G.R. No.

112573 February 9, 1995

NORTHWEST ORIENT AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents.
PADILLA, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals
affirming the dismissal of the petitioner's complaint to enforce the judgment of a Japanese
court. The principal issue here is whether a Japanese court can acquire jurisdiction over a
Philippine corporation doing business in Japan by serving summons through diplomatic
channels on the Philippine corporation at its principal office in Manila after prior attempts to
serve summons in Japan had failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized
under the laws of the State of Minnesota, U.S.A., sought to enforce in Civil Case No. 8317637 of the Regional Trial Court (RTC), Branch 54, Manila, a judgment rendered in its favor
by a Japanese court against private respondent C.F. Sharp & Company, Inc., (hereinafter
SHARP), a corporation incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10 November 1993, 1 the
following are the factual and procedural antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp & Company, through
its Japan branch, entered into an International Passenger Sales Agency Agreement, whereby
the former authorized the latter to sell its air transportation tickets. Unable to remit the
proceeds of the ticket sales made by defendant on behalf of the plaintiff under the said
agreement, plaintiff on March 25, 1980 sued defendant in Tokyo, Japan, for collection of the
unremitted proceeds of the ticket sales, with claim for damages.
On April 11, 1980, a writ of summons was issued by the 36th Civil Department, Tokyo District
Court of Japan against defendant at its office at the Taiheiyo Building, 3rd floor, 132,
Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the
summons was unsuccessful because the bailiff was advised by a person in the office that Mr.
Dinozo, the person believed to be authorized to receive court processes was in Manila and
would be back on April 24, 1980.

On April 24, 1980, bailiff returned to the defendant's office to serve the summons. Mr. Dinozo
refused to accept the same claiming that he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the Tokyo District Court
decided to have the complaint and the writs of summons served at the head office of the
defendant in Manila. On July 11, 1980, the Director of the Tokyo District Court requested the
Supreme Court of Japan to serve the summons through diplomatic channels upon the
defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff Rolando
Balingit the writ of summons (p. 276, Records). Despite receipt of the same,
defendant failed to appear at the scheduled hearing. Thus, the Tokyo Court
proceeded to hear the plaintiff's complaint and on [January 29, 1981],
rendered judgment ordering the defendant to pay the plaintiff the sum of
83,158,195 Yen and damages for delay at the rate of 6% per annum from
August 28, 1980 up to and until payment is completed (pp. 12-14, Records).
On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of
the judgment. Defendant not having appealed the judgment, the same
became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May 20,
1983, a suit for enforcement of the judgment was filed by plaintiff before the
Regional Trial Court of Manila Branch 54. 2
On July 16, 1983, defendant filed its answer averring that the judgment of the
Japanese Court sought to be enforced is null and void and unenforceable in
this jurisdiction having been rendered without due and proper notice to the
defendant and/or with collusion or fraud and/or upon a clear mistake of law
and fact (pp. 41-45, Rec.).
Unable to settle the case amicably, the case was tried on the merits. After the
plaintiff rested its case, defendant on April 21, 1989, filed a Motion for
Judgment on a Demurrer to Evidence based on two grounds:
(1) the foreign judgment sought to be enforced is null and void for want of
jurisdiction and (2) the said judgment is contrary to Philippine law and public
policy and rendered without due process of law. Plaintiff filed its opposition
after which the court a quo rendered the now assailed decision dated June
21, 1989 granting the demurrer motion and dismissing the complaint

(Decision, pp. 376-378, Records). In granting the demurrer motion, the trial
court held that:

On October 16, 1989, the lower court disregarded the Motion for Reconsideration and gave
due course to the plaintiff's Notice of Appeal. 3

The foreign judgment in the Japanese Court sought in this

action is null and void for want of jurisdiction over the person
of the defendant considering that this is an action in
personam; the Japanese Court did not acquire jurisdiction
over the person of the defendant because jurisprudence
requires that the defendant be served with summons in
Japan in order for the Japanese Court to acquire jurisdiction
over it, the process of the Court in Japan sent to the
Philippines which is outside Japanese jurisdiction cannot
confer jurisdiction over the defendant in the case before the
Japanese Court of the case at bar. Boudard versus Tait 67
Phil. 170. The plaintiff contends that the Japanese Court
acquired jurisdiction because the defendant is a resident of
Japan, having four (4) branches doing business therein and
in fact had a permit from the Japanese government to
conduct business in Japan (citing the exhibits presented by
the plaintiff); if this is so then service of summons should
have been made upon the defendant in Japan in any of
these alleged four branches; as admitted by the plaintiff the
service of the summons issued by the Japanese Court was
made in the Philippines thru a Philippine Sheriff. This Court
agrees that if the defendant in a foreign court is a resident in
the court of that foreign court such court could acquire
jurisdiction over the person of the defendant but it must be
served upon the defendant in the territorial jurisdiction of the
foreign court. Such is not the case here because the
defendant was served with summons in the Philippines and
not in Japan.

In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its
reliance upon Boudard vs. Tait 4 wherein it was held that "the process of the court has no
extraterritorial effect and no jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state." To support its position, the Court of Appeals
further stated:

Unable to accept the said decision, plaintiff on July 11, 1989 moved for reconsideration of the
decision, filing at the same time a conditional Notice of Appeal, asking the court to treat the
said notice of appeal "as in effect after and upon issuance of the court's denial of the motion
for reconsideration."
Defendant opposed the motion for reconsideration to which a Reply dated August 28, 1989
was filed by the plaintiff.

In an action strictly in personam, such as the instant case, personal service of

summons within the forum is required for the court to acquire jurisdiction over the defendant
(Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction on the court,
personal or substituted service of summons on the defendant not extraterritorial service is
necessary (Dial Corp vs. Soriano, 161 SCRA 739).
But while plaintiff-appellant concedes that the collection suit filed is an action in
personam, it is its theory that a distinction must be made between an action in
personam against a resident defendant and an action in personam against a non-resident
defendant. Jurisdiction is acquired over a non-resident defendant only if he is served
personally within the jurisdiction of the court and over a resident defendant if by personal,
substituted or constructive service conformably to statutory authorization. Plaintiff-appellant
argues that since the defendant-appellee maintains branches in Japan it is considered a
resident defendant. Corollarily, personal, substituted or constructive service of summons
when made in compliance with the procedural rules is sufficient to give the court jurisdiction
to render judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully be served outside
the territorial limits of the jurisdiction of the court from which it issues (Carter vs. Carter; 41
S.E. 2d 532, 201) and this isregardless of the residence or citizenship of the party thus
served (Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292, Am. Case 1912
D680). There must be actual service within the proper territorial limits on defendant or
someone authorized to accept service for him. Thus, a defendant, whether a resident or not
in the forum where the action is filed, must be served with summons within that forum.
But even assuming a distinction between a resident defendant and non-resident
defendant were to be adopted, such distinction applies only to natural persons and not in the
corporations. This finds support in the concept that "a corporation has no home or residence

in the sense in which those terms are applied to natural persons" (Claude Neon Lights vs.
Phil. Advertising Corp., 57 Phil. 607). Thus, as cited by the defendant-appellee in its brief:
Residence is said to be an attribute of a natural person, and can be predicated on
an artificial being only by more or less imperfect analogy. Strictly speaking, therefore, a
corporation can have no local residence or habitation. It has been said that a corporation is a
mere ideal existence, subsisting only in contemplation of law an invisible being which can
have, in fact, no locality and can occupy no space, and therefore cannot have a dwelling
place. (18 Am. Jur. 2d, p. 693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v. Hartfold
F. Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character of a corporation is
to be determined by the place of its origin where its charter was granted and not by the
location of its business activities (Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p.
101), A corporation is a "resident" and an inhabitant of the state in which it is incorporated and
no other (36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly organized under the
Philippine laws. Clearly, its residence is the Philippines, the place of its incorporation, and not
Japan. While defendant-appellee maintains branches in Japan, this will not make it a resident
of Japan. A corporation does not become a resident of another by engaging in business there
even though licensed by that state and in terms given all the rights and privileges of a
domestic corporation (Galveston H. & S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4
S Ct. 401).
On this premise, defendant appellee is a non-resident corporation. As such, court
processes must be served upon it at a place within the state in which the action is brought
and not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354). 5

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a
tribunal of a foreign country having jurisdiction to pronounce the same is presumptive
evidence of a right as between the parties and their successors-in-interest by a subsequent
title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of
Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was
acting in the lawful exercise of jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of overcoming the
presumption of its validity.7 Being the party challenging the judgment rendered by the
Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment. In an
attempt to discharge that burden, it contends that the extraterritorial service of summons
effected at its home office in the Philippines was not only ineffectual but also void, and the
Japanese Court did not, therefore acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those relating to the service of
process upon a defendant are governed by the lex fori or the internal law of the forum. 8 In
this case, it is the procedural law of Japan where the judgment was rendered that determines
the validity of the extraterritorial service of process on SHARP. As to what this law is is a
question of fact, not of law. It may not be taken judicial notice of and must be pleaded and
proved like any other fact. 9 Sections 24 and 25, Rule 132 of the Rules of Court provide that it
may be evidenced by an official publication or by a duly attested or authenticated copy
thereof. It was then incumbent upon SHARP to present evidence as to what that Japanese
procedural law is and to show that under it, the assailed extraterritorial service is invalid. It did
not. Accordingly, the presumption of validity and regularity of the service of summons and the
decision thereafter rendered by the Japanese court must stand.

Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this
Court contending that the respondent court erred in holding that SHARP was not a resident of
Japan and that summons on SHARP could only be validly served within that country.

Alternatively in the light of the absence of proof regarding Japanese

law, the presumption of identity or similarity or the so-called processual presumption 10 may
be invoked. Applying it, the Japanese law on the matter is presumed to be similar with the
Philippine law on service of summons on a private foreign corporation doing business in the
Philippines. Section 14, Rule 14 of the Rules of Court provides that if the defendant is a
foreign corporation doing business in the Philippines, service may be made: (1) on its
resident agent designated in accordance with law for that purpose, or, (2) if there is no such
resident agent, on the government official designated by law to that effect; or (3) on any of its
officers or agents within the Philippines.

A foreign judgment is presumed to be valid and binding in the country from which it comes,
until the contrary is shown. It is also proper to presume the regularity of the proceedings and
the giving of due notice therein. 6

If the foreign corporation has designated an agent to receive summons, the designation is
exclusive, and service of summons is without force and gives the court no jurisdiction unless
made upon him. 11

It then concluded that the service of summons effected in Manila or beyond the territorial
boundaries of Japan was null and did not confer jurisdiction upon the Tokyo District Court
over the person of SHARP; hence, its decision was void.

Where the corporation has no such agent, service shall be made on the government official
designated by law, to wit: (a) the Insurance Commissioner in the case of a foreign insurance
company; (b) the Superintendent of Banks, in the case of a foreign banking corporation; and
(c) the Securities and Exchange Commission, in the case of other foreign corporations duly
licensed to do business in the Philippines. Whenever service of process is so made, the
government office or official served shall transmit by mail a copy of the summons or other
legal proccess to the corporation at its home or principal office. The sending of such copy is a
necessary part of the service. 12
SHARP contends that the laws authorizing service of process upon the Securities and
Exchange Commission, the Superintendent of Banks, and the Insurance Commissioner, as
the case may be, presuppose a situation wherein the foreign corporation doing business in
the country no longer has any branches or offices within the Philippines. Such contention is
belied by the pertinent provisions of the said laws. Thus, Section 128 of the Corporation
Code13 and Section 190 of the Insurance Code 14 clearly contemplate two situations: (1) if the
corporation had left the Philippines or had ceased to transact business therein, and (2) if the
corporation has no designated agent. Section 17 of the General Banking Act 15 does not even
speak a corporation which had ceased to transact business in the Philippines.
Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to
receive court processes in Japan. This silence could only mean, or least create an
impression, that it had none. Hence, service on the designated government official or on any
of SHARP's officers or agents in Japan could be availed of. The respondent, however, insists
that only service of any of its officers or employees in its branches in Japan could be resorted
to. We do not agree. As found by the respondent court, two attempts at service were made at
SHARP's Yokohama branch. Both were unsuccessful. On the first attempt, Mr. Dinozo, who
was believed to be the person authorized to accept court process, was in Manila. On the
second, Mr. Dinozo was present, but to accept the summons because, according to him, he
was no longer an employee of SHARP. While it may be true that service could have been
made upon any of the officers or agents of SHARP at its three other branches in Japan, the
availability of such a recourse would not preclude service upon the proper government
official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court which ordered that
summons for SHARP be served at its head office in the Philippine's after the two attempts of
service had failed. 16 The Tokyo District Court requested the Supreme Court of Japan to
cause the delivery of the summons and other legal documents to the Philippines. Acting on
that request, the Supreme Court of Japan sent the summons together with the other legal
documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to
the Japanese Embassy in Manila . Thereafter, the court processes were delivered to the

Ministry (now Department) of Foreign Affairs of the Philippines, then to the Executive Judge
of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith ordered
Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila.
This service is equivalent to service on the proper government official under Section 14, Rule
14 of the Rules of Court, in relation to Section 128 of the Corporation Code. Hence, SHARP's
contention that such manner of service is not valid under Philippine laws holds no water. 17
In deciding against the petitioner, the respondent court sustained the trial court's reliance
on Boudard vs. Tait 18where this Court held:
The fundamental rule is that jurisdiction in
personam over nonresidents, so as to sustain a money judgment, must be based upon
personal service within the state which renders the judgment.
The process of a court, has no extraterritorial effect, and no jurisdiction is acquired over the
person of the defendant by serving him beyond the boundaries of the state. Nor has a
judgment of a court of a foreign country against a resident of this country having no property
in such foreign country based on process served here, any effect here against either the
defendant personally or his property situated here.
Process issuing from the courts of one state or country cannot run into another, and although
a nonresident defendant may have been personally served with such process in the state or
country of his domicile, it will not give such jurisdiction as to authorize a personal judgment
against him.
It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial
Corp. vs. Soriano, 20 as well as the principle laid down by the Iowa Supreme Court in the 1911
case of Raher vs. Raher. 21
The first three cases are, however, inapplicable. Boudard involved the enforcement of a
judgment of the civil division of the Court of First Instance of Hanoi, French Indo-China. The
trial court dismissed the case because the Hanoi court never acquired jurisdiction over the
person of the defendant considering that "[t]he, evidence adduced at the trial conclusively
proves that neither the appellee [the defendant] nor his agent or employees were ever in
Hanoi, French Indo-China; and that the deceased Marie Theodore Jerome Boudard had
never, at any time, been his employee." In Magdalena Estate, what was declared invalid
resulting in the failure of the court to acquire jurisdiction over the person of the defendants in
an action in personam was the service of summons through publication against nonappearing resident defendants. It was claimed that the latter concealed themselves to avoid
personal service of summons upon them. In Dial, the defendants were foreign corporations
which were not, domiciled and licensed to engage in business in the Philippines and which
did not have officers or agents, places of business, or properties here. On the other hand, in

the instant case, SHARP was doing business in Japan and was maintaining four branches
therein.

clear indication of its meaning. There are however other statutes, albeit of subsequent
enactment and effectivity, from which enlightening notions of the term may be derived.

Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a divided
Supreme Court of Iowa declared that the principle that there can be no jurisdiction in a court
of a territory to render a personal judgment against anyone upon service made outside its
limits was applicable alike to cases of residents and non-residents. The principle was put at
rest by the United States Supreme Court when it ruled in the 1940 case of Milliken
vs. Meyer 22 that domicile in the state is alone sufficient to bring an absent defendant within
the reach of the state's jurisdiction for purposes of a personal judgment by means of
appropriate substituted service or personal service without the state. This principle is
embodied in section 18, Rule 14 of the Rules of Court which allows service of summons on
residents temporarily out of the Philippines to be made out of the country. The rationale for
this rule was explained in Millikenas follows:
[T]he authority of a state over one of its
citizens is not terminated by the mere fact of his absence from the state. The state which
accords him privileges and affords protection to him and his property by virtue of his domicile
may also exact reciprocal duties. "Enjoyment of the privileges of residence within the state,
and the attendant right to invoke the protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that citizenship arise out of the
relationship to the state which domicile creates. That relationship is not dissolved by mere
absence from the state. The attendant duties, like the rights and privileges incident to
domicile, are not dependent on continuous presence in the state. One such incident of
domicile is amenability to suit within the state even during sojourns without the state, where
the state has provided and employed a reasonable method for apprising such an absent party
of the proceedings against him. 23

The National Internal Revenue Code declares that the term "'resident foreign corporation'
applies to a foreign corporation engaged in trade or business within the Philippines," as
distinguished from a "'non-resident foreign corporation' . . . (which is one) not engaged in
trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)].

The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict
technical sense, such domicile as a corporation may have is single in its essence and a
corporation can have only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain purposes, be regarded a
resident in another state in which it has offices and transacts business. This is the rule in our
jurisdiction and apropos thereto, it may be necessery to quote what we stated in State
Investment House, Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may be considered "residents of the
Philippine Islands" as that term is used in Section 20 of the Insolvency Law . . . or residents of
the state under the laws of which they were respectively incorporated. The answer cannot be
found in the Insolvency Law itself, which contains no definition of the term, resident, or any

The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries,
affiliation, extension offices or any other units of corporation or juridical person organized
under the laws of any foreign country operating in the Philippines shall be considered
residents of the Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches and agencies in the
Philippines of foreign banks . . . (which are) called Philippine branches," in the same category
as "commercial banks, savings associations, mortgage banks, development banks, rural
banks, stock savings and loan associations" (which have been formed and organized under
Philippine laws), making no distinction between the former and the latter in so far as the
terms "banking institutions" and "bank" are used in the Act [Sec. 2], declaring on the contrary
that in "all matters not specifically covered by special provisions applicable only to foreign
banks, or their branches and agencies in the Philippines, said foreign banks or their branches
and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and
regulations applicable to domestic banking corporations of the same class, except such laws,
rules and regulations as provided for the creation, formation, organization, or dissolution of
corporations or as fix the relation, liabilities, responsibilities, or duties of members,
stockholders or officers of corporation. [Sec. 18].
This court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs.
Philippine Advertising Corp., 57 Phil. 607] that a foreign corporation licitly doing business in
the Philippines, which is a defendant in a civil suit, may not be considered a nonresident within the scope of the legal provision authorizing attachment against a
defendant not residing in the Philippine Islands; [Sec. 424, in relation to Sec. 412 of Act No.
190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57,
Rules of 1964] in other words, a preliminary attachment may not be applied for and granted
solely on the asserted fact that the defendant is a foreign corporation authorized to do
business in the Philippines and is consequently and necessarily, "a party who resides out
of the Philippines." Parenthetically, if it may not be considered as a party not residing in the
Philippines, or as a party who resides out of the country, then, logically, it must be considered
a party who does reside in the Philippines, who is a resident of the country. Be this as it may,
this Court pointed out that: . . . Our laws and jurisprudence indicate a purpose to assimilate

foreign corporations, duly licensed to do business here, to the status of domestic

corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co.,
46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out
of line with this policy should we make a discrimination against a foreign corporation, like the
petitioner, and subject its property to the harsh writ of seizure by attachment when it has
complied not only with every requirement of law made specially of foreign corporations, but in
addition with every requirement of law made of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized to do business in the
Philippines "to the status of domestic corporations, subsumes their being found and operating
as corporations, hence,residing, in the country.

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is
AFFIRMED insofar as it denied NORTHWEST's claims for attorneys fees, litigation expenses,
and exemplary damages but REVERSED insofar as in sustained the trial court's dismissal of
NORTHWEST's complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial
Court of Manila, and another in its stead is hereby rendered ORDERING private respondent
C.F. SHARP L COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign
judgment subject of said case, with interest thereon at the legal rate from the filing of the
complaint therein until the said foreign judgment is fully satisfied.
Costs against the private respondent.
SO ORDERED.

The same principle is recognized in American law: that the residence of a corporation, if it can
be said to have a residence, is necessarily where it exercises corporate functions . . .;" that it
is considered as dwelling "in the place where its business is done . . .," as being "located
where its franchises are exercised . . .," and as being "present where it is engaged in the
prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in
a state is a resident of any country where it maintains an office or agent for transaction of its
usual and customary business for venue purposes;" and that the "necessary element in its
signification is locality of existence." [Words and Phrases, Permanent Ed., vol. 37, pp. 394,
412, 493].
In as much as SHARP was admittedly doing business in Japan through its four duly
registered branches at the time the collection suit against it was filed, then in the light of the
processual presumption, SHARP may be deemed a resident of Japan, and, as such, was
amenable to the jurisdiction of the courts therein and may be deemed to have assented to the
said courts' lawful methods of serving process. 27
Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not
only under the processual presumption but also because of the presumption of regularity of
performance of official duty.
We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary
damages to be without merit. We find no evidence that would justify an award for attorney's
fees and litigation expenses under Article 2208 of the Civil Code of the Philippines. Nor is an
award for exemplary damages warranted. Under Article 2234 of the Civil Code, before the
court may consider the question of whether or not exemplary damages should be awarded,
the plaintiff must show that he is entitled to moral, temperate, or compensatory damaged.
There being no such proof presented by NORTHWEST, no exemplary damages may be
adjudged in its favor.

G.R. No. 108538

January 22, 1996

LOURDES A. VALMONTE and ALFREDO D. VALMONTE, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, THIRD DIVISION and ROSITA DIMALANTA, respondents.
DECISION

Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in an action for
partition filed against her and her husband, who is also her attorney, summons intended for
her may be served on her husband, who has a law office in the Philippines. The Regional
Trial Court of Manila, Branch 48, said no and refused to declare Lourdes A. Valmonte in
default, but the Court of Appeals said yes. Hence this petition for review on certiorari.
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife. They are
both residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A. Petitioner Alfredo
D. Valmonte, who is a member of the Philippine bar, however, practices his profession in the
Philippines, commuting for this purpose between his residence in the state of Washington
and Manila, where he holds office at S-304 Gedisco Centre, 1564 A. Mabini Ermita, Manila.
On March 9, 1992, private respondent Rosita Dimalanta, who is the sister of petitioner
Lourdes A. Valmonte, filed a complaint for partition of real property and accounting of rentals
against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte before the Regional Trial
Court of Manila, Branch 48. The subject of the action is a three-door apartment located in
Paco, Manila.

In her Complaint, private respondent alleged: The plaintiff is of legal age, a widow and is at
present a resident of 14823 Conway Road, Chesterfield, Missouri, U.S.A., while the
defendants are spouses, of legal age and at present residents of 90222 Carkeek Drive, South
Seattle, Washington, U.S.A., but, for purposes of this complaint may be served with
summons at Gedisco Center, Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant
Alfredo D. Valmonte as defendant Lourdes Arreola Valmonte's spouse holds office and where
he can be found.

On December 29, 1992, the Court of Appeals rendered a decision granting the petition and
declaring Lourdes A. Valmonte in default. A copy of the appellate court's decision was
received by petitioner Alfredo D. Valmonte on January 15, 1993 at his Manila office and on
January 21, 1993 in Seattle, Washington. Hence, this petition.

Apparently, the foregoing averments were made on the basis of a letter previously sent by
petitioner Lourdes A. Valmonte to private respondent's counsel in which, in regard to the
partition of the property in question, she referred private respondent's counsel to her husband
as the party to whom all communications intended for her should be sent. The letter reads:

[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the
aforementioned counsel of Dimalanta to address all communications (evidently referring to
her controversy with her sister Mrs. Dimalanta over the Paco property, now the subject of the
instant case) to her lawyer who happens also to be her husband. Such directive was made
without any qualification just as was her choice/designation of her husband Atty. Valmonte as
her lawyer likewise made without any qualification or reservation. Any disclaimer therefore on
the part of Atty. Valmonte as to his being his wife's attorney (at least with regard to the
dispute vis-a-vis (sic) the Paco property) would appear to be feeble or trifling, if not incredible.

July 4, 1991
Dear Atty. Balgos:
This is in response to your letter, dated 20 June 1991, which I received on 3 July 1991. Please address all communications to my
lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and fax numbers appear below.
c/o Prime Marine
Gedisco Center, Unit 304
1564 A. Mabini, Ermita
Metro Manila
Telephone: 521-1736
Fax: 521-2095

Service of summons was then made upon petitioner Alfredo D. Valmonte, who at the time,
was at his office in Manila. Petitioner Alfredo D. Valmonte accepted the summons, insofar as
he was concerned, but refused to accept the summons for his wife, Lourdes A. Valmonte, on
the ground that he was not authorized to accept the process on her behalf. Accordingly the
process server left without leaving a copy of the summons and complaint for petitioner
Lourdes A. Valmonte.
Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim. Petitioner
Lourdes A. Valmonte, however, did not file her Answer. For this reason private respondent
moved to declare her in default. Petitioner Alfredo D. Valmonte entered a special appearance
in behalf of his wife and opposed the private respondent's motion.
In its Order dated July 3, 1992, the trial court, denied private respondent's motion to declare
petitioner Lourdes A. Valmonte in default. A motion for reconsideration was similarly denied
on September 23, 1992. Whereupon, private respondent filed a petition for certiorari,
prohibition and mandamus with the Court of Appeals.

The issue at bar is whether in light of the facts set forth above, petitioner Lourdes A. Valmonte
was validly served with summons. In holding that she had been, the Court of Appeals stated: 1

This view is bolstered by Atty. Valmonte's subsequent alleged special appearance made on
behalf of his wife. Whereas Mrs. Valmonte had manifestly authorized her husband to serve as
her lawyer relative to her dispute with her sister over the Paco property and to receive all
communications regarding the same and subsequently to appear on her behalf by way of a
so-called special appearance, she would nonetheless now insist that the same husband
would nonetheless had absolutely no authority to receive summons on her behalf. In effect,
she is asserting that representation by her lawyer (who is also her husband) as far as the
Paco property controversy is concerned, should only be made by him when such
representation would be favorable to her but not otherwise. It would obviously be inequitable
for this Court to allow private respondent Lourdes A. Valmonte to hold that her husband has
the authority to represent her when an advantage is to be obtained by her and to deny such
authority when it would turn out to be her disadvantage. If this be allowed, Our Rules of
Court, instead of being an instrument to promote justice would be made use of to thwart or
frustrate the same.
Turning to another point, it would not do for Us to overlook the fact that the disputed
summons was served not upon just an ordinary lawyer of private respondent Lourdes A.
Valmonte, but upon her lawyer husband. But that is not all, the same lawyer/husband
happens to be also her co-defendant in the instant case which involves real property which,
according to her lawyer/husband/co-defendant, belongs to the conjugal partnership of the
defendants (the spouses Valmonte). It is highly inconceivable and certainly it would be
contrary to human nature for the lawyer/husband/co-defendant to keep to himself the fact that
they (the spouses Valmonte) had been sued with regard to a property which, he claims to be

conjugal. Parenthetically, there is nothing in the records of the case before Us regarding any
manifestation by private respondent Lourdes A. Valmonte about her lack of knowledge about
the case instituted against her and her lawyer/husband/co-defendant by her sister Rosita. . . .
PREMISES CONSIDERED, the instant petition for certiorari, prohibition and mandamus is
given due course. This Court hereby Resolves to nullify the orders of the court a quo dated
July 3, 1992 and September 23, 1992 and further declares private respondent Lourdes
Arreola Valmonte as having been properly served with summons.
Petitioners assail the aforequoted decision, alleging that the Court of Appeals erred (1) in
refusing to apply the provisions of Rule 14, 17 of the Revised Rules of Court and applying
instead Rule 14, 8 when the fact is that petitioner Lourdes A. Valmonte is a nonresident
defendant; and (2) because even if Rule 14, 8 is the applicable provision, there was no valid
substituted service as there was no strict compliance with the requirement by leaving a copy
of the summons and complaint with petitioner Alfredo D. Valmonte. Private respondent, upon
the other hand, asserts that petitioners are invoking a technicality and that strict adherence to
the rules would only result in a useless ceremony.
We hold that there was no valid service of process on Lourdes A. Valmonte.
To provide
perspective, it will be helpful to determine first the nature of the action filed against petitioners
Lourdes A. Valmonte and Alfredo D. Valmonte by private respondent, whether it is an
action in personam, in rem or quasi in rem. This is because the rules on service of summons
embodied in Rule 14 apply according to whether an action is one or the other of these
actions.
In an action in personam, personal service of summons or, if this is not possible and he
cannot be personally served, substituted service, as provided in Rule 14, 7-8 2 is essential
for the acquisition by the court of jurisdiction over the person of a defendant who does not
voluntarily submit himself to the authority of the court. 3 If defendant cannot be served with
summons because he is temporarily abroad, but otherwise he is a Philippine resident, service
of summons may, by leave of court, be made by publication. 4 Otherwise stated, a resident
defendant in an action in personam, who cannot be personally served with summons, may be
summoned either by means of substituted service in accordance with Rule 14, 8 or by
publication as provided in 17 and 18 of the same Rule. 5
In all of these cases, it should be noted, defendant must be a resident of the Philippines,
otherwise an action in personam cannot be brought because jurisdiction over his person is
essential to make a binding decision.

On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the
defendant is not essential for giving the court jurisdiction so long as the court acquires
jurisdiction over the res. If the defendant is a nonresident and he is not found in the country,
summons may be served exterritorially in accordance with Rule 14, 17, which provides:
17. Extraterritorial service. - When the defendant does not reside and is not found in the
Philippines and the action affects the personal status of the plaintiff or relates to, or the
subject of which is, property within the Philippines, in which the defendant has or claims a lien
or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in
excluding the defendant from any interest therein, or the property of the defendant has been
attached within the Philippines, service may, by leave of court, be effected out of the
Philippines by personal service as under section 7; or by publication in a newspaper of
general circulation in such places and for such time as the court may order, in which case a
copy of the summons and order of the court shall be sent by registered mail to the last known
address of the defendant, or in any other manner the court may deem sufficient. Any order
granting such leave shall specify a reasonable time, which shall not be less than sixty (60)
days after notice, within which the defendant must answer..
In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it
has jurisdiction over theres, i.e. the personal status of the plaintiff who is domiciled in the
Philippines or the property litigated or attached.
Service of summons in the manner provided in 17 is not for the purpose of vesting it with
jurisdiction but for complying with the requirements of fair play or due process, so that he will
be informed of the pendency of the action against him and the possibility that property in the
Philippines belonging to him or in which he has an interest may be subjected to a judgment in
favor of the plaintiff and he can thereby take steps to protect his interest if he is so minded. 6
Applying the foregoing rules to the case at bar, private respondent's action, which is for
partition and accounting under Rule 69, is in the nature of an action quasi in rem. Such an
action is essentially for the purpose of affecting the defendant's interest in a specific property
and not to render a judgment against him. As explained in the leading case of Banco Espaol
Filipino v. Palanca :7
[An action quasi in rem is] an action which while not strictly speaking an action in
rem partakes of that nature and is substantially such. . . . The action quasi in rem differs from
the true action in rem in the circumstance that in the former an individual is named as
defendant and the purpose of the proceeding is to subject his interest therein to the obligation
or lien burdening the property. All proceedings having for their sole object the sale or other
disposition of the property of the defendant, whether by attachment, foreclosure, or other form

of remedy, are in a general way thus designated. The judgment entered in these proceedings
is conclusive only between the parties.
As petitioner Lourdes A. Valmonte is a nonresident who is not found in the Philippines,
service of summons on her must be in accordance with Rule 14, 17. Such service, to be
effective outside the Philippines, must be made either (1) by personal service; (2) by
publication in a newspaper of general circulation in such places and for such time as the court
may order, in which case a copy of the summons and order of the court should be sent by
registered mail to the last known address of the defendant; or (3) in any other manner which
the court may deem sufficient.
Since in the case at bar, the service of summons upon petitioner Lourdes A. Valmonte was
not done by means of any of the first two modes, the question is whether the service on her
attorney, petitioner Alfredo D. Valmonte, can be justified under the third mode, namely, "in any
. . . manner the court may deem sufficient."
We hold it cannot. This mode of service, like the first two, must be made outside the
Philippines, such as through the Philippine Embassy in the foreign country where the
defendant resides.8 Moreover, there are several reasons why the service of summons on Atty.
Alfredo D. Valmonte cannot be considered a valid service of summons on petitioner Lourdes
A. Valmonte. In the first place, service of summons on petitioner Alfredo D. Valmonte was not
made upon the order of the court as required by Rule 14, 17 and certainly was not a mode
deemed sufficient by the court which in fact refused to consider the service to be valid and on
that basis declare petitioner Lourdes A. Valmonte in default for her failure to file an answer.
In the second place, service in the attempted manner on petitioner was not made upon prior
leave of the trial court as required also in Rule 14, 17. As provided in 19, such leave must
be applied for by motion in writing, supported by affidavit of the plaintiff or some person on his
behalf and setting forth the grounds for the application.
Finally, and most importantly, because there was no order granting such leave, petitioner
Lourdes A. Valmonte was not given ample time to file her Answer which, according to the
rules, shall be not less than sixty (60) days after notice. It must be noted that the period to file
an Answer in an action against a resident defendant differs from the period given in an action
filed against a nonresident defendant who is not found in the Philippines. In the former, the
period is fifteen (15) days from service of summons, while in the latter, it is at least sixty (60)
days from notice.
Strict compliance with these requirements alone can assure observance of due process. That
is why in one case,9although the Court considered publication in the Philippines of the

summons (against the contention that it should be made in the foreign state where defendant
was residing) sufficient, nonetheless the service was considered insufficient because no copy
of the summons was sent to the last known correct address in the Philippines..
Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-463 (1975),
in which it was held that service of summons upon the defendant's husband was binding on
her. But the ruling in that case is justified because summons were served upon defendant's
husband in their conjugal home in Cebu City and the wife was only temporarily absent,
having gone to Dumaguete City for a vacation. The action was for collection of a sum of
money. In accordance with Rule 14, 8, substituted service could be made on any person of
sufficient discretion in the dwelling place of the defendant, and certainly defendant's husband,
who was there, was competent to receive the summons on her behalf. In any event, it
appears that defendant in that case submitted to the jurisdiction of the court by instructing her
husband to move for the dissolution of the writ of attachment issued in that case.
On the other hand, in the case of Gemperle v. Schenker, 10 it was held that service on the
wife of a nonresident defendant was found sufficient because the defendant had appointed
his wife as his attorney-in-fact. It was held that although defendant Paul Schenker was a
Swiss citizen and resident of Switzerland, service of summons upon his wife Helen Schenker
who was in the Philippines was sufficient because she was her husband's representative and
attorney-in-fact in a civil case, which he had earlier filed against William Gemperle. In fact
Gemperle's action was for damages arising from allegedly derogatory statements contained
in the complaint filed in the first case. As this Court said, "[i]n other words, Mrs. Schenker had
authority to sue, and had actually sued, on behalf of her husband, so that she was, also,
empowered to represent him in suits filed against him, particularly in a case, like the one at
bar, which is a consequence of the action brought by her on his behalf" 11 Indeed, if instead of
filing an independent action Gemperle filed a counterclaim in the action brought by Mr.
Schenker against him, there would have been no doubt that the trial court could have
acquired jurisdiction over Mr. Schenker through his agent and attorney-in-fact, Mrs. Schenker.
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint her husband as
her attorney-in-fact. Although she wrote private res- pondent's attorney that "all
communications" intended for her should be addressed to her husband who is also her
lawyer at the latter's address in Manila, no power of attorney to receive summons for her can
be inferred therefrom. In fact the letter was written seven months before the filing of this case
below, and it appears that it was written in connection with the negotiations between her and
her sister, respondent Rosita Dimalanta, concerning the partition of the property in question.
As is usual in negotiations of this kind, the exchange of correspondence was carried on by
counsel for the parties. But the authority given to petitioner's husband in these negotiations
certainly cannot be construed as also including an authority to represent her in any litigation.

For the foregoing reasons, we hold that there was no valid service on petitioner Lourdes A.
Valmonte in this case.WHEREFORE, the decision appealed from is REVERSED and the
orders dated July 3, 1992 and September 23, 1992 of the Regional Trial Court of Manila,
Branch 48 are REINSTATED.

G.R. No. 77085 April 26, 1989

PHILIPPINE INTERNATIONAL SHIPPING CORPORATION (PISC), GEORGE LIM, MARCOS
BAUTISTA, CARLOS LAUDE, TAN SING LIM, ANTONIO LIU LAO, ONG TEH, PHILIPPINE
CONSORTIUM CONSTRUCTION CORPORATION, PACIFIC MILLS, INC., and UNIVERSAL STEEL
SMELTING CO., INC., petitioners,
vs.
THE HON. COURT OF APPEALS, HON. JOSE C. DE GUZMAN, as Judge presiding Branch 93 of
the Regional Trial Court of Quezon City, INTERPOOL, LTD. and SHERIFF NORBERTO V.
DOBLADA JR.,respondents.
FELICIANO, J.:

Plaintiff [respondent Interpool, Ltd.] is a foreign corporation, duly organized and existing
under the laws of Bahamas Islands with office and business address at 630, 3rd Avenue,
New York, New York, and not licensed to do, and not doing business, in the Philippines.
Defendants Philippine International Shipping Corporation, Philippine Construction Consortium
Corporation, Pacific Mills Inc., and Universal Steel Smelting Company, Inc., are corporations
duly organized and existing under and by virtue of the laws of the Philippines. The other
defendants, George Lim Marcos Bautista, Carlos Laude, Tan Sing Lim, Antonio Liu Lao and
Ong Teh are Philippine residents.
In 1979 to 1981, the defendant, Philippine International Shipping Corporation (PISC) leased
from the plaintiff and its wholly owned subsidiary, the Container Trading Corporation, several
containers pursuant to the Membership Agreement and Hiring Conditions (Exhibit B) 1 and
the Master Equipment Leasing Agreement (Exhibit C ), 2 both dated June 8, 1979.
Defendants Philippine Construction Consortium Corporation, Pacific Mills Inc. and Universal
Steel Smelting Company, guaranteed to pay (sic) all monies due, or to become due, to the

plaintiff from (PISC) and any liability of the latter arising out of the leasing or purchasing of
equipment from the plaintiff or any of its subsidiaries, affiliates and/or agents of I.S.C. dry
cargo containers and/or chassis, including but not limited, to per diem leasing charges,
damages protection plan charges, damages charge and/or replacement costs of
constructively and/or totally lost containers as well as handling and drop-off charges (Exhibit
J). 3
The other defendants, namely: 1) George Lim; 2) Marcos Bautista; 3) Carlos Laude 4) Tan
Sing Lim; 5) Antonio Liu Lao and 6) Ong Teh, unconditionally and irrevocably guaranteed to
pay (sic) plaintiff all payments due to it under the Master Equipment Leasing Agreement
(Exhibit C) and Membership Agreement and Hiring Conditions (Exhibit B) dated June 8, 1979,
in the amounts at the time and in the manner set out in the said agreements and to indemnify
plaintiff against all claims, liabilities, costs, damages and expenses (including legal fees)
suffered or incurred by plaintiff, arising out of or in connection with any failure by defendant
Philippine International Shipping Corporation to perform any of its obligations under the
aforesaid Agreements (Exhibit D, E, F, G, H, and I). 4
In 1979 to 1981, defendant Philippine International Shipping Corporation incurred outstanding
and unpaid obligations with the plaintiff, in the amount of $94,456.28, representing unpaid per
diems, drop-off charges, interest and other agreed charges.
The plaintiff sent letters to the defendants (Exhibit K, L, M, N 0, P, Q, R, S and
T ), 5 demanding payment of their outstanding and unpaid obligations, but to no avail, so
plaintiff was constrained to file a case against the principal defendant, (PISC) before the
United States District Court, Southern District of New York, which was docketed as 83 Civil
290 (EW) Plaintiff obtained a Default Judgment on July 3, 1983 against (PISC) ordering it to
pay the plaintiff the sum of $80,779.33, as liquidated damages, together with interest in the
amount of $13,676.95 and costs in the amount of $80.00. or for a total judgment of
$94,456.28 (Exhibit A). 6
Because of the unjustifiable failure and refusal of PISC and its guarantors to jointly and
severally pay their obligations to the plaintiff, the latter filed on November 16, 1983 a
complaint [docketed as Civil Case No. Q-39927, Branch 93, Regional Trial Court of Quezon
City] (Annex A) 7 to enforce the default judgment of the U.S. District Court against the
defendant PISC and also to enforce the individually executed Continuing Guaranties of the
other defendants (Annexes D, E, F, G, H, I, and J of the Complaint).
The defendants (herein petitioners) were duly summoned, but they failed to answer the
complaint. On motion of the plaintiff, they were declared in default 8 and the plaintiff (herein
private respondent) was allowed to present its evidence ex parte.

10

On April 11, 1985 the court rendered judgment for the plaintiff, 9 the dispositive part reading
as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants, ordering:
1) The defendant, Philippine International Shipping Corporation, and the defendantsGuarantors, to jointly and severally pay plaintiff the liquidated amount of $80,779.33, together
with interest in the amount of $13,676.95 and costs in the amount of $80.00 or a total of
$94,456.28, pursuant to the Default Judgment rendered by the United States District Court,
Southern District of New York, or in the Philippine currency equivalent of the aforesaid
amount of $94,456.28, computed at the time of payment, with interest for late payment at the
rate of 18% per annum from July 4, 1983, until fully paid;
2) The defendant, Philippine International Shipping Corporation, and the defendantsGuarantors, to jointly and severally pay plaintiff the sum equivalent to twenty (20%) percent of
the total amount due from the defendants by way of attorney's fees; and
3) To pay the costs.
On May 17, 1985, the defendants appealed the decision to this Appellate Court (AC-G.R.
UDK No. 7383) which dismissed the appeal on November 13, 1985 for failure of the
appellants to pay the docketing fee despite their receipt of the notice to do so on August 26,
1985. 10 Entry of that final resolution was made on December 6,1985.
In view of the finality of the decision, the plaintiff filed on July 23, 1986 a motion for execution
and for appointment of a special sheriff to enforce it. 11
Over the defendants' opposition, the trial court issued an order of execution on October 15,
1986 and appointed Norberto V. Doblado, Jr., of the office of the Makati Sheriff, as special
sheriff for the purpose (Annex D). 12
On 20 November 1986, petitioners (defendants below) filed with the Court of Appeals a
Petition to Annul Judgment (docketed as C.A.-GR SP No. 10614) 13 directed at the 15
October 1986 Order of the Regional Trial Court. On 12 December 1986, the appellate court
rendered a Decision 14 denying that petition for lack of merit. A Motion for Reconsideration
was likewise denied for lack of merit.15
In the instant Petition for Review, filed with this Court on 27 February 1987, petitioners allege
that both the Default Judgment rendered by the U.S. District Court, Southern District of New

York, in 83 Civil 290 (EW), and the Decision of the Regional Trial Court of Quezon City, in
Civil Case No. Q-39927, are null and void essentially on jurisdictional grounds. In the first
instance, petitioners contend that the U.S. District Court never acquired jurisdiction over their
persons as they had not been served with summons and a copy of the Complaint in 83 Civil
290 (EW). In the second instance, petitioners contend that such jurisdictional ty effectively
prevented the Regional Trial Court of Quezon City from taking cognizance of the Complaint in
Civil Case No. Q-39927 and from enforcing the U.S. District Court's Default Judgment against
them. Petitioners contend, finally, that assuming the validity of the disputed Default Judgment,
the same may be enforced only against petitioner Philippine International Shipping
Corporation (PISC) the other nine (9) petitioners not having been impleaded originally in the
case filed in New York, U.S.A.
The Petition must fail.
1. To begin with, the evidence of record clearly shows that the U.S. District Court had validly
acquired jurisdiction over petitioner (PISC) under the procedural law applicable in that forum
i.e., the U.S. Federal Rules on Civil Procedure. Copies of the Summons and Complaint 16 in
83 Civil 290 (EW) which were in fact attached to the Petition for Review filed with this Court,
were stamped "Received, 18 Jan 1983, PISC Manila." indicating that service thereof had
been made upon and acknowledged by the (PISC) office in Manila on, 18 January 1983, and
that (PISC) had actual notice of such Complaint and Summons. Moreover, copies of said
Summons and Complaint had likewise been served upon Prentice-Hall Corporation System,
Inc. (New York), petitioner PISCs agent, expressly designated by it in the Master Equipment
Leasing Agreement with respondent Interpool. "for the purpose of accepting service of any
process within the State of New York, USA with respect to any claim or controversy arising
out of or relating to directly or indirectly, this Lease." 17 The record also shows that petitioner
PISC, without, however, assailing the jurisdiction of the U.S. District Court over the person of
petitioner, had filed a Motion to Dismiss 18 the Complaint in 83 Civil 290 (EW) which Motion
was denied. All of the foregoing matters, which were stated specifically in the U.S. District
Court's disputed Default Judgement, 19 have not been disproven or otherwise overcome by
petitioners, whose bare and unsubstantiated allegations cannot prevail over clear and
convincing evidence of record to the contrary.
That foreign judgment-which had become final and executory, no appeal having been taken
therefrom and perfected by petitioner PISC-is thus "presumptive evidence of a right as
between the parties [i.e., PISC and Interpool] and their successors in interest by a
subsequent title." 20 We note, further that there has been in this case no showing by
petitioners that the Default Judgment rendered by the U.S. District Court in 83 Civil 290 (EW)
was vitiated by "want of notice to the party, collusion, fraud, or clear mistake of law or fact.

11

" 21 In other words, the Default Judgment imposing upon petitioner PISC a liability of U.S.
$94,456.28 in favor of respondent Interpool, is valid and may be enforced in this jurisdiction.
2. The existence of liability (i.e., in the amount of U.S.$94,456.28) on the part of petitioner
PISC having been duly established in the U.S. case, it was not improper for respondent
Interpool, in seeking enforcement in this jurisdiction of the foreign judgment imposing such
liability, to have included the other nine (9) petitioners herein (i.e., George Lim, Marcos
Bautista, Carlos Laude,Tan Sing Lim, Antonio Liu Lao, Ong Teh Philippine Consortium
Construction Corporation, Pacific Mills, Inc. and Universal Steel Smelting Co., Inc.) as
defendants in Civil Case No. Q- 39927, filed with Branch 93 of the Regional Trial Court of
Quezon City. With respect to the latter, Section 6, Rule 3 of the Revised Rules of Court
expressly provides: Sec. 6. Permissive joinder of parties. All persons in whom or against
whom any right to relief in respect to or arising out of the same transaction or series of
transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as
otherwise provided in these rules, join as plaintiffs or be joined as defendants in one
complaint, where any question of law or fact common to all such plaintiffs or to all such
defendants may arise in the action; but the court may make such orders as may be just to
prevent any plaintiff or defendant from being embarrassed or put to expense in connection
with any proceedings in which he may have no interest. (Emphasis supplied)

even assuming (though merely arguendo) that none of the ten (10) petitioner herein had been
served with notice or summons below, the record shows, however, that they did in fact file
with the Regional Trial Court a Motion for Extension of Time to file Answer 22 (dated 9
December 1983) as well as Motion for Bill of Particulars 23 (dated 15 December 1983), both
addressing respondent Interpool's .Complaint in Civil Case No. Q-39927. In those pleadings,
petitioners not only manifested their intention to controvert the allegations in the Complaint,
but they neither questioned nor assailed the jurisdiction of the trial court, either over the case
filed against them or over their individual persons, as defendants therein. There was here, in
effect, voluntary submission to the jurisdiction of the Quezon City trial court by petitioners,
who are thereby estopped from asserting otherwise before this Court. 24
ACCORDINGLY, the Petition for Review is DENIED and the Decision dated 12 December
1986 of the Court of Appeals in C.A.-G.R. SP No. 10614, is hereby AFFIRMED. This
Resolution is immediately executory. Costs against petitioners.
SO ORDERED.

The record shows that said nine (9) petitioners had executed continuing guarantees" to
secure performance by petitioner PISC of its contractual obligations, under the Membership
Agreement and Hiring Conditions and Master Equipment Leasing Agreement with respondent
Interpool. As guarantors, they had held themselves out as liable. "whether jointly, severally, or
in the alternative," to respondent Interpool under their separate "continuing guarantees"
executed in the Philippines, for any breach of those Agreements on the part of (PISC) The
liability of the nine (9) other petitioners was, in other words, not based upon the Membership
Agreement and the Master Equipment Leasing Agreement to which they were not parties.
The New York award of U.S.$94,456.28 is precisely premised upon a breach by PISC of its
own obligations under those Agreements. We, therefore, consider the nine (9) other
petitioners as persons 44 against whom [a] right to relief in respect to or arising out of the
same transaction or series of transactions [has been] alleged to exist." as contemplated in the
Rule quoted above and, consequently, properly impleaded as defendants in Civil Case No. Q39927. There was, in other words, no need at all, in order that Civil Case No. Q-39927 would
prosper, for respondent Interpool to have first impleaded the nine (9) other petitioners in the
New York case and there obtain judgment against all ten (10) petitioners.
3. Petitioners' argument of lack or absence of jurisdiction on the part of the Quezon City
Regional Trial Court, on the alleged ground of non-service of notice or summons in Civil Case
No. Q-39927, does not persuade. But we do not need to address this specific argument. For

12

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the April 18, 2001 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No.
60827, and the July 25, 2001 Resolution[2] denying the motion for reconsideration thereof.

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., v

MINORU KITAMURA,
Respondent.
G.R. No. 149177
NACHURA, J.:

On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a
Japanese consultancy firm providing technical and management support in the infrastructure
projects of foreign governments,[3] entered into an Independent Contractor Agreement (ICA)
with respondent Minoru Kitamura, a Japanese national permanently residing in the
Philippines.[4] The agreement provides that respondent was to extend professional services
to Nippon for a year starting on April 1, 1999.[5] Nippon then assigned respondent to work as
the project manager of the Southern Tagalog Access Road (STAR) Project in the Philippines,
following the company's consultancy contract with the Philippine Government.[6]
When the STAR Project was near completion, the Department of Public Works and
Highways (DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this
time for the detailed engineering and construction supervision of the Bongabon-Baler Road
Improvement (BBRI) Project.[7] Respondent was named as the project manager in the
contract's Appendix 3.1.[8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for
its International Division, informed respondent that the company had no more intention of
automatically renewing his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000, just in time for the ICA's
expiry.[9]
Threatened with impending unemployment, respondent, through his lawyer, requested
a negotiation conference and demanded that he be assigned to the BBRI project. Nippon
insisted that respondents contract was for a fixed term that had already expired, and refused
to negotiate for the renewal of the ICA.[10]
As he was not able to generate a positive response from the petitioners, respondent
consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and
damages with the Regional Trial Court of Lipa City.[11]
For their part, petitioners, contending that the ICA had been perfected in Japan and
executed by and between Japanese nationals, moved to dismiss the complaint for lack of
jurisdiction. They asserted that the claim for improper pre-termination of respondent's ICA
could only be heard and ventilated in the proper courts of Japan following the principles of lex
loci celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the
replacement of Kitamura by a certain Y. Kotake as project manager of the BBRI Project.[13]
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14] that
matters connected with the performance of contracts are regulated by the law prevailing at
the place of performance,[15] denied the motion to dismiss.[16] The trial court subsequently
denied petitioners' motion for reconsideration,[17] prompting them to file with the appellate
court, on August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CAG.R. SP No. 60205].[18] On August 23, 2000, the CA resolved to dismiss the petition on
procedural groundsfor lack of statement of material dates and for insufficient verification
and certification against forum shopping.[19] An Entry of Judgment was later issued by the
appellate court on September 20, 2000.[20]

13

Aggrieved by this development, petitioners filed with the CA, on September 19, 2000,
still within the reglementary period, a second Petition for Certiorari under Rule 65 already
stating therein the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the same issues as those in the
first, was docketed as CA-G.R. SP No. 60827.[21]
Ruling on the merits of the second petition, the appellate court rendered the assailed
April 18, 2001 Decision[22] finding no grave abuse of discretion in the trial court's denial of
the motion to dismiss. The CA ruled, among others, that the principle of lex loci celebrationis
was not applicable to the case, because nowhere in the pleadings was the validity of the
written agreement put in issue. The CA thus declared that the trial court was correct in
applying instead the principle of lex loci solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by the CA in the
assailed July 25, 2001 Resolution.[24]
Remaining steadfast in their stance despite the series of denials, petitioners instituted
the instant Petition for Review on Certiorari[25] imputing the following errors to the appellate
court:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF
THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN
TOKYO, JAPAN.
B.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING
THE NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE
INTERNATIONAL LAWS.[26]
The pivotal question that this Court is called upon to resolve is whether the subject
matter jurisdiction of Philippine courts in civil cases for specific performance and damages
involving contracts executed outside the country by foreign nationals may be assailed on the
principles of lex loci celebrationis, lex contractus, the state of the most significant relationship
rule, or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters
raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No.
60205 has already barred the filing of the second petition docketed as CA-G.R. SP No. 60827
(fundamentally raising the same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the
petition's defective certification of non-forum shopping, it was a dismissal without prejudice.
[27] The same holds true in the CA's dismissal of the said case due to defects in the formal
requirement of verification[28] and in the other requirement in Rule 46 of the Rules of Court

on the statement of the material dates.[29] The dismissal being without prejudice, petitioners
can re-file the petition, or file a second petition attaching thereto the appropriate verification
and certificationas they, in fact didand stating therein the material dates, within the
prescribed period[30] in Section 4, Rule 65 of the said Rules.[31]
The dismissal of a case without prejudice signifies the absence of a decision on the
merits and leaves the parties free to litigate the matter in a subsequent action as though the
dismissed action had not been commenced. In other words, the termination of a case not on
the merits does not bar another action involving the same parties, on the same subject matter
and theory.[32]
Necessarily, because the said dismissal is without prejudice and has no res judicata
effect, and even if petitioners still indicated in the verification and certification of the second
certiorari petition that the first had already been dismissed on procedural grounds,[33]
petitioners are no longer required by the Rules to indicate in their certification of non-forum
shopping in the instant petition for review of the second certiorari petition, the status of the
aforesaid first petition before the CA. In any case, an omission in the certificate of non-forum
shopping about any event that will not constitute res judicata and litis pendentia, as in the
present case, is not a fatal defect. It will not warrant the dismissal and nullification of the
entire proceedings, considering that the evils sought to be prevented by the said certificate
are no longer present.[34]
The Court also finds no merit in respondent's contention that petitioner Hasegawa is
only authorized to verify and certify, on behalf of Nippon, the certiorari petition filed with the
CA and not the instant petition. True, the Authorization[35] dated September 4, 2000, which is
attached to the second certiorari petition and which is also attached to the instant petition for
review, is limited in scopeits wordings indicate that Hasegawa is given the authority to sign
for and act on behalf of the company only in the petition filed with the appellate court, and that
authority cannot extend to the instant petition for review.[36] In a plethora of cases, however,
this Court has liberally applied the Rules or even suspended its application whenever a
satisfactory explanation and a subsequent fulfillment of the requirements have been made.
[37] Given that petitioners herein sufficiently explained their misgivings on this point and
appended to their Reply[38] an updated Authorization[39] for Hasegawa to act on behalf of
the company in the instant petition, the Court finds the same as sufficient compliance with the
Rules.
However, the Court cannot extend the same liberal treatment to the defect in the
verification and certification. As respondent pointed out, and to which we agree, Hasegawa is
truly not authorized to act on behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001 Authorization were issued only by
Nippon's president and chief executive officer, not by the company's board of directors. In not
a few cases, we have ruled that corporate powers are exercised by the board of directors;
thus, no person, not even its officers, can bind the corporation, in the absence of authority
from the board.[40] Considering that Hasegawa verified and certified the petition only on his
behalf and not on behalf of the other petitioner, the petition has to be denied pursuant to
Loquias v. Office of the Ombudsman.[41] Substantial compliance will not suffice in a matter

14

that demands strict observance of the Rules.[42] While technical rules of procedure are
designed not to frustrate the ends of justice, nonetheless, they are intended to effect the
proper and orderly disposition of cases and effectively prevent the clogging of court dockets.
[43]
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to
question the trial court's denial of their motion to dismiss. It is a well-established rule that an
order denying a motion to dismiss is interlocutory, and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The appropriate recourse is to file an
answer and to interpose as defenses the objections raised in the motion, to proceed to trial,
and, in case of an adverse decision, to elevate the entire case by appeal in due course.[44]
While there are recognized exceptions to this rule,[45] petitioners' case does not fall among
them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its
jurisdiction to hear and resolve the civil case for specific performance and damages filed by
the respondent. The ICA subject of the litigation was entered into and perfected in Tokyo,
Japan, by Japanese nationals, and written wholly in the Japanese language. Thus, petitioners
posit that local courts have no substantial relationship to the parties[46] following the [state of
the] most significant relationship rule in Private International Law.[47]
The Court notes that petitioners adopted an additional but different theory when they
elevated the case to the appellate court. In the Motion to Dismiss[48] filed with the trial court,
petitioners never contended that the RTC is an inconvenient forum. They merely argued that
the applicable law which will determine the validity or invalidity of respondent's claim is that of
Japan, following the principles of lex loci celebrationis and lex contractus.[49] While not
abandoning this stance in their petition before the appellate court, petitioners on certiorari
significantly invoked the defense of forum non conveniens.[50] On petition for review before
this Court, petitioners dropped their other arguments, maintained the forum non conveniens
defense, and introduced their new argument that the applicable principle is the [state of the]
most significant relationship rule.[51]

further question whether the application of a substantive law which will determine the merits
of the case is fair to both parties. The power to exercise jurisdiction does not automatically
give a state constitutional authority to apply forum law. While jurisdiction and the choice of the
lex fori will often coincide, the minimum contacts for one do not always provide the
necessary significant contacts for the other.[55] The question of whether the law of a state
can be applied to a transaction is different from the question of whether the courts of that
state have jurisdiction to enter a judgment.[56]
In this case, only the first phase is at issuejurisdiction. Jurisdiction, however, has
various aspects. For a court to validly exercise its power to adjudicate a controversy, it must
have jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over
the subject matter, over the issues of the case and, in cases involving property, over the res
or the thing which is the subject of the litigation.[57] In assailing the trial court's jurisdiction
herein, petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the
sovereign authority which establishes and organizes the court. It is given only by law and in
the manner prescribed by law.[58] It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein.[59]
To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject
matter of the claim,[60] the movant must show that the court or tribunal cannot act on the
matter submitted to it because no law grants it the power to adjudicate the claims.[61]
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial
court is not properly vested by law with jurisdiction to hear the subject controversy for, indeed,
Civil Case No. 00-0264 for specific performance and damages is one not capable of
pecuniary estimation and is properly cognizable by the RTC of Lipa City.[62] What they rather
raise as grounds to question subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the state of the most significant relationship rule.

To elucidate, in the judicial resolution of conflicts problems, three consecutive phases

are involved: jurisdiction, choice of law, and recognition and enforcement of judgments.
Corresponding to these phases are the following questions: (1) Where can or should litigation
be initiated? (2) Which law will the court apply? and (3) Where can the resulting judgment be
enforced?[53]

The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the law of the place of the ceremony[63] or the law of
the place where a contract is made.[64] The doctrine of lex contractus or lex loci contractus
means the law of the place where a contract is executed or to be performed.[65] It controls
the nature, construction, and validity of the contract[66] and it may pertain to the law
voluntarily agreed upon by the parties or the law intended by them either expressly or
implicitly.[67] Under the state of the most significant relationship rule, to ascertain what state
law to apply to a dispute, the court should determine which state has the most substantial
connection to the occurrence and the parties. In a case involving a contract, the court should
consider where the contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the parties.[68] This rule takes into
account several contacts and evaluates them according to their relative importance with
respect to the particular issue to be resolved.[69]

Analytically, jurisdiction and choice of law are two distinct concepts.[54] Jurisdiction
considers whether it is fair to cause a defendant to travel to this state; choice of law asks the

Since these three principles in conflict of laws make reference to the law applicable to a
dispute, they are rules proper for the second phase, the choice of law.[70] They determine

Be that as it may, this Court is not inclined to deny this petition merely on the basis of
the change in theory, as explained in Philippine Ports Authority v. City of Iloilo.[52] We only
pointed out petitioners' inconstancy in their arguments to emphasize their incorrect assertion
of conflict of laws principles.

15

which state's law is to be applied in resolving the substantive issues of a conflicts problem.
[71] Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are
not only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact
that they have not yet pointed out any conflict between the laws of Japan and ours. Before
determining which law should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules.[72] Also, when the law of a foreign
country is invoked to provide the proper rules for the solution of a case, the existence of such
law must be pleaded and proved.[73]
It should be noted that when a conflicts case, one involving a foreign element, is
brought before a court or administrative agency, there are three alternatives open to the latter
in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to
assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the
internal law of the forum; or (3) assume jurisdiction over the case and take into account or
apply the law of some other State or States.[74] The courts power to hear cases and
controversies is derived from the Constitution and the laws. While it may choose to recognize
laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or
other formal agreements, even in matters regarding rights provided by foreign sovereigns.[75]
Neither can the other ground raised, forum non conveniens,[76] be used to deprive the trial
court of its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because
Section 1, Rule 16 of the Rules of Court does not include it as a ground.[77] Second, whether
a suit should be entertained or dismissed on the basis of the said doctrine depends largely
upon the facts of the particular case and is addressed to the sound discretion of the trial
court.[78] In this case, the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual determination; hence, this
conflicts principle is more properly considered a matter of defense.[79]
Accordingly, since the RTC is vested by law with the power to entertain and hear the
civil case filed by respondent and the grounds raised by petitioners to assail that jurisdiction
are inappropriate, the trial and appellate courts correctly denied the petitioners motion to
dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.

G.R. No. 162894

February 26, 2008

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

TINGA, J.:

Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and
existing under the laws of the State of Connecticut, United States of America, and respondent
Stockton W. Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired
respondent as its representative to negotiate the sale of services in several government
projects in the Philippines for an agreed remuneration of 10% of the gross receipts. On 11
March 1992, respondent secured a service contract with the Republic of the Philippines on
behalf of BMSI for the dredging of rivers affected by the Mt. Pinatubo eruption and mudflows. 3
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor
Relations Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST),
Rodney C. Gilbert and Walter G. Browning for alleged nonpayment of commissions, illegal
termination and breach of employment contract. 4 On 28 September 1995, Labor Arbiter Pablo
C. Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondents money
claims.5 Upon appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter and
dismissed respondents complaint on the ground of lack of jurisdiction. 6 Respondent elevated
the case to this Court but was dismissed in a Resolution dated 26 November 1997. The
Resolution became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages
before the Regional Trial Court (RTC) of Bauang, La Union. The Complaint, 7 docketed as
Civil Case No. 1192-BG, named as defendants herein petitioner Raytheon International, Inc.
as well as BMSI and RUST, the two corporations impleaded in the earlier labor case. The
complaint essentially reiterated the allegations in the labor case that BMSI verbally employed
respondent to negotiate the sale of services in government projects and that respondent was
not paid the commissions due him from the Pinatubo dredging project which he secured on
behalf of BMSI. The complaint also averred that BMSI and RUST as well as petitioner itself
had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondents claim, it was a foreign
corporation duly licensed to do business in the Philippines and denied entering into any
arrangement with respondent or paying the latter any sum of money. Petitioner also denied
combining with BMSI and RUST for the purpose of assuming the alleged obligation of the
said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the

16

written agreement between respondent and BMSI and RUST, denominated as "Special Sales
Representative Agreement," the rights and obligations of the parties shall be governed by the
laws of the State of Connecticut. 10Petitioner sought the dismissal of the complaint on grounds
of failure to state a cause of action and forum non conveniens and prayed for damages by
way of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on
Affirmative Defenses and for Summary Judgment 12 seeking the dismissal of the complaint on
grounds of forum non conveniens and failure to state a cause of action. Respondent opposed
the same. Pending the resolution of the omnibus motion, the deposition of Walter Browning
was taken before the Philippine Consulate General in Chicago. 13
In an Order14 dated 13 September 2000, the RTC denied petitioners omnibus motion. The
trial court held that the factual allegations in the complaint, assuming the same to be
admitted, were sufficient for the trial court to render a valid judgment thereon. It also ruled
that the principle of forum non conveniens was inapplicable because the trial court could
enforce judgment on petitioner, it being a foreign corporation licensed to do business in the
Philippines.15
Petitioner filed a Motion for Reconsideration 16 of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001, 18 the trial court denied petitioners motion.
Thus, it filed a Rule 65 Petition 19 with the Court of Appeals praying for the issuance of a writ of
certiorari and a writ of injunction to set aside the twin orders of the trial court dated 13
September 2000 and 31 July 2001 and to enjoin the trial court from conducting further
proceedings.20
On 28 August 2003, the Court of Appeals rendered the assailed Decision 21 denying the
petition for certiorari for lack of merit. It also denied petitioners motion for reconsideration in
the assailed Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have confined itself to the
allegations in the complaint and should have also considered evidence aliunde in resolving
petitioners omnibus motion, it found the evidence presented by petitioner, that is, the
deposition of Walter Browning, insufficient for purposes of determining whether the complaint
failed to state a cause of action. The appellate court also stated that it could not rule one way
or the other on the issue of whether the corporations, including petitioner, named as
defendants in the case had indeed merged together based solely on the evidence presented
by respondent. Thus, it held that the issue should be threshed out during trial. 23 Moreover, the
appellate court deferred to the discretion of the trial court when the latter decided not to desist

from assuming jurisdiction on the ground of the inapplicability of the principle of forum non
conveniens.
Hence, this petition raising the following issues: WHETHER

OR NOT THE COURT OF APPEALS

ERRED IN REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST
RAYTHEON INTERNATIONAL, INC. WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO
DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino
Padua Law Office, counsel on record for respondent, manifested that the lawyer handling the
case, Atty. Rogelio Karagdag, had severed relations with the law firm even before the filing of
the instant petition and that it could no longer find the whereabouts of Atty. Karagdag or of
respondent despite diligent efforts. In a Resolution 25 dated 20 November 2006, the Court
resolved to dispense with the filing of a comment.
The instant petition lacks merit. Petitioner mainly asserts that the written contract between
respondent and BMSI included a valid choice of law clause, that is, that the contract shall be
governed by the laws of the State of Connecticut. It also mentions the presence of foreign
elements in the dispute namely, the parties and witnesses involved are American
corporations and citizens and the evidence to be presented is located outside the Philippines
that renders our local courts inconvenient forums. Petitioner theorizes that the foreign
elements of the dispute necessitate the immediate application of the doctrine of forum non
conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in
judicial resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and
recognition and enforcement of judgments. Thus, in the instances 27 where the Court held that
the local judicial machinery was adequate to resolve controversies with a foreign element, the
following requisites had to be proved: (1) that the Philippine Court is one to which the parties
may conveniently resort; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have
the power to enforce its decision.28
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a
Philippine court and where the court has jurisdiction over the subject matter, the parties and
the res, it may or can proceed to try the case even if the rules of conflict-of-laws or the
convenience of the parties point to a foreign forum. This is an exercise of sovereign
prerogative of the country where the case is filed. 29
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution
and the law30 and by the material allegations in the complaint, irrespective of whether or not

17

the plaintiff is entitled to recover all or some of the claims or reliefs sought therein. 31 Civil
Case No. 1192-BG is an action for damages arising from an alleged breach of contract.
Undoubtedly, the nature of the action and the amount of damages prayed are within the
jurisdiction of the RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein
respondent (as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction
over the person of petitioner (as party defendant) was acquired by its voluntary appearance in
court.32 That the subject contract included a stipulation that the same shall be governed by
the laws of the State of Connecticut does not suggest that the Philippine courts, or any other
foreign tribunal for that matter, are precluded from hearing the civil action. Jurisdiction and
choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the case is fair to both
parties.33The choice of law stipulation will become relevant only when the substantive issues
of the instant case develop, that is, after hearing on the merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere. 34 Petitioners averments of the
foreign elements in the instant case are not sufficient to oust the trial court of its jurisdiction
over Civil Case No. No. 1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly considered as a
matter of defense. While it is within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only after vital facts are established, to determine
whether special circumstances require the courts desistance. 35
Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its
conclusion that it can assume jurisdiction over the dispute notwithstanding its foreign
elements. In the same manner, the Court defers to the sound discretion of the lower courts
because their findings are binding on this Court.

The complaint alleged that petitioner had combined with BMSI and RUST to function as one
company. Petitioner contends that the deposition of Walter Browning rebutted this allegation.
On this score, the resolution of the Court of Appeals is instructive, thus: x x x Our examination
of the deposition of Mr. Walter Browning as well as other documents produced in the hearing
shows that these evidence aliunde are not quite sufficient for us to mete a ruling that the
complaint fails to state a cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that
Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of
defendant Rust International in the Makar Port Project in General Santos City, after Rust
International ceased to exist after being absorbed by REC. Other documents already
submitted in evidence are likewise meager to preponderantly conclude that Raytheon
International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have combined
into one company, so much so that Raytheon International, Inc., the surviving company (if at
all) may be held liable for the obligation of BMSI to respondent Rouzie for unpaid
commissions. Neither these documents clearly speak otherwise. 38
As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and
RUST merged together requires the presentation of further evidence, which only a full-blown
trial on the merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs
against petitioner. SO ORDERED.
G.R. No. 122191 October 8, 1998
SAUDI ARABIAN AIRLINES, petitioner,
vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his
capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon
City, respondents.
QUISUMBING, J.:

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause
of action against petitioner. Failure to state a cause of action refers to the insufficiency of
allegation in the pleading. 36 As a general rule, the elementary test for failure to state a cause
of action is whether the complaint alleges facts which if true would justify the relief
demanded.37

The pertinent antecedent facts which gave rise to the instant petition, as stated in the
questioned Decision 9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines
based in Jeddah, Saudi Arabia. . . .

18

On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance
with fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals.
Because it was almost morning when they returned to their hotels, they agreed to have
breakfast together at the room of Thamer. When they were in te (sic) room, Allah left on some
pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and
several security personnel heard her cries for help and rescued her. Later, the Indonesian
police came and arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her
about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the
release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base
manager Baharini negotiated with the police for the immediate release of the detained crew
members but did not succeed because plaintiff refused to cooperate. She was afraid that she
might be tricked into something she did not want because of her inability to understand the
local dialect. She also declined to sign a blank paper and a document written in the local
dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the
Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention.
Eventually, they were again put in service by defendant SAUDI (sic). In September 1990,
defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind
her, her superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in
Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the
police took her passport and questioned her about the Jakarta incident. Miniewy simply stood
by as the police put pressure on her to make a statement dropping the case against Thamer
and Allah. Not until she agreed to do so did the police return her passport and allowed her to
catch the afternoon flight out of Jeddah.
One year and a half later or on lune 16, 1993, in Riyadh, Saudi Arabia, a few minutes before
the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead
ordered to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA.
When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she
was asked to sign a document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to
appear before the court on June 27, 1993. Plaintiff then returned to Manila.

Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again
and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving
assurance from SAUDIA's Manila manager, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993.
Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an
interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA officer told her that the
airline had forbidden her to take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah,
at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the
judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that
the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta.
The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the
music in violation of Islamic laws; and (3) socializing with the male crew, in contravention of
Islamic tradition. 10
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in
Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she
worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the
international
flights. 11
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her
and allowed her to leave Saudi Arabia. Shortly before her return to Manila, 12 she was
terminated from the service by SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint
Khaled Al-Balawi ("Al-Balawi"), its country manager.

13

for damages against SAUDIA, and

On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the
following grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2)
that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in
the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial
court has no jurisdiction to try the case.

19

On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 15. Saudia filed a
reply 16 thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped as
party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss
Amended Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss
Amended Complaint filed by Saudia.
From the Order of respondent Judge 20 denying the Motion to Dismiss, SAUDIA filed on
September 20, 1994, its Motion for Reconsideration 21 of the Order dated August 29, 1994. It
alleged that the trial court has no jurisdiction to hear and try the case on the basis of Article
21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi
Arabia. On October 14, 1994, Morada filed her Opposition 22 (To Defendant's Motion for
Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its
Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus
Motion Rule does not apply, even if that ground is raised for the first time on appeal.
Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the
prosecution of the instant case, and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order 24 dated February 2, 1995, denying
SAUDIA's Motion for Reconsideration. The pertinent portion of the assailed Order reads as
follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru
counsel, on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel,
on October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian Airlines filed,
thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs Amended
Complaint, which is one for the recovery of actual, moral and exemplary damages plus
attorney's fees, upon the basis of the applicable Philippine law, Article 21 of the New Civil
Code of the Philippines, is, clearly, within the jurisdiction of this Court as regards the subject
matter, and there being nothing new of substance which might cause the reversal or
modification of the order sought to be reconsidered, the motion for reconsideration of the
defendant, is DENIED. SO ORDERED. 25

Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition
with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining
Order 26 with the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining
Order 27 dated February 23, 1995, prohibiting the respondent Judge from further conducting
any proceeding, unless otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate
court denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated
February 18, 1995, to wit: The Petition for the Issuance of a Writ of Preliminary Injunction is hereby
DENIED, after considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135)
the Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto (Unciano
Paramedical College, et. Al.,v. Court of Appeals, et. Al., 100335, April 7, 1993, Second Division).

On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition
Review with Prayer for Temporary Restraining Order dated October 13, 1995.

29

for

However, during the pendency of the instant Petition, respondent Court of Appeals rendered
the Decision 30 dated April 10, 1996, now also assailed. It ruled that the Philippines is an
appropriate forum considering that the Amended Complaint's basis for recovery of damages
is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It
further held that certiorari is not the proper remedy in a denial of a Motion to Dismiss,
inasmuch as the petitioner should have proceeded to trial, and in case of an adverse ruling,
find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for
Temporary Restraining Order 31dated April 30, 1996, given due course by this Court. After
both parties submitted their Memoranda, 32 the instant case is now deemed submitted for
decision.
Petitioner SAUDIA raised the following issues:
The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based
on Article 21 of the New Civil Code since the proper law applicable is the law of the Kingdom
of Saudi Arabia inasmuch as this case involves what is known in private international law as a
"conflicts problem". Otherwise, the Republic of the Philippines will sit in judgment of the acts
done by another sovereign state which is abhorred.

20

Leave of court before filing a supplemental pleading is not a jurisdictional

requirement. Besides, the matter as to absence of leave of court is now moot and academic
when this Honorable Court required the respondents to comment on petitioner's April 30,
1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order
Within Ten (10) Days From Notice Thereof. Further, the Revised Rules of Court should be
construed with liberality pursuant to Section 2, Rule 1 thereof.

2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing

business in the Philippines. It may be served with summons and other court processes at
Travel Wide Associated Sales (Phils.). Inc., 3rd Floor, Cougar Building, 114 Valero St.,
Salcedo Village, Makati, Metro Manila.

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533
entitled "Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al." and filed its April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7,
1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1,
Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has
not yet become final and executory and this Honorable Court can take cognizance of this
case. 33

6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention.
Eventually, they were again put in service by defendant SAUDIA. In September 1990,
defendant SAUDIA transferred plaintiff to Manila.

From the foregoing factual and procedural antecedents, the following issues emerge for our
resolution:
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE
REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY
CIVIL CASE NO. Q-93-18394 ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN
AIRLINES".
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THIS CASE
PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset.
It maintains that private respondent's claim for alleged abuse of rights occurred in the
Kingdom of Saudi Arabia. It alleges that the existence of a foreign element qualifies the
instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of the lex
loci delicti commissi rule. 34
On the other hand, private respondent contends that since her Amended Complaint is based
on Articles 19 35 and 21 36 of the Civil Code, then the instant case is properly a matter of
domestic law. 37
Under the factual antecedents obtaining in this case, there is no dispute that the interplay of
events occurred in two states, the Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint

38

dated June 23, 1994:

xxx xxx xxx

7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already
behind her, her superiors reauested her to see MR. Ali Meniewy, Chief Legal Officer of
SAUDIA in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the Jakarta incident. Miniewy
simply stood by as the police put pressure on her to make a statement dropping the case
against Thamer and Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes
before the departure of her flight to Manila, plaintiff was not allowed to board the plane and
instead ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of
SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court
where she was asked to sigh a document written in Arabic. They told her that this was
necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a
notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again
and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving
assurance from SAUDIA's Manila manger, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27,
1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff
through an interpreter about the Jakarta incident. After one hour of interrogation, they let her
go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her
that the airline had forbidden her to take that flight. At the Inflight Service Office where she
was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to
remain in Jeddah, at the crew quarters, until further orders.

21

11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where
the judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that
the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta.
The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to
the music in violation of Islamic laws; (3) socializing with the male crew, in contravention of
Islamic tradition.

On one hand, Article 19 of the New Civil Code provides: Art. 19. Every person must, in the
exercise of his rights and in the performance of his duties, act with justice give everyone his
due and observe honesty and good faith.

12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the
Philippines Embassy in Jeddah. The latter helped her pursue an appeal from the decision of
the court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA
while, ironically, Thamer and Allah freely served the international flights. 39

Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this Court held that: The
aforecited provisions on human relations were intended to expand the concept of torts in this
jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.

Where the factual antecedents satisfactorily establish the existence of a foreign element, we
agree with petitioner that the problem herein could present a "conflicts" case.

Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions.
Thus, we agree with private respondent's assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal forum.

A factual situation that cuts across territorial lines and is affected by the diverse laws of two or
more states is said to contain a "foreign element". The presence of a foreign element is
inevitable since social and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception. 40
The forms in which this foreign element may appear are many. 41 The foreign element may
simply consist in the fact that one of the parties to a contract is an alien or has a foreign
domicile, or that a contract between nationals of one State involves properties situated in
another State. In other cases, the foreign element may assume a complex form. 42
In the instant case, the foreign element consisted in the fact that private respondent Morada
is a resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation.
Also, by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess,
events did transpire during her many occasions of travel across national borders, particularly
from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts"
situation to arise.
We thus find private respondent's assertion that the case is purely domestic, imprecise.
A conflicts problem presents itself here, and the question of jurisdiction 43 confronts the
court a quo.
After a careful study of the private respondent's Amended Complaint, 44 and the Comment
thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the
New Civil Code.

On the other hand, Article 21 of the New Civil Code provides: Art. 21. Any person who willfully
causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for damages.

Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of Court
on jurisdiction 47 we find that the Regional Trial Court (RTC) of Quezon City possesses
jurisdiction over the subject matter of the suit. 48 Its authority to try and hear the case is
provided for under Section 1 of Republic Act No. 7691, to wit:
Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary
Reorganization Act of 1980", is hereby amended to read as follows:
Sec. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive
jurisdiction:
(8) In all other cases in which demand, exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses, and cots or the value of the property in controversy
exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred
Thousand pesos (P200,000.00). (Emphasis ours)
And following Section 2 (b), Rule 4 of the Revised Rules of Court the venue, Quezon City,
is appropriate:
Sec. 2 Venue in Courts of First Instance. [Now Regional Trial Court]
(a)

22

(b) Personal actions. All other actions may be commenced and tried where the defendant
or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff
resides, at the election of the plaintiff.
Pragmatic considerations, including the convenience of the parties, also weigh heavily in
favor of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative advantages
and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an
inconvenient forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon him
needless expense or disturbance. But unless the balance is strongly in favor of the
defendant, the plaintiffs choice of forum should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a quo found it best to hear the case in
the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff
(private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi
Arabia where she no longer maintains substantial connections. That would have caused a
fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and
inconvenience have been shown by either of the parties. The choice of forum of the plaintiff
(now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By
filing her Complaint and Amended Complaint with the trial court, private respondent has
voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions 50 praying for the
dismissal of Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is
that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has
effectively submitted to the trial court's jurisdiction by praying for the dismissal of the
Amended Complaint on grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.: 51 We observe that the motion to
dismiss filed on April 14, 1962, aside from disputing the lower court's jurisdiction over
defendant's person, prayed for dismissal of the complaint on the ground that plaintiff's cause
of action has prescribed. By interposing such second ground in its motion to dismiss, Ker and
Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea of defendant Ker & Co.,
Ltd., it necessarily had to acquire jurisdiction upon the latter's person, who, being the

proponent of the affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the court.
Similarly, the case of De Midgely vs. Ferandos, held that; When the appearance is by motion
for the purpose of objecting to the jurisdiction of the court over the person, it must be for the
sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any
other purpose than to object to the jurisdiction of the court over his person, he thereby
submits himself to the jurisdiction of the court. A special appearance by motion made for the
purpose of objecting to the jurisdiction of the court over the person will be held to be a
general appearance, if the party in said motion should, for example, ask for a dismissal of the
action upon the further ground that the court had no jurisdiction over the subject matter. 52
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City.
Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof,
justified.
As to the choice of applicable law, we note that choice-of-law problems seek to answer two
important questions: (1) What legal system should control a given situation where some of
the significant facts occurred in two or more states; and (2) to what extent should the chosen
legal system regulate the situation. 53
Several theories have been propounded in order to identify the legal system that should
ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both
notions of justice and predictability, they do not always do so. The forum is then faced with
the problem of deciding which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to determine under what category a
certain set of facts or rules fall. This process is known as "characterization", or the "doctrine
of qualification". It is the "process of deciding whether or not the facts relate to the kind of
question specified in a conflicts rule." 55 The purpose of "characterization" is to enable the
forum to select the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual situation, event, or
operative fact. 57 An essential element of conflict rules is the indication of a "test" or
"connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting factor or point of
contact, such as the situs of the res, the place of celebration, the place of performance, or the
place of wrongdoing. 58

23

Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law. 59 These "test factors" or "points of contact" or
"connecting factors" could be any of the following:
(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In
particular, the lex situs is decisive when real rights are involved;
(4) the place where an act has been done, the locus actus, such as the place where a
contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci
actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the place of performance of
contractual duties, or the place where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should govern their agreement,
the lex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted or done. The lex
fori the law of the forum is particularly important because, as we have seen earlier,
matters of "procedure" not going to the substance of the claim involved are governed by it;
and because the lex fori applies whenever the content of the otherwise applicable foreign law
is excluded from application in a given case for the reason that it falls under one of the
exceptions to the applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of
the ship and of its master or owner as such. It also covers contractual relationships
particularly contracts of affreightment. 60 (Emphasis ours.)
After a careful study of the pleadings on record, including allegations in the Amended
Complaint deemed admitted for purposes of the motion to dismiss, we are convinced that
there is reasonable basis for private respondent's assertion that although she was already
working in Manila, petitioner brought her to Jeddah on the pretense that she would merely
testify in an investigation of the charges she made against the two SAUDIA crew members for
the attack on her person while they were in Jakarta. As it turned out, she was the one made
to face trial for very serious charges, including adultery and violation of Islamic laws and
tradition.

There is likewise logical basis on record for the claim that the "handing over" or "turning over"
of the person of private respondent to Jeddah officials, petitioner may have acted beyond its
duties as employer. Petitioner's purported act contributed to and amplified or even
proximately caused additional humiliation, misery and suffering of private respondent.
Petitioner thereby allegedly facilitated the arrest, detention and prosecution of private
respondent under the guise of petitioner's authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found by the Prince of
Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But
these capped the injury or harm allegedly inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide compensation or redress for the wrongs
done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the "connecting factor"
or "point of contact" could be the place or places where the tortious conduct or lex loci
actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines
could be said as a situs of the tort (the place where the alleged tortious conduct took place).
This is because it is in the Philippines where petitioner allegedly deceived private respondent,
a Filipina residing and working here. According to her, she had honestly believed that
petitioner would, in the exercise of its rights and in the performance of its duties, "act with
justice, give her due and observe honesty and good faith." Instead, petitioner failed to protect
her, she claimed. That certain acts or parts of the injury allegedly occurred in another country
is of no moment. For in our view what is important here is the place where the over-all harm
or the totality of the alleged injury to the person, reputation, social standing and human rights
of complainant, had lodged, according to the plaintiff below (herein private respondent). All
told, it is not without basis to identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi,
modern theories and rules on tort liability 61 have been advanced to offer fresh judicial
approaches to arrive at just results. In keeping abreast with the modern theories on tort
liability, we find here an occasion to apply the "State of the most significant relationship" rule,
which in our view should be appropriate to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most significant relationship,
the following contacts are to be taken into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place where the injury occurred; (b) the
place where the conduct causing the injury occurred; (c) the domicile, residence, nationality,
place of incorporation and place of business of the parties, and (d) the place where the
relationship, if any, between the parties is centered. 62

24

As already discussed, there is basis for the claim that over-all injury occurred and lodged in
the Philippines. There is likewise no question that private respondent is a resident Filipina
national, working with petitioner, a resident foreign corporation engaged here in the business
of international air carriage. Thus, the "relationship" between the parties was centered here,
although it should be stressed that this suit is not based on mere labor law violations. From
the record, the claim that the Philippines has the most significant contact with the matter in
this dispute, 63 raised by private respondent as plaintiff below against defendant (herein
petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the tort complained of and
the place "having the most interest in the problem", we find, by way of recapitulation, that the
Philippine law on tort liability should have paramount application to and control in the
resolution of the legal issues arising out of this case. Further, we hold that the respondent
Regional Trial Court has jurisdiction over the parties and the subject matter of the complaint;
the appropriate venue is in Quezon City, which could properly apply Philippine law. Moreover,
we find untenable petitioner's insistence that "[s]ince private respondent instituted this suit,
she has the burden of pleading and proving the applicable Saudi law on the matter." 64 As
aptly said by private respondent, she has "no obligation to plead and prove the law of the
Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21" of the Civil
Code of the Philippines. In her Amended Complaint and subsequent pleadings, she never
alleged that Saudi law should govern this case. 65 And as correctly held by the respondent

appellate court, "considering that it was the petitioner who was invoking the applicability of
the law of Saudi Arabia, then the burden was on it [petitioner] to plead and to establish what
the law of Saudi Arabia is". 66
Lastly, no error could be imputed to the respondent appellate court in upholding the trial
court's denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was
jurisdiction in order and venue properly laid, but appeal after trial was obviously available, and
expeditious trial itself indicated by the nature of the case at hand. Indubitably, the Philippines
is the state intimately concerned with the ultimate outcome of the case below, not just for the
benefit of all the litigants, but also for the vindication of the country's system of law and justice
in a transnational setting. With these guidelines in mind, the trial court must proceed to try
and adjudge the case in the light of relevant Philippine law, with due consideration of the
foreign element or elements involved. Nothing said herein, of course, should be construed as
prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-9318394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further proceedings.
SO ORDERED.

25