens.
In his Comment, respondent extensively quoted the assailed
CA Decision maintaining that the factual allegations in the
complaint determine whether or not the complaint states a
cause of action.

The petition lacks merit.

In Hongkong and Shanghai Banking Corporation Limited v.

Catalan,12 this Court held:
The elementary test for failure to state a cause of
action is whether the complaint alleges facts which if
true would justify the relief demanded. Stated
otherwise, may the court render a valid judgment
upon the facts alleged therein? The inquiry is into the
sufficiency, not the veracity of the material
allegations. If the allegations in the complaint furnish
sufficient basis on which it can be maintained, it
should not be dismissed regardless of the defense that
may be presented by the defendants.13
Moreover, the complaint does not have to establish or allege
facts proving the existence of a cause of action at the outset;
this will have to be done at the trial on the merits of the case. 14
To sustain a motion to dismiss for lack of cause of action, the
complaint must show that the claim for relief does not exist,
rather than that a claim has been defectively stated, or is
ambiguous, indefinite or uncertain.15
Hence, in resolving whether or not the Complaint in the
present case states a cause of action, the trial court correctly

limited itself to examining the sufficiency of the allegations in

the Complaint as well as the annexes thereto. It is proscribed
from inquiring into the truth of the allegations in the
Complaint or the authenticity of any of the documents referred
or attached to the Complaint, since these are deemed
hypothetically admitted by the respondent.
This Court has reviewed respondents allegations in its
Complaint. In a nutshell, respondent alleged that herein
petitioners reneged on their contractual obligation to employ
him on a permanent basis. This allegation is sufficient to
constitute a cause of action for damages.
The issue as to whether or not there was a perfected contract
between petitioners and respondent is a matter which is not
ripe for determination in the present case; rather, this issue
must be taken up during trial, considering that its resolution
would necessarily entail an examination of the veracity of the
allegations not only of herein respondent as plaintiff but also
of petitioners as defendants.
The Court does not agree with petitioners' contention that they
were not privy to the negotiations for respondent's possible
employment. It is evident from paragraphs 24 to 28 of the
Complaint16 that, on various occasions, Klepzig conducted
negotiations with respondent regarding the latter's possible
employment. In fact, Annex "H"17 of the complaint shows that
it was Klepzig who informed respondent that his company was
no longer interested in employing respondent. Hence, based
on the allegations in the Complaint and the annexes attached
thereto, respondent has a cause of action against herein
petitioners.
As 13
to the question of jurisdiction, this Court has consistently
held that where no employer-employee relationship exists
between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes
or any collective bargaining agreement, it is the Regional Trial
Court that has jurisdiction.18 In the present case, no employeremployee relationship exists between petitioners and
respondent. In fact, in his complaint, private respondent is not
seeking any relief under the Labor Code, but seeks payment of
damages on account of petitioners' alleged breach of their
obligation under their agreement to employ him. It is settled
that an action for breach of contractual obligation is
intrinsically a civil dispute.19 In the alternative, respondent
seeks redress on the basis of the provisions of Articles 19 and
21 of the Civil Code. Hence, it is clear that the present action
is within the realm of civil law, and jurisdiction over it belongs
to the regular courts.20
With respect to the applicability of the principle of forum non
conveniens in the present case, this Court's ruling in Bank of
America NT & SA v. Court of Appeals21 is instructive, to wit:
The doctrine of forum non conveniens, literally
meaning the forum is inconvenient, emerged in
private international law to deter the practice of
global forum shopping, that is to prevent non-resident
litigants from choosing the forum or place wherein to
bring their suit for malicious reasons, such as to
secure procedural advantages, to annoy and harass
the defendant, to avoid overcrowded dockets, or to
select a more friendly venue. Under this doctrine, a
court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most
"convenient" or available forum and the parties are
not precluded from seeking remedies elsewhere.

Whether a suit should be entertained or dismissed on

the basis of said doctrine depends largely upon the
facts of the particular case and is addressed to the
sound discretion of the trial court. In the case of
Communication Materials and Design, Inc. vs. Court
of Appeals, this Court held that "xxx [a] Philippine
Court may assume jurisdiction over the case if it
chooses to do so; provided, that the following
requisites are met: (1) that the Philippine Court is one
to which the parties may conveniently resort to; (2)
that the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and,
(3) that the Philippine Court has or is likely to have
power to enforce its decision."
Moreover, this Court enunciated in Philsec.
Investment Corporation vs. Court of Appeals, that the
doctrine of forum non conveniens should not be
used as a ground for a motion to dismiss because
Sec. 1, Rule 16 of the Rules of Court does not
include said doctrine as a ground. This Court
further ruled that while it is within the discretion
of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only
after vital facts are established, to determine
whether special circumstances require the courts
desistance; and that the propriety of dismissing a
case based on this principle of forum non
conveniens requires a factual determination, hence
it is more properly considered a matter of
defense.22 (emphasis supplied)
In the present case, the factual circumstances cited by
petitioners which would allegedly justify the application of the
doctrine of forum non conveniens are matters of defense, the
merits of which should properly be threshed out during trial.
WHEREFORE, the instant petition is DENIED and the
assailed Decision and Resolution of the Court of Appeals are
AFFIRMED.
Costs against petitioners.
SO ORDERED.

14

G.R. No. 120077

October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL

INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION,
ARBITER CEFERINA J. DIOSANA AND MARCELO G.
SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari 1 to annul
the following orders of the National Labor Relations
Commission (hereinafter referred to as "NLRC") for having
been issued without or with excess jurisdiction and with grave
abuse of discretion:2
(1) Order of May 31, 1993.3 Reversing and setting
aside its earlier resolution of August 28, 1992. 4 The
questioned order declared that the NLRC, not the
Philippine Overseas Employment Administration
(hereinafter referred to as "POEA"), had jurisdiction
over private respondent's complaint;
(2) Decision of December 15, 1994.5 Directing
petitioners to jointly and severally pay private
respondent twelve thousand and six hundred dollars
(US$ 12,600.00) representing salaries for the
unexpired portion of his contract; three thousand six
hundred dollars (US$3,600.00) as extra four months
salary for the two (2) year period of his contract,
three thousand six hundred dollars (US$3,600.00) as
"14th month pay" or a total of nineteen thousand and
15 eight hundred dollars (US$19,800.00) or its peso
equivalent and attorney's fees amounting to ten
percent (10%) of the total award; and
(3) Order of March 30, 1995.6 Denying the motion
for reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter
referred to as "Santos") was an overseas worker employed as a
printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the
Palace Hotel, Beijing, People's Republic of China and later
terminated due to retrenchment.

May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager,

Palace Hotel, Beijing, China. Mr. Schmidt informed
respondent Santos that he was recommended by one Nestor
Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as
printer, but with a higher monthly salary and increased
benefits. The position was slated to open on October 1, 1988.11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and
signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J.
Henk mailed a ready to sign employment contract to
respondent Santos. Mr. Henk advised respondent Santos that if
the contract was acceptable, to return the same to Mr. Henk in
Manila, together with his passport and two additional pictures
for his visa to China.
On May 30, 1988, respondent Santos resigned from the
Mazoon Printing Press, effective June 30, 1988, under the
pretext that he was needed at home to help with the family's
piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel
and acknowledged Mr. Henk's letter. Respondent Santos
enclosed four (4) signed copies of the employment contract
(dated June 4, 1988) and notified them that he was going to
arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his
employment would commence September 1, 1988 for a period
of two years.12 It provided for a monthly salary of nine
hundred dollars (US$900.00) net of taxes, payable fourteen
(14) times a year.13
On June 30, 1988, respondent Santos was deemed resigned
from the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing,
China. He started to work at the Palace Hotel.14

Petitioners are the Manila Hotel Corporation (hereinafter

referred to as "MHC") and the Manila Hotel International
Company, Limited (hereinafter referred to as "MHICL").

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".

When the case was filed in 1990, MHC was still a

government-owned and controlled corporation duly organized
and existing under the laws of the Philippines.

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.

MHICL is a corporation duly organized and existing under the

laws of Hong Kong.7 MHC is an "incorporator" of MHICL,
owning 50% of its capital stock.8

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain

Joanna suggested in a handwritten note that respondent Santos
be given one (1) month notice of his release from
employment.

By virtue of a "management agreement" 9 with the Palace

Hotel (Wang Fu Company Limited), MHICL 10 trained the
personnel and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the
Sultanate of Oman, respondent Santos received a letter dated

On August 10, 1989, the Palace Hotel informed respondent

Santos by letter signed by Mr. Shmidt that his employment at
the Palace Hotel print shop would be terminated due to
business reverses brought about by the political upheaval in
China.15 We quote the letter:16

"After the unfortunate happenings in China and

especially Beijing (referring to Tiannamen Square
incidents), our business has been severely affected.
To reduce expenses, we will not open/operate
printshop for the time being.
"We sincerely regret that a decision like this has to be
made, but rest assured this does in no way reflect
your past performance which we found up to our
expectations."
"Should a turnaround in the business happen, we will
contact you directly and give you priority on future
assignment."
On September 5, 1989, the Palace Hotel terminated the
employment of respondent Santos and paid all benefits due
him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the
Philippines.
On October 24, 1989, respondent Santos, through his lawyer,
Atty. Ednave wrote Mr. Shmidt, demanding full compensation
pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:17
His service with the Palace Hotel, Beijing was not
abruptly terminated but we followed the one-month
notice clause and Mr. Santos received all benefits due
him.

16 "For your information the Print Shop at the Palace

Hotel is still not operational and with a low business
outlook, retrenchment in various departments of the
hotel is going on which is a normal management
practice to control costs.
"When going through the latest performance ratings,
please also be advised that his performance was
below average and a Chinese National who is doing
his job now shows a better approach.
"In closing, when Mr. Santos received the letter of
notice, he hardly showed up for work but still
enjoyed free accommodation/laundry/meals up to the
day of his departure."
On February 20, 1990, respondent Santos filed a complaint for
illegal dismissal with the Arbitration Branch, National Capital
Region, National Labor Relations Commission (NLRC). He
prayed for an award of nineteen thousand nine hundred and
twenty three dollars (US$19,923.00) as actual damages, forty
thousand pesos (P40,000.00) as exemplary damages and
attorney's fees equivalent to 20% of the damages prayed for.
The complaint named MHC, MHICL, the Palace Hotel and
Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with
summons and neither participated in the proceedings before
the Labor Arbiter.18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided
the case against petitioners, thus:19
"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant

jointly and severally;
"a) $20,820 US dollars or its equivalent in
Philippine currency as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as
attorney's fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing
that the POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution,
stating:20
"WHEREFORE, let the appealed Decision be, as it is
hereby, declared null and void for want of
jurisdiction. Complainant is hereby enjoined to file
his complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for
reconsideration of the afore-quoted resolution. He argued that
the case was not cognizable by the POEA as he was not an
"overseas contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed
itself. The NLRC directed Labor Arbiter Emerson Tumanon to
hear the case on the question of whether private respondent
was retrenched or dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the
proceedings based on the testimonial and documentary
evidence presented to and heard by him.23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial
Arbiter of the National Capital Region, Arbitration Branch,
and the case was transferred to Labor Arbiter Jose G. de
Vera.24
On November 25, 1994, Labor Arbiter de Vera submitted his
report.25 He found that respondent Santos was illegally
dismissed from employment and recommended that he be paid
actual damages equivalent to his salaries for the unexpired
portion of his contract.26
On December 15, 1994, the NLRC ruled in favor of private
respondent, to wit:27
"WHEREFORE, finding that the report and
recommendations of Arbiter de Vera are supported by
substantial evidence, judgment is hereby rendered,
directing the respondents to jointly and severally pay
complainant the following computed contractual
benefits: (1) US$12,600.00 as salaries for the
unexpired portion of the parties' contract; (2)
US$3,600.00 as extra four (4) months salary for the
two (2) years period (sic) of the parties' contract; (3)
US$3,600.00 as "14th month pay" for the aforesaid
two (2) years contract stipulated by the parties or a

total of US$19,800.00 or its peso equivalent, plus (4)

attorney's fees of 10% of complainant's total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for
reconsideration arguing that Labor Arbiter de Vera's
recommendation had no basis in law and in fact.28
On March 30, 1995, the NLRC denied the motion for
reconsideration.29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent
motion for the issuance of a temporary restraining order and/or
writ of preliminary injunction and a motion for the annulment
of the entry of judgment of the NLRC dated July 31, 1995.31
On November 20, 1995, the Court denied petitioner's urgent
motion. The Court required respondents to file their respective
comments, without giving due course to the petition.32
On March 8, 1996, the Solicitor General filed a manifestation
stating that after going over the petition and its annexes, they
can not defend and sustain the position taken by the NLRC in
its assailed decision and orders. The Solicitor General prayed
that he be excused from filing a comment on behalf of the
NLRC33
On April 30,1996, private respondent Santos filed his
comment.34
On 17
June 26, 1996, the Court granted the manifestation of the
Solicitor General and required the NLRC to file its own
comment to the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two
foreign jurisdictions and the case involves purely foreign
elements. The only link that the Philippines has with the case
is that respondent Santos is a Filipino citizen. The Palace
Hotel and MHICL are foreign corporations. Not all cases
involving our citizens can be tried here.
The employment contract. Respondent Santos was hired
directly by the Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman, where
respondent Santos was then employed. He was hired without
the intervention of the POEA or any authorized recruitment
agency of the government.36
Under the rule of forum non conveniens, a Philippine court or
agency may assume jurisdiction over the case if it chooses to
do so provided: (1) that the Philippine court is one to which
the parties may conveniently resort to; (2) that the Philippine
court is in a position to make an intelligent decision as to the
law and the facts; and (3) that the Philippine court has or is
likely to have power to enforce its decision. 37 The conditions
are unavailing in the case at bar.

Not Convenient. We fail to see how the NLRC is a

convenient forum given that all the incidents of the case
from the time of recruitment, to employment to dismissal
occurred outside the Philippines. The inconvenience is
compounded by the fact that the proper defendants, the Palace
Hotel and MHICL are not nationals of the Philippines. Neither
.are they "doing business in the Philippines." Likewise, the
main witnesses, Mr. Shmidt and Mr. Henk are non-residents of
the Philippines.
No power to determine applicable law. Neither can an
intelligent decision be made as to the law governing the
employment contract as such was perfected in foreign soil.
This calls to fore the application of the principle of lex loci
contractus (the law of the place where the contract was
made).38
The employment contract was not perfected in the Philippines.
Respondent Santos signified his acceptance by writing a letter
while he was in the Republic of Oman. This letter was sent to
the Palace Hotel in the People's Republic of China.
No power to determine the facts. Neither can the NLRC
determine the facts surrounding the alleged illegal dismissal as
all acts complained of took place in Beijing, People's Republic
of China. The NLRC was not in a position to determine
whether the Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to justify respondent
Santos' retrenchment.
Principle of effectiveness, no power to execute decision.
Even assuming that a proper decision could be reached by the
NLRC, such would not have any binding effect against the
employer, the Palace Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no
power to solve controversies involving foreign employers.
Neither are we saying that we do not have power over an
employment contract executed in a foreign country. If Santos
were an "overseas contract worker", a Philippine forum,
specifically the POEA, not the NLRC, would protect him.39 He
is not an "overseas contract worker" a fact which he admits
with conviction.40
Even assuming that the NLRC was the proper forum, even on
the merits, the NLRC's decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had
jurisdiction over the case, and (2) that MHICL was liable for
Santos' retrenchment, still MHC, as a separate and distinct
juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty
percent (50%) of its capital stock. However, this is not enough
to pierce the veil of corporate fiction between MHICL and
MHC.
Piercing the veil of corporate entity is an equitable remedy. It
is resorted to when the corporate fiction is used to defeat
public convenience, justify wrong, protect fraud or defend a
crime. 41 It is done only when a corporation is a mere alter
ego or business conduit of a person or another corporation.

In Traders Royal Bank v. Court of Appeals,42 we held that "the

mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities."
The tests in determining whether the corporate veil may be
pierced are: First, the defendant must have control or
complete domination of the other corporation's finances,
policy and business practices with regard to the transaction
attacked. There must be proof that the other corporation had
no separate mind, will or existence with respect the act
complained of. Second, control must be used by the defendant
to commit fraud or wrong. Third, the aforesaid control or
breach of duty must be the proximate cause of the injury or
loss complained of. The absence of any of the elements
prevents the piercing of the corporate veil.43
It is basic that a corporation has a personality separate and
distinct from those composing it as well as from that of any
other legal entity to which it may be related. 44 Clear and
convincing evidence is needed to pierce the veil of corporate
fiction.45 In this case, we find no evidence to show that
MHICL and MHC are one and the same entity.

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

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact
that MHICL "signed" his employment contract with the Palace
Hotel. This fact fails to persuade us.

Considering that the NLRC was forum non-conveniens and

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

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
18
under the word "noted".

Labor Arbiters have exclusive and original jurisdiction only

over the following:53
"1. Unfair labor practice cases;

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 employee's conduct."

"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

19

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.