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G.R. No.

167052, March 11, 2015

FACTS: Respondent, as a president of a stock brokerage firm PHILSEC
(owned by Ayala International Finance), was tasked to resolve the
outstanding loans of Ventura Ducat. The debtor proposed to settle his debts
by an exchange of his assets. It was agreed that his property in Harris
County, Texas, which was believed to be around $2.9 mil, will be the object
of the exchange. William Craig, a former owner of the property was the one
who conducted the appraisal of its fair market value which he estimated to
be $3.365 mil. The agreement was executed in Makati, Philippines; however,
the ATHONA holdings had difficulty to sell the property because the actual
price is lower than expected. Due to that, ATHONA did not pay the balance
of the purchase price for the property and PHILSEC and AIFL refused to
release Ducats stock portfolio, claiming that they were defrauded into
believing with the appraised value. 1488, Inc. before the U.S. District Court
sued PHILSEC, AIFL, and ATHONA while the latter group filed counterclaims
against 1488, Inc., Daic, Craig, Ducat, and respondent seeking to recover
damages and excess payment, or the rescission of sale. The U.S. District
Court dropped respondent as counter-defendant for lack of evidence.
Respondent then moved to sanction petitioner (PHILSEC, now BPI Securities
Corp. the petitioner) based on Rule 11 of the U.S. Federal Rules of Civil
Procedure. In the said case, the Court concluded that the counterclaims
against respondent are frivolous and brought against him simply to humiliate
and embarrass him, thus directing PHILSEC and AILF to pay $49,450. Upon
appeal, The U.S. Court of Appeals found no basis of fraud, thus dismissing
the claim, but vacated the award of Rule 11 sanctions in favor of respondent
for being rendered without due process, and remanded such issue to the
U.S. District Court. However, the U.S. District Court reinstated its previous
judgment on the ground that the basis of the original suit was unfounded.
Still, petitioner continued to refuse compliance with the order of the U.S.
District Court and this prompted respondent to file an action for enforcement
in the RTC of Makati. The same allegations were presented by petitioner, that
the U.S District court rendered a decision upon a clear mistake of law or fact

and in violation of its right to due process. The RTC favored the respondent
which the CA affirmed.

ISSUE: Whether or not the decision of the U.S. District Court is

unenforceable in Philippine Jurisdiction on the ground that it committed a
clear mistake of law and fact.
HELD: Foreign decisions are enforceable in Philippine Jurisdiction by virtue
of general accepted principles of international law and the incorporations
clause of the Constitution even though there is no procedure for the
enforcement thereof. However, the Supreme Court provides for its rules in
Section 48, Rule 39 Rules of Court stating that in case of a judgment of a
tribunal of a foreign country, having jurisdiction to render it: upon a specific
thing, the judgment is conclusive upon the title; while, if against a person, it
is a presumptive evidence of a right between the parties. In either case, the
judgment or final order may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of
law or fact. Consequently, the party attacking a foreign judgment has the
burden of overcoming the presumption of its validity. The rules are silent to
what initiatory procedure must be undertaken but there is no question that a
civil action is an appropriate measure since it is one by which a party sues
another for the enforcement or protection of a right, and clearly an action to
enforce a foreign judgment is in essence a vindication of a right prescinding
either from a conclusive judgment upon title or the presumptive evidence
of a right.
However, due to the policy of preclusion, Philippine courts cannot substitute
their own judgment to what was rendered under the jurisdiction of another
state. Philippine courts can only recognize the foreign judgment as a fact
and can only be repelled by them on grounds external to its merits. Since
the fact of the foreign final order in this case is not dispute, the presumptive
validity of the order by the U.S. District Court stands enforceable. Any
purported mistake petitioner attributes to the U.S. District Court in the
latters issuance of the Order would merely constitute an error of judgment
in the exercise of its legitimate jurisdiction, which could have been corrected
by a timely appeal before the U.S. Court of Appeals.