SECOND DIVISION

[G.R. No. 113074. January 22, 1997]

ALFRED HAHN, petitioner, vs. COURT OF APPEALS and BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT
(BMW), respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision [1] of the Court of Appeals dismissing a complaint for specific performance which
petitioner had filed against private respondent on the ground that the Regional Trial Court of Quezon City did not acquire jurisdiction
over private respondent, a nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for
reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila." On the other hand, private
respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of the
former Federal Republic of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of Attorney,"
which reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which ASSIGNOR
uses and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer
of the ASSIGNEE in the Philippines, the same being evidenced by certificate of registration issued by the Director of Patents on 12
December 1963 and is referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said BMW trademark and device in
favor of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder stated, the ASSIGNOR hereby
affirms the said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer of the BMW trademark in the
Philippines, for such purpose, the ASSIGNOR shall inform the ASSIGNEE immediately of any such use or infringement of the said
trademark which comes to his knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of
the ASSIGNEE for such case, with full power, authority and responsibility to prosecute unilaterally or in concert with ASSIGNEE,
any such infringer of the subject mark and for purposes hereof the ASSIGNOR is hereby named and constituted as ASSIGNEE's
Attorney-In-Fact, but any such suit without ASSIGNEE's consent will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal contract,
and for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the only limitation
that, for the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." But on
February 16, 1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez,
petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had
expressed interest in acquiring the same. On February 24, 1993, petitioner received confirmation of the information from BMW
which, in a letter, expressed dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in
sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the
standards for an exclusive BMW dealer.[2] Nonetheless, BMW expressed willingness to continue business relations with the petitioner
on the basis of a "standard BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no
alternative but to terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment.
Hahn insisted that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the
Philippines because the assignment was made in consideration of the exclusive dealership. In the same letter petitioner explained that
the decline in sales was due to lower prices offered for BMW cars in the United States and the fact that few customers returned for
repairs and servicing because of the durability of BMW parts and the efficiency of petitioner's service.
[3]

Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a "standard
importer contract" and terminated the exclusive dealer relationship effective June 30, 1993. [4] At a conference of BMW Regional

Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On
April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against
BMW to compel it to continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary
restraining order and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive
dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be
served with summons and other court processes through the Secretary of the Department of Trade and Industry of the Philippines. . . .
....
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney covering
the trademark and in consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer of
the Assignee in the Philippines" . . . .
....
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's goodwill
and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to singlehandedly compete against other motorcycle and car companies .... Moreover, Plaintiff has built buildings and other infrastructures
such as service centers and showrooms to maintain and promote the car and products of defendant BMW.
....
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to maintain with Plaintiff a relationship
but only "on the basis of a standard BMW importer contract as adjusted to reflect the particular situation in the Philippines" subject to
certain conditions, otherwise, defendant BMW would terminate Plaintiff's exclusive dealership and any relationship for cause effective
June 30, 1993. . . .
....
15. The actuations of defendant BMW are in breach of the assignment agreement between itself and plaintiff since the consideration
for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows that the exclusive
dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City Regional Trial Court, which
on June 14, 1993 issued a temporary restraining order. Summons and copies of the complaint and amended complaint were thereafter
served on the private respondent through the Department of Trade and Industry, pursuant to Rule 14, 14 of the Rules of Court. The
order, summons and copies of the complaint and amended complaint were later sent by the DTI to BMW via registered mail on June
15, 1993[5] and received by the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction
proceeded ex parte, with petitioner Hahn testifying. On June 30, 1993, the trial court issued an order granting the writ of preliminary
injunction upon the filing of a bond of P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of
preliminary injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the
service of summons on the Department of Trade and Industry, because it (BMW) was a foreign corporation and it was not doing
business in the Philippines. It contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was not
its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other
products; and that Hahn was an indentor or middleman transacting business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent,
as shown by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive
BMW dealer; that BMW officials periodically inspected standards of service rendered by him; and that he was described in service
booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.
The trial court[6] deferred resolution of the Motion to dismiss until after trial on the merits for the reason that the grounds
advanced by BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the Court of Appeals
alleging that:

I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS
LEADING TOWARD THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE
TERMS FOR THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON
THE GROUND OF LACK OF JURISDICTION, AND THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A
QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a writ of preliminary injunction, to
enjoin the trial court from proceeding further in Civil Case No. Q-93-15933. Private respondent pointed out that, unless the trial
court's order was set aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in
default, when the very question was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it rendered judgment
finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out with its questioned order of July 26, 1993, we rule
and so hold that petitioner's (BMW) motion to dismiss could be resolved then and there, and that the respondent judge's deferment of
his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion.
....
. . . [T]here is not much appreciable disagreement as regards the factual matters relating, to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal conclusions they respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing business in the Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be elevated to it on
appeal, the Court of Appeals itself resolved the motion. It ruled that BMW was not doing business in the country and, therefore,
jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, Section 14. The court upheld
private respondent's contention that Hahn acted in his own name and for his own account and independently of BMW, based on Alfred
Hahn's allegations that he had invested his own money and resources in establishing BMW's goodwill in the Philippines and on
BMW's claim that Hahn sold products other than those of BMW. It held that petitioner was a mere indentor or broker and not an agent
through whom private respondent BMW transacted business in the Philippines. Consequently, the Court of Appeals dismissed
petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its
discretion in deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not doing business in the
Philippines and, for this reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign corporation, or a nonresident joint stock company or
association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents
within the Philippines. (Emphasis added)
What acts are considered "doing business in the Philippines" are enumerated in 3(d) of the Foreign Investments Act of 1991
(R.A. No. 7042) as follows:[7]
d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices
or branches, appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or
control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or
the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the
purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed
to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or
the exercise of rights as such investor; nor having, a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for
its own account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or
distributor "transacts business in its name and for its own account." In addition, Section 1(f)(1) of the Rules and Regulations
implementing (IRR) the Omnibus Investment Code of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In particular, "doing business"
includes:

(1).... A foreign firm which does business through middlemen acting in their own names, such as indentors, commercial brokers or
commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is,
BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the
service of summons on the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer,
albeit of BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning
of the Foreign Investments Act of 1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own account and not as agent or
distributor in the Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring
BMW vehicles. Independence characterizes Hahn's undertakings, for which reason he is to be considered, under governing statutes, as
doing business." (p. 13) In support of this conclusion, the appellate court cited the following allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA" and without any monetary contributions from defendant BMW; established BMW's
goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to singlehandedly compete against other motorcycle and car companies.... Moreover, Plaintiff has built buildings and other infrastructures such
as service centers and showrooms to maintain and promote the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's
finding that Hahn solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." (p. 13)
To the contrary, Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed
the down payment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed
directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a
commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the
vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn
performed after-sale services, including, warranty services, for which he received reimbursement from BMW. All orders were on
invoices and forms of BMW.[8]
These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals, stated:[9]
9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are made, the vehicles are shipped to the
Philippines. (The payments may be made by the purchasers or third-persons or even by Hahn.) The bills of lading are made up in the
name of the purchasers, but Hahn-Manila is therein indicated as the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-delivery inspections. Thereafter, he
delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen percent (14%) of the full purchase
price thereof, and as soon as he confirms in writing, that the vehicles have been registered in the Philippines and have been serviced
by him, he will receive an additional three percent (3%) of the full purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the
successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if
no sale is eventually made.
As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the service centers to
see to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure
to maintain BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is
not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's
activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications.
[10]
For example, in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and letters that we have to tackle the Philippine market more
professionally and that we are through your present activities not adequately prepared to cope with the forthcoming challenges.
[11]

In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court of Appeals,[12] in which the foreign corporation entered
into a "Representative Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of which the latter was

appointed "exclusive representative" in the Philippines for a stipulated commission. Pursuant to these contracts, the domestic
corporation sold products exported by the foreign corporation and put up a service center for the products sold locally. This Court held
that these acts constituted doing business in the Philippines. The arrangement showed that the foreign corporation's purpose was to
penetrate the Philippine market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the
Asian region that Hahn was the "official BMW agent" in the Philippines. [13]
The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not exclusively in BMW products, and,
on this basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its motion to
dismiss filed in the trial court and in its petition for certiorari before the Court of Appeals.[14] But this allegation was denied by
Hahn[15] and therefore the Court of Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals the necessity of affirming the
trial court's order deferring resolution of BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an agent of
BMW, the fact is that BMW did business in the Philippines because it sold cars directly to Philippine buyers. [16] This was denied by
BMW, which claimed that Hahn was not its agent and that, while it was true that it had sold cars to Philippine buyers, this was done
without solicitation on its part.[17]
It is not true then that the question whether BMW is doing business could have been resolved simply by considering the parties'
pleadings. There are genuine issues of facts which can only be determined on the basis of evidence duly presented. BMW cannot short
circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court
which precisely it denies. Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on
which the motion is based does not appear to be indubitable. Here the record of the case bristles with factual issues and it is not at all
clear whether some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial
court's jurisdiction. It is now settled that. for purposes of having summons served on a foreign corporation in accordance with Rule 14,
14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need
not go beyond the allegations of the complaint in order to determine whether it has jurisdiction. [18] A determination that the foreign
corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over
the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding
should evidence later show that it is not transacting business in the country. As this Court has explained:
This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the
Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventilation, in
effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue
posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do
business at the time of the filing, of a complaint, can still be made to answer for a cause of action which accrued while it was doing,
business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably
been raised by the petitioner, there should be no real cause for what may understandably be its apprehension, i.e., that by its
participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to
have voluntarily submitted itself to the court's jurisdiction.[19]
Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided
prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally
assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain
allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his
cause of action. Nor was there justification for nullifying the writ of preliminary injunction issued by the trial court. Although the
injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further
proceedings.
SO ORDERED.

SECOND DIVISION
[G.R. No. 107314. September 17, 1998]
PATRICIA S. VILLAREAL, for herself and as guardian of her minor children, CLAIRE HOPE and TRICIA, both surnamed
VILLAREAL, petitioner, vs. THE COURT OF APPEALS, ELISEO SEVILLA, and ERNA SEVILLA,respondents.
DECISION
MENDOZA, J.:
Petitioners seek a review of the decision, [1] dated December 23, 1991, of the Court of Appeals nullifying the decision and orders
of the Regional Trial Court in Civil Case No. 16194 and remanding the said case to the court a quo for further proceedings as well as
the resolution of the Court of Appeals denying reconsideration of its decision.
The complaint in this case was filed by petitioner Patricia Villareal to recover damages in the total amount of P1,944,000.00 from
private respondents Eliseo and Erna Sevilla and certain John Does for the killing on June 6, 1986 of petitioners husband Jose Villareal.
The complaint, docketed as Civil Case No. 16194, was filed with the Regional Trial Court of Makati, Metro Manila. It was found that
prior to the filing of the complaint on March 2, 1987, the Sevillas had abruptly left the country (at least two months after the murder)
and had started disposing of their properties in the Philippines.[2]

On March 11, 1987, after a hearing, during which witness Deborah Alamares gave private respondents address in the United
States as allegedly divulged to her by private respondent Erna Sevilla herself, [3] the trial court ordered the Sevillas properties in the
Philippines attached,[4] upon the posting of a bond in the amount of P500,000.00. Pursuant to this, Deputy Sheriff Eulalio C. Juanson
attached private respondents personal and real properties on March 17, 18, and 19, 1987.[5]
On July 21, 1987, petitioners filed a Motion for Leave for Extraterritorial Service pursuant to Rule 14, 17 alleging that private
respondents were non-residents. The judge granted the motion [6] and authorized the service of summons by registered mail at private
respondents address in California, U.S.A. This mail was received on August 17, 1987 by a certain D. Pyle, whose signature appears on
the registry return card.[7]
Petitioners then moved to declare private respondents in default for failure to answer notwithstanding service of summons.
However, petitioners motion was denied[8] on October 12, 1987 by the judge for the reason that perhaps the address given by the
plaintiff (petitioners herein) is not the correct address of the defendants (private respondents herein) or that they have already moved
out.
On October 13, 1987, the trial court motu proprio set aside its order of March 11, 1987[9] on the ground that the attachment of
property was improper because petitioners claims were unliquidated. Accordingly, all properties garnished and attached pursuant to
the writ of attachment were ordered released. Petitioners moved for reconsideration of the courts order. On December 21, 1987, the
trial court modified its order[10] by allowing attachment in the amount of P30,000.00 to answer for actual damages for the death of Jose
Villareal. The amount represents the value of human life as then fixed by this Court.
On August 29, 1988, petitioners filed a Motion for Leave to Serve Summons by Publication which was granted by the trial court
in an order dated August 31, 1988.[11]
Accordingly, copies of the order, summons, complaint, and the affidavit of merit were published in the Manila Times on
November 29, December 6, and 13, 1988. [12] In addition, copies of the aforesaid order, summons, complaint, and affidavit of merit
were sent by registered mail to the last known address of private respondents in the United States. [13] On January 17, 1989, the mail
matter were returned to the Branch Clerk of Court with a notation which said, Moved, left no address. [14]
Meanwhile, at the instance of petitioner Patricia Villareal, an Information [15] charging private respondents with murder was filed
on October 10, 1988 with the Regional Trial Court of Makati, where it was docketed as Criminal Case No. 555.
On March 7, 1989, petitioners filed a Motion to Declare Defendants in Default for failure to file their Answer within the 60-day
period counted from the last day of publication. Private respondents were declared in default on April 11, 1989, and petitioners were
then allowed to present evidence ex-parte.[16]
After presenting their evidence, petitioners amended their complaint to make it conform to the evidence. [17] On the supposition
that they had proven damages in a much bigger amount than that prayed for in the original complaint, they increased the amount of
damages prayed for toP13,082,888.00 plus 50% of this amount as attorneys fees. In addition, Patricia Villareals children were included
as plaintiffs.
On August 29, 1989, the trial court admitted the Amended Complaint and granted petitioners Motion for Extra-territorial Service
of Summons.[18] Accordingly, summons were published once a week [19] for three consecutive weeks in the newspaper Abante. Copies
of the Amended Complaint, the summons, and the order were sent by registered mail to the last known addresses of private
respondents at Paraaque, Metro Manila and the United States. However, the summons and the accompanying papers mailed were
returned to the court with the notation MOVED for the letter addressed to the Paraaque residence, and REFUSED TO RECEIVE for
the letter addressed to the United States residence.[20]
On December 27, 1989, Attorney Teresita Marbibi filed a formal request in court seeking photocopies of all the pleadings and
orders pertinent to the case, including the summons and the Amended Complaint. [21] In her letter, she stated that she was making the
request for the purpose of protecting the interest of the defendants whose sister contracted our services. [22]
On January 24, 1990, upon motion of the petitioners, the trial court declared the private respondents in default for the second
time for having failed to file their Answer to the Amended Complaint within 60 days after publication of the summons. It also
declared the case submitted for decision, upon being informed by the petitioners that the very same evidence earlier presented would
be reproduced and adopted in support of the Amended Complaint.[24]
[23]

On February 7, 1990, counsel for private respondents, Teresita Marbibi, filed a Notice of Appearance [25] on their behalf.
On February 14, 1990, again through counsel, private respondents filed a verified Motion to Lift Order of Default with Motion
for Reconsideration[26] claiming that they were totally unaware of the existence of the case at bar; that their inability to come forth
promptly with responsive pleading was due to accident, mistake, or excusable neglect; and, that the allegation of petitioners that they
were the killers of Jose Villareal was not true. Petitioners filed an Opposition to the Motion, to which private respondents filed a
Reply.
On March 27, 1990, the trial court issued an order [27] denying the Motion to Lift Order of Default with Motion for
Reconsideration, on the ground that private respondents herein failed to comply with the requirements of Rule 18, 3.

On April 2, 1990, the trial court rendered a decision [28] finding private respondents liable for the killing of Jose Villareal and
ordering them jointly and severally to pay petitioners more than P10 million in damages. The trial court found that private respondent
Erna Sevilla and the victim Jose Villareal were lovers; that private respondent Eliseo Sevilla, Ernas husband, is a very jealous husband
who inflicts physical injuries upon his wife; that apparently, private respondent Eliseo discovered his wifes infidelity; and, that in
conspiracy with several other persons, including his wife Erna whom he seemed to have threatened, private respondent Eliseo hatched
a plan whereby Erna was to lure Jose Villareal to a carpark near the latters office where Eliseo and his companions were to attack and
kill Jose. The trial court found that after the killing, private respondents lost no time in disposing of their properties in the Philippines,
pulling out their children from school, and escaping to the United States.
Copies of the order dated March 27, 1990 denying the Motion to Lift Order of Default with Motion for Reconsideration and the
decision dated April 2, 1990 were received by private respondents on the same day, April 7, 1990. Private respondents filed a Motion
for Reconsideration with Motion to Set Aside Decision asking the court to reconsider and/or set aside the decision dated April 2, 1990
and the order of March 27, 1990. [29] On May 17, 1990, they filed a Supplemental Motion for Reconsideration with Reply of the order
dated March 27, 1990 and the decision dated April 2, 1990, asserting for the first time that the court did not acquire jurisdiction over
their persons. On July 16, 1990, they filed a Consolidated Memorandum [30] in support of their aforesaid Motion for Reconsideration
with Reply.
On August 10, 1990, the trial court issued an order [31] denying private respondents Motion for Reconsideration with Motion to
Set Aside Decision and the Supplemental Motion for Reconsideration with Reply. The trial court simultaneously granted petitioners
Motion for Execution Pending Appeal. Consequently, on August 14, 1990, a Writ of Execution Pending Appeal was issued.[32]
On August 15, 1990, the Deputy Sheriff of the court served and registered with the Register of Deeds of Paraaque a Notice of
Levy over the properties said to be owned by private respondents and covered by TCT Nos. 36350 (now 41338) and 36351 (now
41335) in their names.[33] On August 16, 1990, the Deputy Sheriff served upon private respondents counsel the Notice of Levy with
supporting papers, one of which was a photocopy of the denial order dated August 10, 1990.[34]
On August 21, 1990, private respondents counsel received by mail a duplicate original copy of the denial order of August 10,
1990.[35] On the same date, counsel filed a Notice of Appeal of the denial order dated August 10, 1990 and the decision dated April 2,
1990.[36]
Petitioners filed a Motion to Dismiss Notice of Appeal, contending that the Notice was filed out of time, which private
respondents opposed. Petitioners then filed a Supplemental Comment to Motion to Dismiss dated October 4, 1990.
On October 2, 1990, the trial court issued an order [37] denying due course to the Notice of Appeal on the ground that private
respondents had only a day from August 16, 1990 (the day they received a photocopy of the order denying their Motion for
Reconsideration with Motion to Set Aside Decision and their Supplemental Motion for Reconsideration with Reply), not from August
21, 1990 (the day on which they received the duplicate original of the said order) to perfect their appeal. As the Notice of Appeal was
filed only on August 21, 1990, the trial court ruled that it was late. This order was received by private respondents counsel on October
18, 1990.
On October 25, 1990, private respondents, through counsel, filed a Motion to Set Aside/Reconsider Order Dated October 2,
1990.[38]
This was denied by the trial court in its order dated December 17, 1990, [39] a copy of which was received by private respondents
counsel on January 16, 1991.[40]
On January 16, 1991, private respondents then filed a Notice of Appeal [41] from the orders dated December 17, 1990 and October
2, 1990 and again from the order dated August 10, 1990.
On January 29, 1991, the trial court issued an Entry of Judgment, [42] a copy of which was received by counsel for private
respondents on February 13, 1991. On February 15, 1991, the private respondents filed a Motion for Reconsideration with Motion to
Elevate Records to the Court of Appeals and Motion to Quash Entry of Judgment, [43] but the motions were denied by the trial court in
its order of August 1, 1991.[44]
On September 11, 1991, private respondents filed in the Court of Appeals a petition for certiorari, prohibition, and mandamus
with preliminary injunction,[45] alleging that the trial court had acted without or in excess of jurisdiction and with grave abuse of
discretion in issuing the aforesaid orders and decisions and that there was neither appeal nor any plain, speedy and adequate remedy
open to them in the ordinary course of law. Private respondents contended (1) that the trial court never acquired jurisdiction over them
since they are non-resident defendants and petitioners action is purely in personam and (2) that they were denied due process of law.[46]
On December 23, 1991,[47] the Court of Appeals granted the petition, ruling that the trial court was guilty of grave abuse of
discretion. The dispositive portion of its decision reads:
WHEREFORE, the writs prayed for in the petition are GRANTED. The orders of default, the hearing ex-parte, the default
judgment, the execution pending appeal, the respective orders denying the motions for reconsideration, and all subsequent
orders related thereto are hereby declared null and void and are set aside. The attachment on the properties of petitioners
[private respondents here] shall remain in force. The trial court is ordered to require petitioners to file their answer within

fifteen (15) days from notice, and thence to proceed in the disposition of the case in accordance with the ordinary civil
procedure.
Petitioners moved for a reconsideration,[48] but their motion was denied[49] by the appellate court in a resolution dated September
30, 1992. Hence, this petition for review.
First. The Court of Appeals nullified the several orders and the decision rendered by the trial court against private respondents on
the ground that the trial court did not acquire jurisdiction over them. It ruled that the extraterritorial service of summons did not confer
on the trial court jurisdiction to render and enforce a money judgment against the private respondents who are non-residents. On the
authority of Banco Espaol-Filipino v. Palanca,[50] it held that the only effect of the conversion of an action in personam filed against
non-resident defendants into one quasi-in rem by virtue of the attachment of their properties in the country was to subject such
properties to the payment of the demand which the court might find to be due petitioners, the plaintiffs below. Otherwise, the trial
court could not render a personal judgment against the private respondents, as it did in this case, and enforce it against them. The
Court of Appeals concluded that in doing so, the trial court committed grave abuse of discretion.[51]
It is true that where the defendant in an action in personam is a non-resident, as in this case, and refuses to appear and submit to
the jurisdiction of the court, the jurisdiction of the latter is limited to the property within the country which the court may have ordered
attached. In such a case, the property itself is the sole thing which is impleaded and is the responsible object which is the subject of the
judicial power.[52] Accordingly, the relief must be confined to the res, and the court cannot lawfully render a personal judgment against
him.[53]
But this Court also acknowledged in Banco Espaol-Filipino that if property is attached and later the defendant appears, the cause
becomes mainly a suit in personam, with the added incident that the property attached remains liable, under the control of the court, to
answer to any demand which may be established against the defendant by the final judgment of the court. [54] This rule was affirmed
in Mabanag v. Gallemore[55] in which it was held:
The main action in an attachment or garnishment suit is in rem until jurisdiction of the defendant is secured. Thereafter, it
is in personam and also in rem, unless jurisdiction of the res is lost as by dissolution of the attachment. If jurisdiction of the
defendant is acquired but jurisdiction of the res is lost, it is then purely in personam. . . . a proceeding against property
without jurisdiction of the person of the defendant is in substance a proceeding in rem; and where there is jurisdiction of the
defendant, but the proceeding against the property continues, that proceeding is none the less necessarily in rem, although in
form there is but a single proceeding. (4 Am. Jur., 556-557.)
As the remedy is administered in some states, the theory of an attachment, whether it is by process against or to subject the
property or effects of a resident or non-resident of the state, is that it partakes essentially of the nature and character of a
proceeding in personam and not a proceeding in rem. And if the defendant appears the action proceeds in accordance with
the practice governing proceedings in personam. But where the defendant fails to appear in the action, the proceeding is to
be considered as one in the nature of a proceeding in rem. And where the court acts directly on the property, the title thereof
being charged by the court without the intervention of the party, the proceeding unquestionably is one in rem in the fullest
meaning of the term.
In attachment proceedings against a non-resident defendant where personal service on him is lacking, it is elementary that
the court must obtain jurisdiction of the property of the defendant. If no steps have been taken to acquire jurisdiction of the
defendants person, and he has not appeared and answered or otherwise submitted himself to the jurisdiction of the court, the
court is without jurisdiction to render judgment until there has been a lawful seizure of property owned by him within the
jurisdiction of the court. (2 R. C. L., 800-804.)[56]
In this case, not only was property in the Philippines of private respondents attached, but, what is more, private respondents
subsequently appeared in the trial court and submitted to its jurisdiction. Consequently, the jurisdiction of the trial court to render a
judgment in personam against them is undoubted.
Private respondents contend that the claims for which their property was attached are unliquidated and, therefore, the attachment
is totally invalid. While below they conceded that the attachment was valid at least to the extent of P30,000.00 (then considered the
value of human life), they now contend that even this amount is unliquidated.
As private respondents thus admit, this point was not raised in the Court of Appeals by them. It is only now that it is being
urged. However, this point is now largely immaterial inasmuch as the jurisdiction of the trial court to render a personal judgment
against private respondents derived not so much from the validity of the attachment as from the voluntary submission of private
respondents to its authority.
There can be no question regarding the trial courts acquisition of jurisdiction over the persons of respondents when the latters
counsel entered her appearance on their behalf on February 7, 1990. Through counsel, private respondents voluntarily appeared by
filing a Notice of Appearance without qualification and a Motion to Lift Order of Default with Motion for Reconsideration, in which
they prayed for affirmative reliefs, thus submitting to the jurisdiction of the court. The following instances have been considered
voluntary submission to the jurisdiction of the court: the filing by defendant of a motion to admit answer; [57] the filing of a motion for
reconsideration of the judgment by default;[58] and the filing of a petition to set aside the judgment of default.[59]

Not only did private respondents voluntarily submit themselves to the jurisdiction of the trial court, they never questioned the
validity of the mode of service of summons, that is, by extraterritorial service upon them.
As already stated, private respondents filed a notice of appearance without qualification.
In Flores v. Zurbito, it was held:[60]
He may appear by presenting a motion, for example, and unless by such appearance he specifically objects to the
jurisdiction of the court, he thereby gives his assent to the jurisdiction of the court over his person. When the appearance is
by motion objecting to the jurisdiction of the court over his 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. (Handy vs. Insurance Co., 37 Ohio St., 366; Elliott vs
Lawhead, 43 Ohio St., 171; New Jersey vs New York, 6 Peters [U.S.], 323; Livingston vs Gibbons, 4 Johnsons Chancery
[N.Y.], 94; . . . ). An appearance in court, either in person or by counsel, for any purpose other than to expressly object to the
jurisdiction of the court over the person, waives want of process and service of notice. Such an appearance gives the court
jurisdiction over the person. (Henderson vs Carbondale etc., Co., 140 U.S., 25; Rhode Island vs Massachusetts, 12 Peters,
[U.S.], 657.). . . . His appearance without objecting to the jurisdiction of the court waives all objections to the form and
manner of service of notice. (Provident etc. Association v. Ford, 114 U.S., 635, 639.)
In La Naval Drug Corp. v. Court of Appeals,[61] it was held:
Jurisdiction over the person must be seasonably raised, i.e., that it is pleaded in a motion to dismiss or by way of an
affirmative defense in an answer. Voluntary appearance shall be deemed a waiver of this defense.
In Boticano v. Chu, Jr.,[62] it was stated:
. . . one of the circumstances considered by the Court as indicative of waiver by the defendant-appellant of any alleged
defect of jurisdiction over his person arising from defective or even want of process, is his failure to raise the question of
jurisdiction in the Court of First Instance and at the first opportunity. It has been held that upon general principles, defects in
jurisdiction arising from irregularities in the commencement of the proceedings, defective process or even absence of
process may be waived by a failure to make seasonable objections. (Castro v. Cebu Portland Cement Co., 71 Phil. 481
[1941] citing Machan v. De la Trinidad, 3 Phil. 684; Vergara v. Laciapag, 28 Phil. 439; U.S. v. Inductivo, 40 Phil. 84;
Soriano v. Ramirez, 44 Phil. 519).
Private respondents thus waived any defect in service of summons or even want of process because for the court to validly
decide their plea, it necessarily had to acquire jurisdiction upon their persons.[63]
Second. The Court of Appeals found the trial court to have committed grave abuse of discretion in denying private respondents
Motion to Lift Order of Default with Motion for Reconsideration for the following reasons: Private respondents resided in the United
States which local newspapers do not reach and they came to know of the case against them only on January 5, 1990 from wellmeaning friends. These circumstances, it was held, constituted accident, mistake, or excusable neglect excusing private respondents
failure to answer the complaint and justifying the lifting of the default order under Rule 18, 3.
In addition, the appellate court maintains that the trial courts observation that the Motion contains no specific facts or statements
showing petitioners meritorious defense is not accurate. It points out that it is clearly stated in the said Motion that they did not kill
petitioners husband. Indeed, according to the Court of Appeals, the defense is meritorious because if proved, such circumstance will
defeat petitioners claim for damages.[64]
Under Rule 18, 3, a motion to lift an order of default must allege with particularity the facts constituting the fraud, accident,
mistake, or excusable neglect which caused his failure to answer. [65] In this case, the private respondents motion merely alleged that
private respondents were residents of the United States which local newspapers do not reach and that they did not know about the case
filed against them until January 5, 1990 when well-meaning friends informed them about the matter.[66]
There are factual considerations in this case which belie private respondents allegations of good faith. In his Special Power of
Attorney,[67] which was submitted to the trial court as an annex of private respondents Supplemental Motion for Reconsideration with
Reply, private respondent Eliseo Sevilla gave as their residential address in the United States the same address to which summons had
been sent three times before by the trial court.[68] The last summons sent to private respondents by registered mail was returned to the
court with the notation REFUSED TO RECEIVE.This was long before January 5, 1990 when, according to private respondents, they
were informed by friends of the case pending against them. That private respondents refused to receive the summons is of no
moment. As has been held, the refusal of a defendant (in this case private respondents) to receive summons is a technicality resorted to
by those who attempt to frustrate the service upon them. [69] The trial court was justified in thinking that private respondents were
trying to deceive it by claiming that they did not know about the case until they were told about it on January 5, 1990 by well-meaning
friends.
Indeed, private respondents did not dispute the trial courts finding of deception on their part, nor did they ever offer any
explanation for this in any of their numerous pleadings. For as early as December 27, 1989 and thus prior to the second declaration of
default, private respondents counsel, Atty. Marbibi, made a formal written request to the trial court for permission to photocopy all
pleadings and orders relating to the case for the purpose of protecting the interest of the defendants whose sister contracted our

services. Among the papers photocopied were the Amended Complaint and Summons pursuant thereto. [70] This fact gives the lie to the
allegation in the Motion to Set Aside the Order of Default that private respondents did not know of the case against them until January
5, 1990. Private respondents could have at least asked for an extension of time to file their answer before they were declared in default
for the second time if it was really their intention in good faith to participate in the case. They cannot claim that the reason they could
not do so was because they had appeared only to question jurisdiction over their persons because they had already asked for
affirmative reliefs prior to their raising the issue of jurisdiction over their persons.
Private respondents have thus failed to show good faith which is central to the concept of excusable neglect justifying failure to
answer.
[W]hat must be shown is that the failure to respond was attributable to mishap and not indifference or deliberate disregard of
the notice. In the case of ordinary individuals, the test is in essence one of good faith.[71]
In our opinion, the trial court correctly slammed the blatant attempt of private respondents to foist a falsehood upon it.
The motion to lift order of default, aside from the requirements in Rule 18, 3, must show that the defendant has a meritorious
defense or that something would be gained by having the order of default set aside. [72] Otherwise, and if the motion is not accompanied
by affidavits of merits, it may properly be denied.[73]
As regards this requirement, private respondents contented themselves with just one statement that they have absolutely no
knowledge, much less any hand, in the incident falsely imputed to them. [74] Such allegation is a conclusion rather than a statement of
facts showing a meritorious defense. The affidavit must controvert the facts alleged by the petitioners.
[The term meritorious defense] may imply that the applicant has the burden of proving such a defense in order to have the
judgment set aside. The cases usually do not require such a strong showing. The test employed appears to be essentially the
same as used in considering summary judgment, i.e., whether there is enough evidence to present an issue for submission to
the trier of fact, or a showing that on the undisputed facts it is not clear that the judgment is warranted as a matter of law.[75]
. . . The defendant must show that she has a meritorious defense otherwise the grant of her motion will prove to be a useless
exercise. Thus, her motion must be accompanied by a statement of the evidence which she intends to present if the motion is
granted and which is such as to warrant a reasonable belief that the result of the case would probably be otherwise if a new
trial is granted.[76]
Since private respondents failure to file an answer or any other responsive pleading was not due to fraud, accident, mistake, or
excusable neglect and they failed to show they had a valid and meritorious defense, we think the trial court did not commit an abuse of
discretion in refusing to lift its order of default. Grave abuse of discretion, it bears repeating, means capricious, arbitrary, despotic, and
whimsical exercise of judgment and is rightly treated as equivalent to lack of jurisdiction. [77] Here, it cannot justly be said that, in
issuing its disputed order denying private respondents Motion to Lift the Order of Default and Motion for Reconsideration, the trial
court acted in this fashion so as to call for the annulment of its orders and its decision. The Court of Appeals seriously erred in holding
otherwise and setting aside the order of the trial court.
Third. We agree with the Court of Appeals, however, that the trial court is guilty of grave abuse of discretion in denying due
course to private respondents appeal. The trial court held that its decision had become final on the basis of the following facts: [78] that
the private respondents received the judgment by default on April 7, 1990, one day later than the petitioners; that on April 21, 1990,
they filed a Motion for Reconsideration with Motion to Set Aside Decision through registered mail; that on August 10, 1990, the trial
court issued an order denying said Motion; that on August 16, 1990, a photocopy of the said order was served along with the Writ of
Execution Pending Appeal (granted upon Motion for Execution Pending Appeal) and Notice of Levy of Real Properties by its Sheriff;
that on August 21, 1990, the duplicate original copy of the order of August 10, 1990 sent by registered mail to the private respondents
counsel was received; and, that on the same day, August 21, 1990, said counsel filed a Notice of Appeal. On the basis of these
findings, the trial court concluded:[79]
. . . While it may be true that they received copy of the August 10 order which was sent to their counsel thru registered mail
on August 13, 1990 only on August 21, 1990 as they claimed in the opposition to motion to dismiss appeal, however
defendants forgot the fact that on August 16, 1990, the Sheriff of this Court served upon them, thru counsel, a copy of said
August 10 order, together with the Writ of Execution Pending Appeal and Notice of Levy. This is certified to by the Sheriff
in his Report.
When the defendants therefore filed their Notice of Appeal on August 21, 1990, they were already late and the period to
appeal had expired as the period started to run again on the 17th day of August and it is the last day to perfect appeal.
The question is from which date the period for filing an appeal should be counted: from August 16, 1990, when private
respondents received a photocopy of the order denying their Motion for Reconsideration of the decision, or from August 21, 1990,
when they received by registered mail the duplicate original of the same order? It is to be recalled that the photocopy of the order was
given to private respondents by the sheriff in connection with his service of the Writ of Execution and Notice of Levy on Real
Properties. It was one of the supporting documents attached to the Notice of Levy on Real Properties.
We hold that the period for filing an appeal commenced to run again after it had been interrupted by the filing of private
respondents Motion for Reconsideration of the decision only on August 21, 1990. It cannot be from August 16, 1990 when private

respondents counsel was given a mere photocopy of the courts order. Such copy lacks assurance of its genuineness, considering that
photocopies can easily be tampered with, for the purpose of enabling private respondents to determine whether or not to appeal and, in
the event they choose to do so, what issues to raise on appeal. It was not in fact intended to be a substitute for the copy of the order
which was served only on August 21, 1990. The trial court, therefore, should have given due course to private respondents appeal.
Denied the right to appeal, private respondents perforce had to resort to a petition for certiorari, prohibition, and mandamus.
Petitioners contend, however, that private respondents petition for certiorari in the Court of Appeals was not filed within a
reasonable time and therefore should have been denied. They claim that private respondents received the trial courts order denying
their motion for a reconsideration of the courts refusal to give due course to the first Notice of Appeal on January 16, 1991 and that
from such date until September 11, 1991 when the petition for certiorari was filed, almost eight months had already elapsed, clearly
exceeding the benchmark of 90 days considered as reasonable time for filing petitions of this nature.
This contention has no merit. The relevant date for purposes of determining whether the petition for certiorari was filed within a
reasonable time is August 13, 1991, when private respondents received the trial courts order denying their motion to quash the entry of
judgment which the trial court had issued earlier. It is to be noted that the trial court did not act on the second Notice of Appeal. It
simply entered judgment on January 29, 1991. The private respondents had a right to be notified of the action on their second Notice
of Appeal. They were not guilty of dilatory tactics.Indeed, the moment the trial court entered judgment, they immediately moved to
quash the entry of judgment. When their Motion to Quash was denied in an order which also commented on their second Notice of
Appeal, they filed the petition for certiorari. From August 13, 1991 to September 11, 1991 is a period of only 29 days.
It is also important to note that petitioners questioned the timeliness of private respondents action (their filing of the petition
for certiorari, prohibition, and mandamus) only after the Court of Appeals had rendered a decision. They filed a comment on private
respondents petition, but they did not question the timeliness of its filing by alleging that the petition was filed more than 90 days then
considered to be a reasonable time for filing petitions for certiorari (It is now 60 days under Rule 65, 4 of the Rules of Civil
Procedure). It was only after the Court of Appeals rendered judgment against them that petitioners raised the question in their Motion
for Reconsideration. Petitioners thus waived their objection to the timeliness of the filing of the petition in the Court of Appeals.
To recapitulate, we hold: (1) that the trial court acquired jurisdiction over the persons of private respondents; (2) that it validly
declared them in default; (3) that consequently, its decision is valid and private respondents remedy was to appeal from the decision;
(4) that private respondents appeal was timely and therefore it was grave abuse of discretion for the trial court to hold that private
respondents notice of appeal was filed late and for that reason deny due course to it.
WHEREFORE, the decision of the Court of Appeals is REVERSED insofar as it nullified and set aside the orders of default,
the hearing ex-parte, the default judgment, the execution pending appeal, and all other orders related thereto issued prior to the order
refusing to give due course to the appeal of private respondents of the Regional Trial Court of Makati, Branch 132, and AFFIRMED
insofar as it set aside the orders refusing to give due course to private respondents appeal and ordering the entry of the judgment by
default and insofar as it ordered that the attachment on the properties of private respondents be maintained. The Regional Trial Court
of Makati, Branch 132, is hereby ORDERED to give due course to the appeal of private respondents.
SO ORDERED.
U.S. Supreme Court
International Shoe v. State of Washington, 326 U.S. 310 (1945)
International Shoe v. State of Washington
No. 107
Argued November 14, 1945
Decided December 3, 1945
326 U.S. 310
APPEAL FROM THE SUPREME COURT OF WASHINGTON
Syllabus
Activities within a State of salesmen in the employ of a foreign corporation, exhibiting samples of merchandise and soliciting orders
from prospective buyers to be accepted or rejected by the corporation at a point outside the State, were systematic and continuous, and

resulted in a large volume of interstate business. A statute of the State requires employers to pay into the state unemployment
compensation fund a specified percentage of the wages paid for the services of employees within the State.
Held:
1. In view of 26 U.S.C. 1606(a) , providing that no person shall be relieved from compliance with a state law requiring payments to
an unemployment fund on the ground that he is engaged in interstate commerce, the fact that the corporation is engaged in interstate
commerce does not relieve it from liability for payments to the state unemployment compensation fund. P. 326 U. S. 315.
2. The activities in behalf of the corporation render it amenable to suit in courts of the State to recover payments due to the state
unemployment compensation fund. P. 326 U. S. 320.
(a) The activities in question established between the State and the corporation sufficient contacts or ties to make it reasonable and
just, and in conformity to the due process requirements of the Fourteenth Amendment, for the State to enforce against the corporation
an obligation arising out of such activities. P. 326 U. S. 320.
(b) In such a suit to recover payments due to the unemployment compensation fund, service of process upon one of the corporation's
salesmen within the State, and notice sent by registered mail to the corporation at its home office, satisfies the requirements of due
process. P. 326 U. S. 320.
Page 326 U. S. 311
3. The tax imposed by the state unemployment compensation statute -- construed by the state court, in its application to the
corporation, as a tax on the privilege of employing salesmen within the State -- does not violate the due process clause of the
Fourteenth Amendment. P. 326 U. S. 321.
22 Wash.2d 146, 154 P.2d 801, affirmed.
APPEAL from a judgment upholding the constitutionality of a state unemployment compensation statute as applied to the appellant
corporation.
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
The questions for decision are (1) whether, within the limitations of the due process clause of the Fourteenth Amendment, appellant, a
Delaware corporation, has, by its activities in the State of Washington, rendered itself amenable to proceedings in the courts of that
state to recover unpaid contributions to the state unemployment compensation fund exacted by state statutes, Washington
Unemployment Compensation Act, Washington Revised Statutes, 9998-103a through 9998-123a, 1941 Supp., and (2) whether the
state can exact those contributions consistently with the due process clause of the Fourteenth Amendment.
The statutes in question set up a comprehensive scheme of unemployment compensation, the costs of which are defrayed by
contributions required to be made by employers to a state unemployment compensation fund.
Page 326 U. S. 312
The contributions are a specified percentage of the wages payable annually by each employer for his employees' services in the state.
The assessment and collection of the contributions and the fund are administered by appellees. Section 14(c) of the Act
(Wash.Rev.Stat., 1941 Supp., 9998-114c) authorizes appellee Commissioner to issue an order and notice of assessment of delinquent
contributions upon prescribed personal service of the notice upon the employer if found within the state, or, if not so found, by mailing
the notice to the employer by registered mail at his last known address. That section also authorizes the Commissioner to collect the
assessment by distraint if it is not paid within ten days after service of the notice. By 14e and 6b, the order of assessment may be
administratively reviewed by an appeal tribunal within the office of unemployment upon petition of the employer, and this

determination is, by 6i, made subject to judicial review on questions of law by the state Superior Court, with further right of appeal
in the state Supreme Court, as in other civil cases.
In this case, notice of assessment for the years in question was personally served upon a sales solicitor employed by appellant in the
State of Washington, and a copy of the notice was mailed by registered mail to appellant at its address in St. Louis, Missouri.
Appellant appeared specially before the office of unemployment, and moved to set aside the order and notice of assessment on the
ground that the service upon appellant's salesman was not proper service upon appellant; that appellant was not a corporation of the
State of Washington, and was not doing business within the state; that it had no agent within the state upon whom service could be
made; and that appellant is not an employer, and does not furnish employment within the meaning of the statute.
The motion was heard on evidence and a stipulation of facts by the appeal tribunal, which denied the motion
Page 326 U. S. 313
and ruled that appellee Commissioner was entitled to recover the unpaid contributions. That action was affirmed by the
Commissioner; both the Superior Court and the Supreme Court affirmed. 22 Wash.2d 146, 154 P.2d 801. Appellant in each of these
courts assailed the statute as applied, as a violation of the due process clause of the Fourteenth Amendment, and as imposing a
constitutionally prohibited burden on interstate commerce. The cause comes here on appeal under 237(a) of the Judicial Code, 28
U.S.C. 344(a), appellant assigning as error that the challenged statutes, as applied, infringe the due process clause of the Fourteenth
Amendment and the commerce clause.
The facts, as found by the appeal tribunal and accepted by the state Superior Court and Supreme Court, are not in dispute. Appellant is
a Delaware corporation, having its principal place of business in St. Louis, Missouri, and is engaged in the manufacture and sale of
shoes and other footwear. It maintains places of business in several states other than Washington, at which its manufacturing is carried
on and from which its merchandise is distributed interstate through several sales units or branches located outside the State of
Washington.
Appellant has no office in Washington, and makes no contracts either for sale or purchase of merchandise there. It maintains no stock
of merchandise in that state, and makes there no deliveries of goods in intrastate commerce. During the years from 1937 to 1940, now
in question, appellant employed eleven to thirteen salesmen under direct supervision and control of sales managers located in St.
Louis. These salesmen resided in Washington; their principal activities were confined to that state, and they were compensated by
commissions based upon the amount of their sales. The commissions for each year totaled more than $31,000. Appellant supplies its
salesmen with a line of samples, each consisting of one shoe of a pair, which
Page 326 U. S. 314
they display to prospective purchasers. On occasion, they rent permanent sample rooms, for exhibiting samples, in business buildings,
or rent rooms in hotels or business buildings temporarily for that purpose. The cost of such rentals is reimbursed by appellant.
The authority of the salesmen is limited to exhibiting their samples and soliciting orders from prospective buyers, at prices and on
terms fixed by appellant. The salesmen transmit the orders to appellant's office in St. Louis for acceptance or rejection, and, when
accepted, the merchandise for filling the orders is shipped f.o.b. from points outside Washington to the purchasers within the state. All
the merchandise shipped into Washington is invoiced at the place of shipment, from which collections are made. No salesman has
authority to enter into contracts or to make collections.
The Supreme Court of Washington was of opinion that the regular and systematic solicitation of orders in the state by appellant's
salesmen, resulting in a continuous flow of appellant's product into the state, was sufficient to constitute doing business in the state so
as to make appellant amenable to suit in its courts. But it was also of opinion that there were sufficient additional activities shown to
bring the case within the rule, frequently stated, that solicitation within a state by the agents of a foreign corporation plus some
additional activities there are sufficient to render the corporation amenable to suit brought in the courts of the state to enforce an

obligation arising out of its activities there. International Harvester Co. v. Kentucky, 234 U. S. 579, 234 U. S. 587; People's Tobacco
Co. v. American Tobacco Co., 246 U. S. 79, 246 U. S. 87; Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 516.
The court found such additional activities in the salesmen's display of samples sometimes in permanent display rooms, and the
salesmen's residence within the state, continued over a period of years, all resulting in a
Page 326 U. S. 315
substantial volume of merchandise regularly shipped by appellant to purchasers within the state. The court also held that the statute, as
applied, did not invade the constitutional power of Congress to regulate interstate commerce, and did not impose a prohibited burden
on such commerce.
Appellant's argument, renewed here, that the statute imposes an unconstitutional burden on interstate commerce need not detain us.
For 53 Stat. 1391, 26 U.S.C. 1606(a) provides that
"No person required under a State law to make payments to an unemployment fund shall be relieved from compliance therewith on the
ground that he is engaged in interstate or foreign commerce, or that the State law does not distinguish between employees engaged in
interstate or foreign commerce and those engaged in intrastate commerce."
It is no longer debatable that Congress, in the exercise of the commerce power, may authorize the states, in specified ways, to regulate
interstate commerce or impose burdens upon it. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S. 334; Perkins v.
Pennsylvania, 314 U.S. 586; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S. 308; Hooven & Allison Co. v. Evatt, 324
U. S. 652, 324 U. S. 679; Southern Pacific Co. v. Arizona, 325 U. S. 761, 325 U. S. 769.
Appellant also insists that its activities within the state were not sufficient to manifest its "presence" there, and that, in its absence, the
state courts were without jurisdiction, that, consequently, it was a denial of due process for the state to subject appellant to suit. It
refers to those cases in which it was said that the mere solicitation of orders for the purchase of goods within a state, to be accepted
without the state and filled by shipment of the purchased goods interstate, does not render the corporation seller amenable to suit
within the state. See Green v. Chicago, B. & Q. R. Co., 205 U. S. 530, 205 U. S. 533; International Harvester Co. v. Kentucky,
supra, 234 U. S. 586-587; Philadelphia
Page 326 U. S. 316
& Reading R. Co. v. McKibbin, 243 U. S. 264, 243 U. S. 268; People's Tobacco Co. v. American Tobacco Co., supra, 246 U. S. 87.
And appellant further argues that, since it was not present within the state, it is a denial of due process to subject it to taxation or other
money exaction. It thus denies the power of the state to lay the tax or to subject appellant to a suit for its collection.
Historically, the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant's person.
Hence, his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding
him. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 733. But now that the capias ad respondendum has given way to personal service of
summons or other form of notice, due process requires only that, in order to subject a defendant to a judgment in personam, if he be
not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not
offend "traditional notions of fair play and substantial justice." Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463. See Holmes, J.,
in McDonald v. Mabee, 243 U. S. 90, 243 U. S. 91.Compare Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, 318 U.
S. 319. See Blackmer v. United States, 284 U. S. 421; Hess v. Pawloski, 274 U. S. 352; Young v. Masci, 289 U. S. 253. ,
Since the corporate personality is a fiction, although a fiction intended to be acted upon as though it were a fact, Klein v. Board of
Supervisors, 282 U. S. 19, 282 U. S. 24, it is clear that, unlike an individual, its "presence" without, as well as within, the state of its
origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it. To say that the corporation
is so far "present" there as to satisfy due process requirements, for purposes of taxation or the maintenance of suits against it in the
courts of the state, is to beg the question to be decided. For the terms "present" or "presence" are

Page 326 U. S. 317

used merely to symbolize those activities of the corporation's agent within the state which courts will deem to be sufficient to satisfy
the demands of due process. L. Hand, J., in Hutchinson v. Chase & Gilbert, 45 F.2d 139, 141. Those demands may be met by such
contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to
require the corporation to defend the particular suit which is brought there. An "estimate of the inconveniences" which would result to
the corporation from a trial away from its "home" or principal place of business is relevant in this connection. Hutchinson v. Chase &
Gilbert, supra, 141.
"Presence" in the state in this sense has never been doubted when the activities of the corporation there have not only been continuous
and systematic, but also give rise to the liabilities sued on, even though no consent to be sued or authorization to an agent to accept
service of process has been given. St. Clair v. Cox, 106 U. S. 350, 106 U. S. 355;Connecticut Mutual Co. v. Spratley, 172 U. S.
602, 172 U. S. 610-611; Pennsylvania Lumbermen's Ins. Co. v. Meyer, 197 U. S. 407, 197 U. S. 414-415; Commercial Mutual Co. v.
Davis, 213 U. S. 245, 213 U. S. 255-256; International Harvester Co. v. Kentucky, supra; cf. St. Louis S.W. R. Co. v. Alexander, 227 U.
S. 218. Conversely, it has been generally recognized that the casual presence of the corporate agent, or even his conduct of single or
isolated items of activities in a state in the corporation's behalf, are not enough to subject it to suit on causes of action unconnected
with the activities there. St. Clair v. Cox, supra, 106 U. S. 359, 106 U. S. 360; Old Wayne Life Assn. v. McDonough, 204 U. S. 8, 204
U. S. 21; Frene v. Louisville Cement Co., supra, 515, and cases cited. To require the corporation in such circumstances to defend the
suit away from its home or other jurisdiction where it carries on more substantial activities has been thought to lay too great and
unreasonable a burden on the corporation to comport with due process.
Page 326 U. S. 318
While it has been held, in cases on which appellant relies, that continuous activity of some sorts within a state is not enough to support
the demand that the corporation be amenable to suits unrelated to that activity, Old Wayne Life Assn. v. McDonough, supra; Green v.
Chicago, B. & Q. R. Co., supra; Simon v. Southern R. Co., 236 U. S. 115; People's Tobacco Co. v. American Tobacco Co., supra; cf.
Davis v. Farmers Co-operative Co., 262 U. S. 312, 262 U. S. 317, there have been instances in which the continuous corporate
operations within a state were thought so substantial and of such a nature as to justify suit against it on causes of action arising from
dealings entirely distinct from those activities. See Missouri, K. & T. R. Co. v. Reynolds, 255 U.S. 565; Tauza v. Susquehanna Coal
Co., 220 N.Y. 259, 115 N.E. 915; cf. St. Louis S.W. R. Co. v. Alexander, supra.
Finally, although the commission of some single or occasional acts of the corporate agent in a state sufficient to impose an obligation
or liability on the corporation has not been thought to confer upon the state authority to enforce it, Rosenberg Bros. & Co. v. Curtis
Brown Co., 260 U. S. 516, other such acts, because of their nature and quality and the circumstances of their commission, may be
deemed sufficient to render the corporation liable to suit. Cf. Kane v. New Jersey, 242 U. S. 160; Hess v. Pawloski, supra; Young v.
Masci, supra. True, some of the decisions holding the corporation amenable to suit have been supported by resort to the legal fiction
that it has given its consent to service and suit, consent being implied from its presence in the state through the acts of its authorized
agents. Lafayette Insurance Co. v. French, 18 How. 404, 59 U. S. 407; St. Clair v. Cox, supra, 106 U. S. 356; Commercial Mutual Co.
v. Davis, supra, 213 U. S. 254;Washington v. Superior Court, 289 U. S. 361, 289 U. S. 364-365. But, more realistically, it may be said
that those authorized acts were of such a nature as to justify the fiction. Smolik v. Philadelphia &
Page 326 U. S. 319
Reading Co., 222 F. 148, 151. Henderson, The Position of Foreign Corporations in American Constitutional Law, 94-95.
It is evident that the criteria by which we mark the boundary line between those activities which justify the subjection of a corporation
to suit and those which do not cannot be simply mechanical or quantitative. The test is not merely, as has sometimes been suggested,
whether the activity, which the corporation has seen fit to procure through its agents in another state, is a little more or a little less. St.
Louis S.W. R. Co. v. Alexander, supra, 227 U. S. 228; International Harvester Co. v. Kentucky, supra, 234 U. S. 587. Whether due

process is satisfied must depend, rather, upon the quality and nature of the activity in relation to the fair and orderly administration of
the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding
a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations. Cf.
Pennoyer v. Neff, supra; Minnesota Commercial Assn. v. Benn, 261 U. S. 140.
But, to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection
of the laws of that state. The exercise of that privilege may give rise to obligations, and, so far as those obligations arise out of or are
connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them
can, in most instances, hardly be said to be undue. Compare International Harvester Co. v. Kentucky, supra, with Green v. Chicago, B.
& Q. R. Co., supra, and People's Tobacco Co. v. American Tobacco Co., supra. Compare Connecticut Mutual Co. v. Spratley,
supra, 172 U. S. 619, 172 U. S. 620, and Commercial Mutual Co. v. Davis, supra, with Old Wayne Life Assn. v. McDonough,
supra. See 29 Columbia Law Review, 187-195.
Page 326 U. S. 320
Applying these standards, the activities carried on in behalf of appellant in the State of Washington were neither irregular nor casual.
They were systematic and continuous throughout the years in question. They resulted in a large volume of interstate business, in the
course of which appellant received the benefits and protection of the laws of the state, including the right to resort to the courts for the
enforcement of its rights. The obligation which is here sued upon arose out of those very activities. It is evident that these operations
establish sufficient contacts or ties with the state of the forum to make it reasonable and just, according to our traditional conception of
fair play and substantial justice, to permit the state to enforce the obligations which appellant has incurred there. Hence, we cannot say
that the maintenance of the present suit in the State of Washington involves an unreasonable or undue procedure.
We are likewise unable to conclude that the service of the process within the state upon an agent whose activities establish appellant's
"presence" there was not sufficient notice of the suit, or that the suit was so unrelated to those activities as to make the agent an
inappropriate vehicle for communicating the notice. It is enough that appellant has established such contacts with the state that the
particular form of substituted service adopted there gives reasonable assurance that the notice will be actual. Connecticut Mutual Co.
v. Spratley, supra, 172 U. S. 618, 172 U. S. 619; Board of Trade v. Hammond Elevator Co., 198 U. S. 424, 198 U. S. 437438; Commercial Mutual Co. v. Davis, supra, 213 U. S. 254-255. Cf. Riverside Mills v. Menefee, 237 U. S. 189, 237 U. S. 194, 237 U.
S. 195; See Knowles v. Gaslight & Coke Co., 19 Wall. 58, 86 U. S. 61; McDonald v. Mabee, supra; Milliken v. Meyer, supra. Nor can
we say that the mailing of the notice of suit to appellant by registered mail at its home office was not reasonably calculated to apprise
appellant of the suit. Compare Hess v. Pawloski, supra, with McDonald v. Mabee, supra,
Page 326 U. S. 321
243 U. S. 92, and Wuchter v. Pizzutti, 276 U. S. 13, 276 U. S. 19, 276 U. S. 24; cf. Becquet v. MacCarthy, 2 B. & Ad.
951;Maubourquet v. Wyse, 1 Ir.Rep.C.L. 471. See Washington v. Superior Court, supra, 289 U. S. 365.
Only a word need be said of appellant's liability for the demanded contributions to the state unemployment fund. The Supreme Court
of Washington, construing and applying the statute, has held that it imposes a tax on the privilege of employing appellant's salesmen
within the state measured by a percentage of the wages, here, the commissions payable to the salesmen. This construction we accept
for purposes of determining the constitutional validity of the statute. The right to employ labor has been deemed an appropriate subject
of taxation in this country and England, both before and since the adoption of the Constitution. Steward Machine Co. v. Davis, 301 U.
S. 548, 301 U. S. 579, et seq. And such a tax imposed upon the employer for unemployment benefits is within the constitutional power
of the states. Carmichael v. Southern Coal Co., 301 U. S. 495, 301 U. S. 508, et seq.
Appellant having rendered itself amenable to suit upon obligations arising out of the activities of its salesmen in Washington, the state
may maintain the present suit in personam to collect the tax laid upon the exercise of the privilege of employing appellant's salesmen
within the state. For Washington has made one of those activities which, taken together, establish appellant's "presence" there for

purposes of suit the taxable event by which the state brings appellant within the reach of its taxing power. The state thus has
constitutional power to lay the tax and to subject appellant to a suit to recover it. The activities which establish its "presence" subject it
alike to taxation by the state and to suit to recover the tax. Equitable Life Society v. Pennsylvania, 238 U. S. 143, 238 U. S. 146; cf.
International Harvester Co. v. Department of Taxation, 322 U. S. 435, 322 U. S. 442, et seq.; Hoopeston Canning Co. v. Cullen,
Page 326 U. S. 322
supra, 318 U. S. 316-319; see General Trading Co. v. Tax Comm'n, 322 U. S. 335.
Affirmed.
MR. JUSTICE JACKSON took no part in the consideration or decision of this case.
MR. JUSTICE BLACK delivered the following opinion.
Congress, pursuant to its constitutional power to regulate commerce, has expressly provided that a State shall not be prohibited from
levying the kind of unemployment compensation tax here challenged. 26 U.S.C. 1600. We have twice decided that this Congressional
consent is an adequate answer to a claim that imposition of the tax violates the Commerce Clause. Perkins v. Pennsylvania, 314 U.S.
586, affirming 342 Pa. 529; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S. 308. Two determinations by this Court of an
issue so palpably without merit are sufficient. Consequently, that part of this appeal which again seeks to raise the question seems so
patently frivolous as to make the case a fit candidate for dismissal. Fay v. Crozer, 217 U. S. 455. Nor is the further ground advanced on
this appeal, that the State of Washington has denied appellant due process of law, any less devoid of substance. It is my view,
therefore, that we should dismiss the appeal as unsubstantial, [Footnote 1] Seaboard Air Line R. Co. v. Watson, 287 U. S. 86, 287 U. S.
90, 287 U. S. 92, and decline the invitation to formulate broad rules as to the meaning of due process, which here would amount to
deciding a constitutional question "in advance of the necessity for its decision." Federation of Labor v. McAdory, 325 U. S. 450, 325
U. S. 461.
Page 326 U. S. 323
Certainly appellant cannot, in the light of our past decisions, meritoriously claim that notice by registered mail and by personal service
on its sales solicitors in Washington did not meet the requirements of procedural due process. And the due process clause is not
brought in issue any more by appellant's further conceptualistic contention that Washington could not levy a tax or bring suit against
the corporation because it did not honor that State with its mystical "presence." For it is unthinkable that the vague due process clause
was ever intended to prohibit a State from regulating or taxing a business carried on within its boundaries simply because this is done
by agents of a corporation organized and having its headquarters elsewhere. To read this into the due process clause would, in fact,
result in depriving a State's citizens of due process by taking from the State the power to protect them in their business dealings within
its boundaries with representatives of a foreign corporation. Nothing could be more irrational, or more designed to defeat the function
of our federative system of government. Certainly a State, at the very least, has power to tax and sue those dealing with its citizens
within its boundaries, as we have held before. Hoopeston Canning Co. v. Cullen, 318 U. S. 313. Were the Court to follow this
principle, it would provide a workable standard for cases where, as here, no other questions are involved. The Court has not chosen to
do so, but instead has engaged in an unnecessary discussion, in the course of which it has announced vague Constitutional criteria
applied for the first time to the issue before us. It has thus introduced uncertain elements confusing the simple pattern and tending to
curtail the exercise of State powers to an extent not justified by the Constitution.
The criteria adopted, insofar as they can be identified, read as follows: Due Process does permit State courts to "enforce the
obligations which appellant has incurred" if
Page 326 U. S. 324

it be found "reasonable and just according to our traditional conception of fair play and substantial justice." And this, in turn, means
that we will "permit" the State to act if, upon
"an 'estimate of the inconveniences' which would result to the corporation from a trial away from its 'home' or principal place of
business,"
we conclude that it is "reasonable" to subject it to suit in a State where it is doing business.
It is true that this Court did use the terms "fair play" and "substantial justice" in explaining the philosophy underlying the holding that
it could not be "due process of law" to render a personal judgment against a defendant without notice and an opportunity to be
heard. Milliken v. Meyer, 311 U. S. 457. In McDonald v. Mabee, 243 U. S. 90, 243 U. S. 91, cited in theMilliken, case, Mr. Justice
Holmes, speaking for the Court, warned against judicial curtailment of this opportunity to be heard, and referred to such a curtailment
as a denial of "fair play," which even the common law would have deemed "contrary to natural justice." And previous cases had
indicated that the ancient rule against judgments without notice had stemmed from "natural justice" concepts. These cases, while
giving additional reasons why notice under particular circumstances is inadequate, did not mean thereby that all legislative enactments
which this Court might deem to be contrary to natural justice ought to be held invalid under the due process clause. None of the cases
purport to support or could support a holding that a State can tax and sue corporations only if its action comports with this Court's
notions of "natural justice." I should have thought the Tenth Amendment settled that.
I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts," a power to tax and to open the doors of its
courts for its citizens to sue corporations whose agents do business in those States. Believing that the Constitution gave the States that
power, I think it a judicial deprivation to condition its exercise upon this
Page 326 U. S. 325
Court's notion of "fair play," however appealing that term may be. Nor can I stretch the meaning of due process so far as to authorize
this Court to deprive a State of the right to afford judicial protection to its citizens on the ground that it would be more "convenient"
for the corporation to be sued somewhere else.
There is a strong emotional appeal in the words "fair play," "justice," and "reasonableness." But they were not chosen by those who
wrote the original Constitution or the Fourteenth Amendment as a measuring rod for this Court to use in invalidating State or Federal
laws passed by elected legislative representatives. No one, not even those who most feared a democratic government, ever formally
proposed that courts should be given power to invalidate legislation under any such elastic standards. Express prohibitions against
certain types of legislation are found in the Constitution, and, under the long-settled practice, courts invalidate laws found to conflict
with them. This requires interpretation, and interpretation, it is true, may result in extension of the Constitution's purpose. But that is
no reason for reading the due process clause so as to restrict a State's power to tax and sue those whose activities affect persons and
businesses within the State, provided proper service can be had. Superimposing the natural justice concept on the Constitution's
specific prohibitions could operate as a drastic abridgment of democratic safeguards they embody, such as freedom of speech, press
and religion, [Footnote 2] and the right to counsel. This
Page 326 U. S. 326
has already happened. Betts v. Brady, 316 U. S. 455. Compare Feldman v. United States, 322 U. S. 487, 322 U. S. 494-503. For
application of this natural law concept, whether under the terms "reasonableness," "justice," or "fair play," makes judges the supreme
arbiters of the country's laws and practices. Polk Co. v. Glover, 305 U. S. 5, 305 U. S. 17-18; Federal Power Commission v. Natural
Gas Pipeline Co., 315 U. S. 575, 315 U. S. 600, n. 4. This result, I believe, alters the form of government our Constitution provides. I
cannot agree.

True, the State's power is here upheld. But the rule announced means that tomorrow's judgment may strike down a State or Federal
enactment on the ground that it does not conform to this Court's idea of natural justice. I therefore find myself moved by the same
fears that caused Mr. Justice Holmes to say in 1930:
"I have not yet adequately expressed the more than anxiety that I feel at the ever-increasing scope given to the Fourteenth Amendment
in cutting down what I believe to be the constitutional rights of the States. As the decisions now stand, I see hardly any limit but the
sky to the invalidating of those rights if they happen to strike a majority of this Court as for any reason undesirable."
Baldwin v. Missouri, 281 U. S. 586, 281 U. S. 595.
[Footnote 1]
This Court has, on several occasions, pointed out the undesirable consequences of a failure to dismiss frivolous appeals. Salinger v.
United States, 272 U. S. 542, 272 U. S. 544; United Surety Co. v. American Fruit Product Co., 238 U. S. 140; De Bearn v. Safe
Deposit & Trust Co., 233 U. S. 24, 233 U. S. 33-34.
[Footnote 2]
These First Amendment liberties -- freedom of speech, press and religion -- provide a graphic illustration of the potential restrictive
capacity of a rule under which they are protected at a particular time only because the Court, as then constituted, believes them to be a
requirement of fundamental justice. Consequently, under the same rule, another Court, with a different belief as to fundamental justice,
could, at least as against State action, completely or partially withdraw Constitutional protection from these basic freedoms, just as
though the First Amendment had never been written.

FIRST DIVISION

[G.R. No. 154618. April 14, 2004]

AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., petitioner, vs. INTEGRATED SILICON TECHNOLOGY
PHILIPPINES CORPORATION, TEOH KIANG HONG, TEOH KIANG SENG, ANTHONY CHOO, JOANNE
KATE M. DELA CRUZ, JEAN KAY M. DELA CRUZ and ROLANDO T. NACILLA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12, 2002 of the Court of Appeals in CA-G.R. SP No. 66574, which
dismissed Civil Case No. 3123-2001-C and annulled and set aside the Order dated September 4, 2001 issued by the Regional Trial
Court of Calamba, Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a foreign corporation, which, by its own admission, is not
licensed to do business in the Philippines.[1] Respondent Integrated Silicon Technology Philippines Corporation (Integrated Silicon) is
a private domestic corporation, 100% foreign owned, which is engaged in the business of manufacturing and assembling electronics
components.[2] Respondents Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are current members of
Integrated Silicons board of directors, while Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former
members.[3]

The juridical relation among the various parties in this case can be traced to a 5-year Value Added Assembly Services Agreement
(VAASA), entered into on April 2, 1996 between Integrated Silicon and the Hewlett-Packard Singapore (Pte.)
Ltd., SingaporeComponents Operation (HP-Singapore).[4] Under the terms of the VAASA, Integrated Silicon was to locally
manufacture and assemble fiber optics for export to HP-Singapore. HP-Singapore, for its part, was to consign raw materials to
Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay Integrated Silicon the purchase price of the finished
products.[5] The VAASA had a five-year term, beginning on April 2, 1996, with a provision for annual renewal by mutual written
consent.[6] On September 19, 1999, with the consent of Integrated Silicon, [7] HP-Singapore assigned all its rights and obligations in
the VAASA to Agilent.[8]
On May 25, 2001, Integrated Silicon filed a complaint for Specific Performance and Damages against Agilent and its officers
Tan Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor, docketed as Civil Case No. 3110-01-C. It alleged
that Agilent breached the parties oral agreement to extend the VAASA. Integrated Silicon thus prayed that defendant be ordered to
execute a written extension of the VAASA for a period of five years as earlier assured and promised; to comply with the
extended VAASA; and to pay actual, moral, exemplary damages and attorneys fees.[9]
On June 1, 2001, summons and a copy of the complaint were served on Atty. Ramon Quisumbing, who returned these processes
on the claim that he was not the registered agent of Agilent. Later, he entered a special appearance to assail the courts jurisdiction over
the person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated Silicon, Teoh Kang Seng, Teoh Kiang Gong,
Anthony Choo, Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz and Rolando T. Nacilla,[10] for Specific Performance, Recovery of
Possession, and Sum of Money with Replevin, Preliminary Mandatory Injunction, and Damages, before the Regional Trial
Court, Calamba, Laguna, Branch 92, docketed as Civil Case No. 3123-2001-C. Agilent prayed that a writ of replevin or, in the
alternative, a writ of preliminary mandatory injunction, be issued ordering defendants to immediately return and deliver to plaintiff its
equipment, machineries and the materials to be used for fiber-optic components which were left in the plant of Integrated Silicon. It
further prayed that defendants be ordered to pay actual and exemplary damages and attorneys fees. [11]
Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C, [12] on the grounds of lack of Agilents legal capacity to
sue; litis pendentia;[14] forum shopping;[15] and failure to state a cause of action.[16]
[13]

On September 4, 2001, the trial court denied the Motion to Dismiss and granted petitioner Agilents application for a writ
of replevin.[17]
Without filing a motion for reconsideration, respondents filed a petition for certiorari with the Court of Appeals.[18]
In the meantime, upon motion filed by respondents, Judge Antonio S. Pozas of Branch 92 voluntarily inhibited himself in Civil
Case No. 3123-2001-C. The case was re-raffled and assigned to Branch 35, the same branch where Civil Case No. 3110-2001-C is
pending.
On August 12, 2002, the Court of Appeals granted respondents petition for certiorari, set aside the assailed Order of the trial
court dated September 4, 2001, and ordered the dismissal of Civil Case No. 3123-2001-C.
Hence, the instant petition raising the following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT DISMISSING RESPONDENTS PETITION FOR
CERTIORARI FOR RESPONDENTS FAILURE TO FILE A MOTION FOR RECONSIDERATION BEFORE RESORTING TO
THE REMEDY OF CERTIORARI.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING ASIDE THE TRIAL
COURTS ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C
BELOW ON THE GROUND OF LITIS PENDENTIA, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING ASIDE THE TRIAL
COURTS ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C
BELOW ON THE GROUND OF FORUM SHOPPING, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ORDERING THE DISMISSAL OF CIVIL CASE NO. 3232001-C BELOW INSTEAD OF ORDERING IT CONSOLIDATED WITH CIVIL CASE NO. 3110-2001-C.[19]
The two primary issues raised in this petition: (1) whether or not the Court of Appeals committed reversible error in giving due
course to respondents petition, notwithstanding the failure to file a Motion for Reconsideration of the September 4, 2001 Order; and
(2) whether or not the Court of Appeals committed reversible error in dismissing Civil Case No. 3123-2001-C.
We find merit in the petition.
The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO Standard Eastern, Inc.,[20] held that the lower
court had no jurisdiction over Civil Case No. 3123-2001-C because of the pendency of Civil Case No. 3110-2001-C and, therefore, a
motion for reconsideration was not necessary before resort to a petition for certiorari. This was error.

Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests jurisdiction over the subject matter of Civil Case No. 3123-2001-C in
the RTC.[21]
The Court of Appeals ruling that the assailed Order issued by the RTC of Calamba, Branch 92, was a nullity for lack of
jurisdiction due to litis pendentia and forum shopping, has no legal basis. The pendency of another action does not strip a court of the
jurisdiction granted by law.
The Court of Appeals further ruled that a Motion for Reconsideration was not necessary in view of the urgent necessity in this
case. We are not convinced. In the case of Bache and Co. (Phils.), Inc. v. Ruiz,[22] relied on by the Court of Appeals, it was held
that time is of the essence in view of the tax assessments sought to be enforced by respondent officers of the Bureau of Internal
Revenue against petitioner corporation, on account of which immediate and more direct action becomes necessary. Tax assessments in
that case were based on documents seized by virtue of an illegal search, and the deprivation of the right to due process tainted the
entire proceedings with illegality. Hence, the urgent necessity of preventing the enforcement of the tax assessments was
patent. Respondents, on the other hand, cite the case of Geronimo v. Commission on Elections,[23] where the urgent necessity of
resolving a disqualification case for a position in local government warranted the expeditious resort to certiorari. In the case at bar,
there is no analogously urgent circumstance which would necessitate the relaxation of the rule on a Motion for Reconsideration.
Indeed, none of the exceptions for dispensing with a Motion for Reconsideration is present here. None of the following cases
cited by respondents serves as adequate basis for their procedural lapse.
In Vigan Electric Light Co., Inc. v. Public Service Commission,[24] the questioned order was null and void for failure of
respondent tribunal to comply with due process requirements; in Matanguihan v. Tengco,[25] the questioned order was a patent nullity
for failure to acquire jurisdiction over the defendants, which fact the records plainly disclosed; and in National Electrification
Administration v. Court of Appeals,[26] the questioned orders were void for vagueness. No such patent nullity is evident in the Order
issued by the trial court in this case. Finally, while urgency may be a ground for dispensing with a Motion for Reconsideration, in the
case of Vivo v. Cloribel,[27] cited by respondents, the slow progress of the case would have rendered the issues moot had a motion for
reconsideration been availed of. We find no such urgent circumstance in the case at bar.
Respondents, therefore, availed of a premature remedy when they immediately raised the matter to the Court of Appeals
on certiorari; and the appellate court committed reversible error when it took cognizance of respondents petition instead of dismissing
the same outright.
We come now to the substantive issues of the petition.
Litis pendentia is a Latin term which literally means a pending suit. It is variously referred to in some decisions
as lis pendens and auter action pendant. While it is normally connected with the control which the court has on a property involved in
a suit during the continuance proceedings, it is more interposed as a ground for the dismissal of a civil action pending in court.
Litis pendentia as a ground for the dismissal of a civil action refers to that situation wherein another action is pending between
the same parties for the same cause of action, such that the second action becomes unnecessary and vexatious. For litis pendentia to be
invoked, the concurrence of the following requisites is necessary:
(a) identity of parties or at least such as represent the same interest in both actions;
(b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and
(c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which
party is successful, amount to res judicata in the other.[28]
The Court of Appeals correctly appreciated the identity of parties in Civil Cases No. 3123-2001-C and 3110-2001-C. Well-settled
is the rule that lis pendens requires only substantial, and not absolute, identity of parties. [29] There is substantial identity of parties
when there is a community of interest between a party in the first case and a party in the second case, even if the latter was
not impleaded in the first case.[30] The parties in these cases are vying over the interests of the two opposing corporations; the
individuals are only incidentally impleaded, being the natural persons purportedly accused of violating these corporations rights.
Likewise, the fact that the positions of the parties are reversed, i.e., the plaintiffs in the first case are the defendants in the second
case or vice versa, does not negate the identity of parties for purposes of determining whether the case is dismissible on the ground
of litis pendentia.[31]
The identity of parties notwithstanding, litis pendentia does not obtain in this case because of the absence of the second and third
requisites. The rights asserted in each of the cases involved are separate and distinct; there are two subjects of controversy presented
for adjudication; and two causes of action are clearly involved. The fact that respondents instituted a prior action for Specific
Performance and Damages is not a ground for defeating the petitioners action for Specific Performance, Recovery of Possession, and
Sum of Money with Replevin, Preliminary Mandatory Injunction, and Damages.
In Civil Case No. 3110-2001-C filed by respondents, the issue is whether or not there was a breach of an oral promise to renew
of the VAASA. The issue in Civil Case No. 3123-2001-C, filed by petitioner, is whether petitioner has the right to take possession of
the subject properties. Petitioners right of possession is founded on the ownership of the subject goods, which ownership is not
disputed and is not contingent on the extension or non-extension of the VAASA. Hence, the replevin suit can validly be tried even
while the prior suit is being litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No. 3110-2001-C. The reliefs sought by respondent Integrated
Silicon therein are as follows: (1) execution of a written extension or renewal of the VAASA; (2) compliance with the
extended VAASA; and (3) payment of overdue accounts, damages, and attorneys fees. The reliefs sought by petitioner Agilent in Civil
Case No. 3123-2001-C, on the other hand, are as follows: (1) issuance of a Writ of Replevin or Writ of Preliminary Mandatory
Injunction; (2) recovery of possession of the subject properties; (3) damages and attorneys fees.
Concededly, some items or pieces of evidence may be admissible in both actions. It cannot be said, however, that exactly the
same evidence will support the decisions in both, since the legally significant and controlling facts in each case are entirely different.
Although the VAASA figures prominently in both suits, Civil Case No. 3110-2001-C is premised on a purported breach of an oral
obligation to extend the VAASA, and damages arising out of Agilents alleged failure to comply with such purported extension. Civil

Case No. 3123-2001-C, on the other hand, is premised on a breach of the VAASA itself, and damages arising to Agilent out of that
purported breach.
It necessarily follows that the third requisite for litis pendentia is also absent. The following are the elements of res judicata:
(a) The former judgment must be final;
(b) The court which rendered judgment must have jurisdiction over the parties and the subject matter;
(c) It must be a judgment on the merits; and
(d) There must be between the first and second actions identity of parties, subject matter, and cause of action. [32]
In this case, any judgment rendered in one of the actions will not amount to res judicata in the other action. There being different
causes of action, the decision in one case will not constitute res judicata as to the other.
Of course, a decision in one case may, to a certain extent, affect the other case. This, however, is not the test to determine the
identity of the causes of action. Whatever difficulties or inconvenience may be entailed if both causes of action are pursued on
separate remedies, the proper solution is not the dismissal order of the Court of Appeals. The possible consolidation of said cases, as
well as stipulations and appropriate modes of discovery, may well be considered by the court below to subserve not only procedural
expedience but, more important, the ends of justice.[33]
We now proceed to the issue of forum shopping.
The test for determining whether a party violated the rule against forum-shopping was laid down in the case of Buan v. Lopez.
Forum shopping exists where the elements of litis pendentia are present, or where a final judgment in one case will amount
to resjudicata in the final other. There being no litis pendentia in this case, a judgment in the said case will not amount
to res judicata in Civil Case No. 3110-2001-C, and respondents contention on forum shopping must likewise fail.
[34]

We are not unmindful of the afflictive consequences that may be suffered by both petitioner and respondents if replevin is
granted by the trial court in Civil Case No. 3123-2001-C. If respondent Integrated Silicon eventually wins Civil Case No. 3110-2001C, and the VAASAs terms are extended, petitioner corporation will have to comply with its obligations thereunder, which would
include the consignment of properties similar to those it may recover by way of replevin in Civil Case No. 3123-2001-C. However,
petitioner will also suffer an injustice if denied the remedy of replevin, resort to which is not only allowed but encouraged by law.
Respondents argue that since Agilent is an unlicensed foreign corporation doing business in the Philippines, it lacks the legal
capacity to file suit.[35] The assailed acts of petitioner Agilent, purportedly in the nature of doing business in the Philippines, are the
following: (1) mere entering into the VAASA, which is a service contract;[36] (2) appointment of a full-time representative in Integrated
Silicon, to oversee and supervise the production of Agilents products;[37] (3) the appointment by Agilent of six full-time staff members,
who were permanently stationed at Integrated Silicons facilities in order to inspect the finished goods for Agilent;[38] and
(4) Agilents participation in the management, supervision and control of Integrated Silicon, [39] including instructing Integrated Silicon
to hire more employees to meet Agilents increasing production needs,[40] regularly performing quality audit, evaluation and
supervision of Integrated Silicons employees,[41] regularly performing inventory audit of raw materials to be used by Integrated
Silicon, which was also required to provide weekly inventory updates to Agilent,[42] and providing and dictating Integrated Silicon on
the daily production schedule, volume and models of the products to manufacture and ship for Agilent.[43]
A foreign corporation without a license is not ipso facto incapacitated from bringing an action in Philippine courts. A license is
necessary only if a foreign corporation is transacting or doing business in the country. The Corporation Code provides:
Sec. 133. Doing business without a license. No foreign corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals
on any valid cause of action recognized under Philippine laws.
The aforementioned provision prevents an unlicensed foreign corporation doing business in the Philippines from accessing our
courts.
In a number of cases, however, we have held that an unlicensed foreign corporation doing business in the Philippines may bring
suit in Philippine courts against a Philippine citizen or entity who had contracted with and benefited from said corporation. [44] Such a
suit is premised on the doctrine of estoppel. A party is estopped from challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. This doctrine of estoppel to deny corporate existence and capacity applies
to foreign as well as domestic corporations.[45] The application of this principle prevents a person contracting with a foreign
corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the
benefits of the contract.[46]
The principles regarding the right of a foreign corporation to bring suit in Philippine courts may thus be condensed in four
statements: (1) if a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine courts;
[47]
(2) if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an isolated
transaction or on a cause of action entirely independent of any business transaction [48]; (3) if a foreign corporation does business in the
Philippines without a license, a Philippine citizen or entity which has contracted with said corporation may be estopped from
challenging the foreign corporations corporate personality in a suit brought before Philippine courts; [49] and (4) if a foreign corporation
does business in the Philippines with the required license, it can sue before Philippine courts on any transaction.
The challenge to Agilents legal capacity to file suit hinges on whether or not it is doing business in the Philippines. However,
there is no definitive rule on what constitutes doing, engaging in, or transacting business in the Philippines, as this Court observed in
the case of Mentholatum v. Mangaliman.[50] The Corporation Code itself is silent as to what acts constitute doing or transacting
business in the Philippines.

Jurisprudence has it, however, that the term implies a continuity of commercial dealings and arrangements, and contemplates, to
that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive
prosecution of the purpose and subject of its organization.[51]
In Mentholatum,[52] this Court discoursed on the two general tests to determine whether or not a foreign corporation can be
considered as doing business in the Philippines. The first of these is the substance test, thus:[53]
The true test [for doing business], however, seems to be whether the foreign corporation is continuing the body of the business or
enterprise for which it was organized or whether it has substantially retired from it and turned it over to another.
The second test is the continuity test, expressed thus:[54]
The term [doing business] implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and in the progressive prosecution of, the
purpose and object of its organization.
Although each case must be judged in light of its attendant circumstances, jurisprudence has evolved several guiding principles
for the application of these tests. For instance, considering that it transacted with its Philippine counterpart for seven years, engaging
in futures contracts, this Court concluded that the foreign corporation in Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses
Lara,[55] was doing business in the Philippines. In Commissioner of Internal Revenue v. Japan Airlines (JAL),[56] the Court held that
JAL was doing business in the Philippines, i.e., its commercial dealings in the country were continuous despite the fact that no JAL
aircraft landed in the country as it sold tickets in the Philippines through a general sales agent, and opened a promotions office here as
well.
In General Corp. of the Phils. v. Union Insurance Society of Canton and Firemans Fund Insurance,[57] a foreign insurance
corporation was held to be doing business in the Philippines, as it appointed a settling agent here, and issued 12 marine insurance
policies.We held that these transactions were not isolated or casual, but manifested the continuity of the foreign corporations conduct
and its intent to establish a continuous business in the country. In Eriks PTE Ltd. v. Court of Appeals and Enriquez,[58] the foreign
corporation sold its products to a Filipino buyer who ordered the goods 16 times within an eight-month period. Accordingly, this Court
ruled that the corporation was doing business in the Philippines, as there was a clear intention on its part to continue the body of its
business here, despite the relatively short span of time involved. Communication Materials and Design, Inc., et al. v. Court of
Appeals, ITEC, et al.[59] and Top-Weld Manufacturing v. ECED, IRTI, et al.[60] both involved the License and Technical Agreement and
Distributor Agreement of foreign corporations with their respective local counterparts that were the primary bases for the Courts ruling
that the foreign corporations were doing business in the Philippines. [61] In particular, the Court cited the highly restrictive nature of
certain provisions in the agreements involved, such that, as stated in Communication Materials, the Philippine entity is reduced to a
mere extension or instrument of the foreign corporation. For example, in Communication Materials, the Court deemed the No
Competing Product provision of the Representative Agreement therein restrictive. [62]
The case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of
legislation. The Foreign Investments Act of 1991 (the FIA; Republic Act No. 7042, as amended), defines doing business as follows:
Sec. 3, par. (d). The phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison
offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totaling one hundred eighty (180) days or more; participating in the management, supervision or
control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in the progressive prosecution of, commercial gain or of the purpose and object of the business
organization.
An analysis of the relevant case law, in conjunction with Section 1 of the Implementing Rules and Regulations of the FIA (as
amended by Republic Act No. 8179), would demonstrate that the acts enumerated in the VAASA do not constitute doing business in
the Philippines.
Section 1 of the Implementing Rules and Regulations of the FIA (as amended by Republic Act No. 8179) provides that the
following shall not be deemed doing business:
(1) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the
exercise of rights as such investor;
(2) Having a nominee director or officer to represent its interest in such corporation;
(3) Appointing a representative or distributor domiciled in the Philippines which transacts business in the representatives or
distributors own name and account;
(4) The publication of a general advertisement through any print or broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in
the Philippines;
(6) Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as
installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training
domestic workers to operate it, and similar incidental services.
By and large, to constitute doing business, the activity to be undertaken in the Philippines is one that is for profit-making.[63]

By the clear terms of the VAASA, Agilents activities in the Philippines were confined to (1) maintaining a stock of goods in the
Philippines solely for the purpose of having the same processed by Integrated Silicon; and (2) consignment of equipment with
Integrated Silicon to be used in the processing of products for export. As such, we hold that, based on the evidence presented thus
far, Agilent cannot be deemed to be doing business in the Philippines. Respondents contention that Agilent lacks the legal capacity to
file suit is therefore devoid of merit. As a foreign corporation not doing business in the Philippines, it needed no license before it can
sue before our courts.
Finally, as to Agilents purported failure to state a cause of action against the individual respondents, we likewise rule in favor of
petitioner. A Motion to Dismiss hypothetically admits all the allegations in the Complaint, which plainly alleges that these individual
respondents had committed or permitted the commission of acts prejudicial to Agilent. Whether or not these individuals had divested
themselves of their interests in Integrated Silicon, or are no longer members of Integrated Silicons Board of Directors, is a matter of
defense best threshed out during trial.
WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 66574 dated August 12, 2002, which dismissed Civil Case No. 3123-2001-C, is REVERSED and SET ASIDE. The Order
datedSeptember 4, 2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92, in Civil Case No. 3123-2001-C, is
REINSTATED. Agilents application for a Writ of Replevin is GRANTED.
No pronouncement as to costs.
SO ORDERED.

THIRD DIVISION
[G.R. No. 138104. April 11, 2002]
MR HOLDINGS, LTD., petitioner, vs. SHERIFF CARLOS P. BAJAR, SHERIFF FERDINAND M. JANDUSAY,
SOLIDBANK CORPORATION, AND MARCOPPER MINING CORPORATION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
In the present Petition for Review on Certiorari, petitioner MR Holdings, Ltd. assails the a) Decision[1] dated January 8, 1999 of
the Court of Appeals in CA-G.R. SP No. 49226 finding no grave abuse of discretion on the part of Judge Leonardo P. Ansaldo of the
Regional Trial Court (RTC), Branch 94, Boac, Marinduque, in denying petitioners application for a writ of preliminary injunction;
[2]
and b) Resolution[3] dated March 29, 1999 denying petitioners motion for reconsideration.
The facts of the case are as follows:

Under a Principal Loan Agreement[4] and Complementary Loan Agreement,[5] both dated November 4, 1992, Asian Development
Bank (ADB), a multilateral development finance institution, agreed to extend to Marcopper Mining Corporation (Marcopper) a loan in
the aggregate amount of US$40,000,000.00 to finance the latters mining project at Sta. Cruz, Marinduque. The principal loan of US$
15,000,000.00 was sourced from ADBs ordinary capital resources, while the complementary loan of US$ 25,000,000.00 was funded
by the Bank of Nova Scotia, a participating finance institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns 40% of Marcopper, executed a
Support and Standby Credit Agreement whereby the latter agreed to provide Marcopper with cash flow support for the payment of its
obligations to ADB.
To secure the loan, Marcopper executed in favor of ADB a Deed of Real Estate and Chattel Mortgage[6] dated November 11,
1992, covering substantially all of its (Marcoppers) properties and assets in Marinduque. It was registered with the Register of Deeds
on November 12, 1992.
When Marcopper defaulted in the payment of its loan obligation, Placer Dome, in fulfillment of its undertaking under the
Support and Standby Credit Agreement, and presumably to preserve its international credit standing, agreed to have its subsidiary
corporation, petitioner MR Holding, Ltd., assumed Marcoppers obligation to ADB in the amount of US$
18,453,450.02. Consequently, in an Assignment Agreement [7] dated March 20, 1997, ADB assigned to petitioner all its rights, interests
and obligations under the principal and complementary loan agreements, (Deed of Real Estate and Chattel Mortgage, and Support and
Standby Credit Agreement). On December 8, 1997, Marcopper likewise executed a Deed of Assignment[8] in favor of petitioner. Under
its provisions, Marcopper assigns, transfers, cedes and conveys to petitioner, its assigns and/or successors-in-interest all of its
(Marcoppers) properties, mining equipment and facilities, to wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation (Solidbank) obtained a Partial Judgment [9] against
Marcopper from the RTC, Branch 26, Manila, in Civil Case No. 96-80083 entitled Solidbank Corporation vs. Marcopper Mining
Corporation, John E. Loney, Jose E. Reyes and Teodulo C. Gabor, Jr., the decretal portion of which reads:
WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby rendered ordering defendant Marcopper Mining
Corporation, as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine Hundred Seventy Thousand Pesos Seven
Hundred Fifty Six and 89/100 only (PHP 52,970,756.89), plus interest and charges until fully paid;
2. To pay an amount equivalent to Ten Percent (10%) of above-stated amount as attorneys fees; and
3. To pay the costs of suit.
"SO ORDERED.
Upon Solidbanks motion, the RTC of Manila issued a writ of execution pending appeal directing Carlos P. Bajar, respondent
sheriff, to require Marcopper to pay the sums of money to satisfy the Partial Judgment. [10] Thereafter, respondent Bajar issued two
notices of levy on Marcoppers personal and real properties, and over all its stocks of scrap iron and unserviceable mining equipment.
[11]
Together with sheriff Ferdinand M. Jandusay (also a respondent) of the RTC, Branch 94, Boac, Marinduque, respondent Bajar
issued two notices setting the public auction sale of the levied properties on August 27, 1998 at the Marcopper mine site. [12]
Having learned of the scheduled auction sale, petitioner served an Affidavit of Third-Party Claim [13] upon respondent sheriffs on
August 26, 1998, asserting its ownership over all Marcoppers mining properties, equipment and facilities by virtue of the Deed of
Assignment.
Upon the denial of its Affidavit of ThirdParty Claim by the RTC of Manila, [14] petitioner commenced with the RTC of Boac,
Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint for reivindication of properties, etc., with prayer for preliminary
injunction and temporary restraining order against respondents Solidbank, Marcopper, and sheriffs Bajar and Jandusay. [15] The case
was docketed as Civil Case No. 98-13.

In an Order[16]dated October 6, 1998, Judge Ansaldo denied petitioners application for a writ of preliminary injunction on the
ground that a) petitioner has no legal capacity to sue, it being a foreign corporation doing business in the Philippines without
license; b) an injunction will amount to staying the execution of a final judgment by a court of co-equal and concurrent jurisdiction;
and c) the validity of the Assignment Agreement and the Deed of Assignment has been put into serious question by the timing of their
execution and registration.
Unsatisfied, petitioner elevated the matter to the Court of Appeals on a Petition for Certiorari, Prohibition and Mandamus,
docketed therein as CA-G.R. SP No. 49226. On January 8, 1999, the Court of Appeals rendered a Decision holding that Judge Ansaldo
did not commit grave abuse of discretion in denying petitioners prayer for a writ of preliminary injunction, ratiocinating as follows:
Petitioner contends that it has the legal capacity to sue and seek redress from Philippine courts as it is a non-resident foreign
corporation not doing business in the Philippines and suing on isolated transactions.
xxxxxx
We agree with the finding of the respondent court that petitioner is not suing on an isolated transaction as it claims to be, as it is very
obvious from the deed of assignment and its relationships with Marcopper and Placer Dome, Inc. that its unmistakable intention is to
continue the operations of Marcopper and shield its properties/assets from the reach of legitimate creditors, even those holding valid
and executory court judgments against it. There is no other way for petitioner to recover its huge financial investments which it poured
into Marcoppers rehabilitation and the local situs where the Deeds of Assignment were executed, without petitioner continuing to do
business in the country.
xxxxxx
While petitioner may just be an assignee to the Deeds of Assignment, it may still fall within the meaning of doing business in
light of the Supreme Court ruling in the case of Far East International Import and Export Corporation vs. Nankai Kogyo Co., 6
SCRA 725, that:
Where a single act or transaction however is not merely incidental or casual but indicates the foreign corporations intention to
do other business in the Philippines, said single act or transaction constitutes doing or engaging in or transacting business in
the Philippines.
Furthermore, the court went further by declaring that even a single act may constitute doing business if it is intended to be the
beginning of a series of transactions. (Far East International Import and Export Corporation vs. Nankai Kogyo Co. supra).
On the issue of whether petitioner is the bona fide owner of all the mining facilities and equipment of Marcopper, petitioner relies
heavily on the Assignment Agreement allegedly executed on March 20, 1997 wherein all the rights and interest of Asian Development
Bank (ADB) in a purported Loan Agreement were ceded and transferred in favor of the petitioner as assignee, in addition to a
subsequent Deed of Assignment dated December 28, 1997 conveying absolutely all the properties, mining equipment and facilities of
Marcopper in favor of petitioner.
The Deeds of Assignment executed in favor of petitioner cannot be binding on the judgment creditor, private respondent Solidbank,
under the general legal principle that contracts can only bind the parties who had entered into it, and it cannot favor or prejudice a
third person (Quano vs. Court of Appeals, 211 SCRA 40). Moreover, by express stipulation, the said deeds shall be governed,
interpreted and construed in accordance with laws of New York.
The Deeds of Assignment executed by Marcopper, through its President, Atty. Teodulo C. Gabor, Jr., were clearly made in bad
faith and in fraud of creditors, particularly private respondent Solidbank. The first Assignment Agreement purportedly
executed on March 20, 1997 was entered into after Solidbank had filed on September 19, 1996 a case against Marcopper for
collection of sum of money before Branch 26 of the Regional Trial Court docketed as Civil Case No. 96-80083. The second
Deed of Assignment purportedly executed on December 28, 1997 was entered into by President Gabor after Solidbank had
filed its Motion for Partial Summary Judgment, after the rendition by Branch 26 of the Regional Trial Court of Manila of a
Partial Summary Judgment and after the said trial court had issued a writ of execution, and which judgment was later
affirmed by the Court of Appeals. While the assignments (which were not registered with the Registry of Property as required by
Article 1625 of the new Civil Code) may be valid between the parties thereof, it produces no effect as against third parties. The
purported execution of the Deeds of Assignment in favor of petitioner was in violation of Article 1387 of the New Civil Code x x
x. (Emphasis Supplied)
Hence, the present Petition for Review on Certiorari by MR Holdings, Ltd. moored on the following grounds:
A. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN COMPLETELY
DISREGARDING AS A MATERIAL FACT OF THE CASE THE EXISTENCE OF THE PRIOR, REGISTERED
1992 DEED OF REAL ESTATE AND CHATTEL MORTGAGE CREATING A LIEN OVER THE LEVIED
PROPERTIES, SUBJECT OF THE ASSIGNMENT AGREEMENT DATED MARCH 20, 1997, THUS,
MATERIALLY CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF
THE MERITS OF PETITIONERS CASE.

B. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL

FINDING THAT THE SAID ASSIGNMENT AGREEMENT IS NOT REGISTERED, THE SAME BEING
CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS
MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.
C. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A FACTUAL
FINDING ON THE EXISTENCE OF AN ATTACHMENT ON THE PROPERTIES SUBJECT OF INSTANT
CASE, THE SAME BEING CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY
CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS
OF PETITIONERS CASE.
D. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT THE
SAID ASSIGNMENT AGREEMENT AND THE DEED OF ASSIGNMENT ARE NOT BINDING ON
RESPONDENT SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME BEING CONTRARY TO LAW
AND ESTABLISHED JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE LIENS AND ON
PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN FINDING THAT THE
AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED OF ASSIGNMENT ARE SHAM,
SIMULATED, OF DUBIOUS CHARACTER, AND WERE MADE IN BAD FAITH AND IN FRAUD OF
CREDITORS, PARTICULARLY RESPONDENT SOLIDBANK, THE SAME BEING IN COMPLETE
DISREGARD OF, VIZ: (1) THE LAW AND ESTABLISHED JURISPRUDENCE ON PRIOR, REGISTERED
MORTGAGE LIENS AND ON PREFERENCE OF CREDITS, BY REASON OF WHICH THERE EXISTS NO
CAUSAL CONNECTION BETWEEN THE SAID CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE
NO. 96-80083; (2) THAT THE ASIAN DEVELOPMENT BANK WILL NOT OR COULD NOT HAVE AGREED
TO A SHAM; SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION; AND (3) THAT RESPONDENT
SOLIDBANKS BIGGEST STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A MAJOR BENEFICIARY
OF THE ASSIGNMENT AGREEMENT IN QUESTION.
F. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT
PETITIONER IS WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS FROM PHILIPPINE
COURTS, IT BEING THE CASE THAT SECTION 133 OF THE CORPORATION CODE IS WITHOUT
APPLICATION TO PETITIONER, AND IT BEING THE CASE THAT THE SAID COURT MERELY RELIED
ON SURMISES AND CONJECTURES IN OPINING THAT PETITIONER INTENDS TO DO BUSINESS IN THE
PHILIPPINES.
G. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING THAT
RESPONDENT MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE ONE AND THE SAME
ENTITY, THE SAME BEING WITHOUT FACTUAL OR LEGAL BASIS.
H. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING
PETITIONER GUILTY OF FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS
PENDENTIA NOR RES JUDICATA MAY BAR THE INSTANT REIVINDICATORY ACTION, AND IT BEING
CLEAR THAT AS THIRD-PARTY CLAIMANT, THE LAW AFFORDS PETITIONER THE RIGHT TO FILE
SUCH REIVINDICATORY ACTION.
I. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN RENDERING A
DECISION WHICH IN EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE CASE.
J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS CERTIFICATE OF SALE DATED OCTOBER 12, 1998,
THE RTC-MANILA ORDER DATED FEBRUARY 12, 1999, AND THE RTC-BOAC ORDER DATED
NOVEMBER 25, 1998 ARE NULL AND VOID.
K. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN AFFIRMING THE
DENIAL BY THE RTC-BOAC OF PETITIONERS APPLICATION FOR PRELIMINARY INJUNCTION, THE
SAME BEING IN TOTAL DISREGARD OF PETITIONERS RIGHT AS ASSIGNEE OF A PRIOR,
REGISTERED MORTGAGE LIEN, AND IN DISREGARD OF THE LAW AND JURISPRUDENCE ON
PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not doing business in the Philippines and characterizes its participation in the
assignment contracts (whereby Marcoppers assets where transferred to it) as mere isolated acts that cannot foreclose its right to sue in
local courts. Petitioner likewise maintains that the two assignment contracts, although executed during the pendency of Civil Case No.
96-80083 in the RTC of Manila, are not fraudulent conveyances as they were supported by valuable considerations. Moreover, they
were executed in connection with prior transactions that took place as early as 1992 which involved ADB, a reputable financial
institution. Petitioner further claims that when it paid Marcoppers obligation to ADB, it stepped into the latters shoes and acquired its
(ADBS) rights, titles, and interests under the Deed of Real Estate and Chattel Mortgage.Lastly, petitioner asserts its existence as a
corporation, separate and distinct from Placer Dome and Marcopper.

In its comment, Solidbank avers that: a) petitioner is doing business in the Philippines and this is evidenced by the huge
investment it poured into the assignment contracts; b) granting that petitioner is not doing business in the Philippines, the nature of its
transaction reveals an intention to do business or to begin a series of transaction in the country; c) petitioner, Marcopper and Placer
Dome are one and the same entity, petitioner being then a wholly-owned subsidiary of Placer Dome, which, in turn, owns 40% of
Marcopper; d) the timing under which the assignments contracts were executed shows that petitioners purpose was to defeat any
judgment favorable to it (Solidbank); and e) petitioner violated the rule on forum shopping since the object of Civil Case No. 98-13 (at
RTC, Boac, Marinduque) is similar to the other cases filed by Marcopper in order to forestall the sale of the levied properties.
Marcopper, in a separate comment, states that it is merely a nominal party to the present case and that its principal concerns are
being ventilated in another case.
The petition is impressed with merit.
Crucial to the outcome of this case is our resolution of the following issues: 1) Does petitioner have the legal capacity to
sue? 2) Was the Deed of Assignment between Marcopper and petitioner executed in fraud of creditors? 3) Are petitioner MR
Holdings, Ltd., Placer Dome, and Marcopper one and the same entity? and 4) Is petitioner guilty of forum shopping?
We shall resolve the issues in seriatim.
I
The Court of Appeals ruled that petitioner has no legal capacity to sue in the Philippine courts because it is a foreign corporation
doing business here without license. A review of this ruling does not pose much complexity as the principles governing a foreign
corporations right to sue in local courts have long been settled by our Corporation Law. [17] These principles may be condensed in three
statements, to wit: a) if a foreign corporation does business in the Philippines without a license, it cannot sue before the Philippine
courts;[18] b) if a foreign corporation is not doing business in the Philippines, it needs no license to sue before Philippine courts on an
isolated transaction[19]or on a cause of action entirely independent of any business transaction; [20] and c) if a foreign corporation does
business in the Philippines with the required license, it can sue before Philippine courts on any transaction. Apparently, it is not the
absence of the prescribed license but the doing (of) business in the Philippines without such license which debars the foreign
corporation from access to our courts.[21]
The task at hand requires us to weigh the facts vis--vis the established principles. The question whether or not a foreign
corporation is doing business is dependent principally upon the facts and circumstances of each particular case, considered in the light
of the purposes and language of the pertinent statute or statutes involved and of the general principles governing the jurisdictional
authority of the state over such corporations.[22]
Batas Pambansa Blg. 68, otherwise known as The Corporation Code of the Philippines, is silent as to what constitutes doing
or transacting business in the Philippines. Fortunately, jurisprudence has supplied the deficiency and has held that the term implies a
continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise
of some of the functions normally incident to, and in progressive prosecution of, the purpose and object for which the corporation was
organized.[23] In Mentholatum Co. Inc., vs. Mangaliman,[24] this Court laid down the test to determine whether a foreign company
is doing business, thus:
x x x The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or
enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. (Traction
Cos. vs. Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984,987.) x x x.
The traditional case law definition has metamorphosed into a statutory definition, having been adopted with some qualifications
in various pieces of legislation in our jurisdiction. For instance, Republic Act No. 7042, otherwise known as the Foreign Investment
Act of 1991, defines doing business as follows:
d) The phrase doing business shall include soliciting orders, service contracts, opening offices, whether called liaison
offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay
in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity, or corporation in the Philippines; and any other act or acts
that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of
acts or works; or the exercise of some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization; Provided, however, That the phrase doing
business shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such investor, nor having a nominee director or officer to
represent its interests in such corporation, nor appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account. (Emphasis supplied)[25]
Likewise, Section 1 of Republic Act No. 5455,[26] provides that:
SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase doing business shall include soliciting orders, purchases, service
contracts, opening offices, whether called liaison offices or branches; appointing representatives or distributors who are domiciled in
the Philippines or who in any calendar year stay in the Philippines for a period or periods totaling one hundred eighty days or more;

participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization.
There are other statutes[27] defining the term doing business in the same tenor as those above-quoted, and as may be observed, one
common denominator among them all is the concept of continuity.
In the case at bar, the Court of Appeals categorized as doing business petitioners participation under the Assignment Agreement
and the Deed of Assignment. This is simply untenable. The expression doing business should not be given such a strict and literal
construction as to make it apply to any corporate dealing whatever.[28] At this early stage and with petitioners acts or transactions
limited to the assignment contracts, it cannot be said that it had performed acts intended to continue the business for which it was
organized. It may not be amiss to point out that thepurpose or business for which petitioner was organized is not discernible in
the records. No effort was exerted by the Court of Appeals to establish the nexus between petitioners business and the acts
supposed to constitute doing business. Thus, whether the assignment contracts were incidental to petitioners business or were
continuation thereof is beyond determination. We cannot apply the case cited by the Court of Appeals, Far East Intl Import and
Export Corp. vs. Nankai Kogyo Co., Ltd.,[29] which held that a single act may still constitute doing business if it is not merely
incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other
business in the state. In said case, there was an express admission from an official of the foreign corporation that he was sent to the
Philippines to look into the operation of mines, thereby revealing the foreign corporations desire to continue engaging in business
here. But in the case at bar, there is no evidence of similar desire or intent. Unarguably, petitioner may, as the Court of Appeals
suggested, decide to operate Marcoppers mining business, but, of course, at this stage, that is a mere speculation. Or it may decide to
sell the credit secured by the mining properties to an offshore investor, in which case the acts will still be isolated transactions. To see
through the present facts an intention on the part of petitioner to start a series of business transaction is to rest on assumptions
or probabilities falling short of actual proof. Courts should never base its judgments on a state of facts so inadequately
developed that it cannot be determined where inference ends and conjecture begins.
Indeed, the Court of Appeals holding that petitioner was determined to be doing business in the Philippines is based mainly on
conjectures and speculation. In concluding that the unmistakable intention of petitioner is to continue Marcoppers business, the Court
of Appeals hangs on the wobbly premise that there is no other way for petitioner to recover its huge financial investments which it
poured into Marcoppers rehabilitation without it (petitioner) continuing Marcoppers business in the country. [30] This is a mere
presumption. Absent overt acts of petitioner from which we may directly infer its intention to continue Marcoppers business, we
cannot give our concurrence. Significantly, a view subscribed upon by many authorities is that the mere ownership by a foreign
corporation of a property in a certain state, unaccompanied by its active use in furtherance of the business for which it was
formed, is insufficient in itself to constitute doing business. [31] In Chittim vs. Belle Fourche Bentonite Products Co.,[32] it was held
that even if a foreign corporation purchased and took conveyances of a mining claim, did some assessment work thereon, and
endeavored to sell it, its acts will not constitute the doing of business so as to subject the corporation to the statutory
requirements for the transacting of business. On the same vein, petitioner, a foreign corporation, which becomes the assignee of
mining properties, facilities and equipment cannot be automatically considered as doing business, nor presumed to have the intention
of engaging in mining business.
One important point. Long before petitioner assumed Marcoppers debt to ADB and became their assignee under the two
assignment contracts, there already existed a Support and Standby Credit Agreement between ADB and Placer Dome whereby the
latter bound itself to provide cash flow support for Marcoppers payment of its obligations to ADB. Plainly, petitioners payment of US$
18,453, 450.12 to ADB was more of a fulfillment of an obligation under the Support and Standby Credit Agreement rather than an
investment. That petitioner had to step into the shoes of ADB as Marcoppers creditor was just a necessary legal consequence of the
transactions that transpired. Also, we must hasten to add that the Support and Standby Credit Agreement was executed four (4) years
prior to Marcoppers insovency, hence, the alleged intention of petitioner to continue Marcoppers business could have no basis for at
that time, Marcoppers fate cannot yet be determined.
In the final analysis, we are convinced that petitioner was engaged only in isolated acts or transactions. Single or isolated acts,
contracts, or transactions of foreign corporations are not regarded as a doing or carrying on of business. Typical examples of these are
the making of a single contract, sale, sale with the taking of a note and mortgage in the state to secure payment therefor, purchase, or
note, or the mere commission of a tort.[33] In these instances, there is no purpose to do any other business within the country.
II
Solidbank contends that from the chronology and timing of events, it is evident that there existed a pre-set pattern of response on
the part of Marcopper to defeat whatever court ruling that may be rendered in favor of Solidbank.
We are not convinced.
While it may appear, at initial glance, that the assignment contracts are in the nature of fraudulent conveyances, however, a
closer look at the events that transpired prior to the execution of those contracts gives rise to a different conclusion. The obvious flaw
in the Court of Appeals Decision lies in its constricted view of the facts obtaining in the case. In its factual narration, the Court of
Appeals definitely left out some events. We shall see later the significance of those events.
Article 1387 of the Civil Code of the Philippines provides:

Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in
fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been
rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the
property alienated, and need not have been obtained by the party seeking rescission.
In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by law and of
evidence.
This article presumes the existence of fraud made by a debtor. Thus, in the absence of satisfactory evidence to the contrary, an
alienation of a property will be held fraudulent if it is made after a judgment has been rendered against the debtor making the
alienation.[34] This presumption of fraud is not conclusive and may be rebutted by satisfactory and convincing evidence. All that is
necessary is to establish affirmatively that the conveyance is made in good faith and for a sufficient and valuable
consideration.[35]
The Assignment Agreement and the Deed of Assignment were executed for valuable considerations. Patent from the Assignment
Agreement is the fact that petitioner assumed the payment of US$ 18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt
as of March 20, 1997.[36] Solidbank cannot deny this fact considering that a substantial portion of the said payment, in the sum of US$
13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its major stockholder.[37]
The facts of the case so far show that the assignment contracts were executed in good faith. The execution of the Assignment
Agreement on Macrh 20, 1997 and the Deed of Assignment on December 8,1997 is not the alpha of this case. While the execution of
these assignment contracts almost coincided with the rendition on May 7, 1997 of the Partial Judgment in Civil Case No. 96-80083 by
the Manila RTC, however, there was no intention on the part of petitioner to defeat Solidbanks claim. It bears reiterating that as early
as November 4, 1992, Placer Dome had already bound itself under a Support and Standby Credit Agreement to provide Marcopper
with cash flow support for the payment to ADB of its obligations. When Marcopper ceased operations on account of disastrous mine
tailings spill into the Boac River and ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary, herein
petitioner, paid ADB the amount of US $18,453,450.12. Thereupon, ADB and Marcopper executed, respectively, in favor of petitioner
an Assignment Agreement and a Deed of Assignment. Obviously, the assignment contracts were connected with transactions that
happened long before the rendition in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the Manila RTC. Those contracts
cannot be viewed in isolation. If we may add, it is highly inconceivable that ADB, a reputable international financial organization, will
connive with Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for its claim four years thereafter. And it is
equally incredible for petitioner to be paying the huge sum of US $ 18, 453, 450.12 to ADB only for the purpose of defrauding
Solidbank of the sum ofP52,970.756.89.
It is said that the test as to whether or not a conveyance is fraudulent is -- does it prejudice the rights of creditors? [38] We cannot
see how Solidbanks right was prejudiced by the assignment contracts considering that substantially all of Marcoppers properties were
already covered by the registered Deed of Real Estate and Chattel Mortgage executed by Marcopper in favor of ADB as early as
November 11, 1992. As such, Solidbank cannot assert a better right than ADB, the latter being a preferred creditor. It is basic that
mortgaged properties answer primarily for the mortgaged credit, not for the judgment credit of the mortgagors unsecured creditor.
Considering that petitioner assumed Marcoppers debt to ADB, it follows that Solidbanks right as judgment creditor over the subject
properties must give way to that of the former.
III
The record is lacking in circumstances that would suggest that petitioner corporation, Placer Dome and Marcopper are one and
the same entity. While admittedly, petitioner is a wholly-owned subsidiary of Placer Dome, which in turn, which, in turn, was then a
minority stockholder of Marcopper, however, the mere fact that a corporation owns all of the stocks of another corporation,
taken alone is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a subsidiarys
separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those
arising in their respective business.[39]
The recent case of Philippine National Bank vs. Ritratto Group Inc., [40] outlines the circumstances which are useful in the
determination of whether a subsidiary is but a mere instrumentality of the parent-corporation, to wit:
(a) The parent corporation owns all or most of the capital stock of the subsidiary.
(b) The parent and subsidiary corporations have common directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or losses of the subsidiary.

(g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or
by the parent corporation.
(h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or
division of the parent corporation, or its business or financial responsibility is referred to as the parent corporations own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but take their
orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
In this catena of circumstances, what is only extant in the records is the matter of stock ownership. There are no other
factors indicative that petitioner is a mere instrumentality of Marcopper or Placer Dome. The mere fact that Placer Dome
agreed, under the terms of the Support and Standby Credit Agreement to provide Marcopper with cash flow support in paying its
obligations to ADB, does not mean that its personality has merged with that of Marcopper. This singular undertaking, performed by
Placer Dome with its own stockholders in Canada and elsewhere, is not a sufficient ground to merge its corporate personality with
Marcopper which has its own set of shareholders, dominated mostly by Filipino citizens. The same view applies to petitioners
payment of Marcoppers remaining debt to ADB.
With the foregoing considerations and the absence of fraud in the transaction of the three foreign corporations, we find it
improper to pierce the veil of corporate fiction that equitable doctrine developed to address situations where the corporate personality
of a corporation is abused or used for wrongful purposes.
IV
On the issue of forum shopping, there could have been a violation of the rules thereon if petitioner and Marcopper were indeed
one and the same entity. But since petitioner has a separate personality, it has the right to pursue its third-party claim by filing the
independent reivindicatory action with the RTC of Boac, Marinduque, pursuant to Rule 39, Section 16 of the 1997 Rules of Civil
Procedures. This remedy has been recognized in a long line of cases decided by this Court. [41] In Rodriguez vs. Court of Appeals,[42] we
held:
. . . It has long been settled in this jurisdiction that the claim of ownership of a third party over properties levied for execution of a
judgment presents no issue for determination by the court issuing the writ of execution.
. . .Thus, when a property levied upon by the sheriff pursuant to a writ of execution is claimed by third person in a sworn statement of
ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication arises. And dealing as it
does with the all important question of title, it is reasonable to require the filing of proper pleadings and the holding of a trial on the
matter in view of the requirements of due process.
. . . In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now Section 16 of the 1997 Rules of Civil
Procedure), the rights of third-party claimants over certain properties levied upon by the sheriff to satisfy the judgment may not be
taken up in the case where such claims are presented but in a separate and independent action instituted by the claimants. (Emphasis
supplied)
This reivindicatory action has for its object the recovery of ownership or possession of the property seized by the sheriff, despite
the third party claim, as well as damages resulting therefrom, and it may be brought against the sheriff and such other parties as may
be alleged to have connived with him in the supposedly wrongful execution proceedings, such as the judgment creditor himself. Such
action is an entirely separate and distinct action from that in which execution has been issued. Thus, there being no identity of
parties and cause of action between Civil Case No. 98-13 (RTC, Boac) and those cases filed by Marcopper, including Civil Case No.
96-80083 (RTC, Manila) as to give rise to res judicata or litis pendentia, Solidbanks allegation of forum-shopping cannot prosper.[43]
All considered, we find petitioner to be entitled to the issuance of a writ of preliminary injunction. Section 3, Rule 58 of the 1997
Rules of Civil Procedure provides:
SEC. 3 Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for
a limited period or perpetually;
(b) That the commission, continuance or non-performance of the acts or acts complained of during the litigation would
probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be
done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or
proceeding, and tending to render the judgment ineffectual.
Petitioners right to stop the further execution of the properties covered by the assignment contracts is clear under the facts so far
established. An execution can be issued only against a party and not against one who did not have his day in court. [44] The duty of the
sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying goes, one mans goods shall not be
sold for another man's debts.[45] To allow the execution of petitioners properties would surely work injustice to it and render the
judgment on the reivindicatory action, should it be favorable, ineffectual. In Arabay, Inc., vs. Salvador,[46] this Court held that an
injunction is a proper remedy to prevent a sheriff from selling the property of one person for the purpose of paying the debts of
another; and that while the general rule is that no court has authority to interfere by injunction with the judgments or decrees of
another court of equal or concurrent or coordinate jurisdiction, however, it is not so when a third-party claimant is involved. We quote
the instructive words of Justice Querube C. Makalintal in Abiera vs. Court of Appeals,[47] thus:
The rationale of the decision in the Herald Publishing Company case [48] is peculiarly applicable to the one before Us, and removes it
from the general doctrine enunciated in the decisions cited by the respondents and quoted earlier herein.
1. Under Section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by
action. Obviously a judgment rendered in his favor, that is, declaring him to be the owner of the property, would not constitute
interference with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. If that
be so and it is so because the property, being that of a stranger, is not subject to levy then an interlocutory order such as
injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference
either.
WHEREFORE, the petition is GRANTED. The assailed Decision dated January 8, 1999 and the Resolution dated March 29,
1999 of the Court of Appeals in CA G.R. No. 49226 are set aside. Upon filing of a bond of P1,000,000.00, respondent sheriffs are
restrained from further implementing the writ of execution issued in Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until
further orders from this Court. The RTC, Branch 94, Boac, Marinduque, is directed to dispose of Civil Case No. 98-13 with dispatch.
SO ORDERED.
FIRST DIVISION

[G. R. No. 120077. October 13, 2000]

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS, respondents.
DECISION
PARDO, J.:
The case before the Court is a petition for certiorari[1] to annul the following orders of the National Labor Relations Commission
(hereinafter referred to as NLRC) for having been issued without or with excess jurisdiction and with grave abuse of discretion: [2]
(1) Order of May 31, 1993.[3] Reversing and setting aside its earlier resolution of August 28, 1992. [4] The questioned order
declared that the NLRC, not the Philippine Overseas Employment Administration (hereinafter referred to as POEA), had jurisdiction
over private respondents complaint;
(2) Decision of December 15, 1994.[5] Directing petitioners to jointly and severally pay private respondent twelve thousand and
six hundred dollars (US$12,600.00) representing salaries for the unexpired portion of his contract; three thousand six hundred dollars
(US$3,600.00) as extra four months salary for the two (2) year period of his contract, three thousand six hundred dollars
(US$3,600.00) as 14th month pay or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso equivalent and
attorneys fees amounting to ten percent (10%) of the total award; and
(3) Order of March 30, 1995.[6] Denying the motion for reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as Santos) was an overseas worker employed as a
printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was directly hired by the Palace Hotel,
Beijing, Peoples Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as MHC) and the Manila Hotel International Company,
Limited (hereinafter referred to as MHICL).
When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and existing
under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong Kong. [7] MHC is an incorporator of MHICL,
owning 50% of its capital stock.[8]

By virtue of a management agreement [9] with the Palace Hotel (Wang Fu Company Limited), MHICL [10] trained the personnel
and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received a letter dated May
2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he
was recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased benefits. The
position was slated to open on October 1, 1988.[11]
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to respondent
Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the same to Mr. Henk in Manila, together
with his passport and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30, 1988, under the pretext that he
was needed at home to help with the familys piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henks letter. Respondent Santos enclosed
four (4) signed copies of the employment contract (dated June 4, 1988) and notified them that he was going to arrive in Manila during
the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would commence September 1, 1988 for a period of two
years.[12] It provided for a monthly salary of nine hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a year.[13]
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace Hotel.[14]
Subsequently, respondent Santos signed an amended employment agreement with the Palace Hotel, effective November 5,
1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and Development) of petitioner
MHICL Miguel D. Cergueda signed the employment agreement under the word noted.
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to China and reassumed his
post on July 17, 1989.
On July 22, 1989, Mr. Shmidts Executive Secretary, a certain Joanna suggested in a handwritten note that respondent Santos be
given one (1) month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his employment at the
Palace Hotel print shop would be terminated due to business reverses brought about by the political upheaval in China. [15] We quote
the letter:[16]
After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square incidents), our business has been
severely affected. To reduce expenses, we will not open/operate printshop for the time being.
We sincerely regret that a decision like this has to be made, but rest assured this does in no way reflect your past performance which
we found up to our expectations.
Should a turnaround in the business happen, we will contact you directly and give you priority on future assignment.
On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all benefits due him,
including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt, demanding full compensation
pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:[17]
His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-month notice clause and Mr. Santos
received all benefits due him.
For your information, the Print Shop at the Palace Hotel is still not operational and with a low business outlook, retrenchment in
various departments of the hotel is going on which is a normal management practice to control costs.
When going through the latest performance ratings, please also be advised that his performance was below average and a Chinese
National who is doing his job now shows a better approach.
In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his departure.

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch, National Capital
Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen thousand nine hundred and twenty three
dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as exemplary damages and attorneys fees equivalent to
20% of the damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before the Labor
Arbiter.[18]
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus: [19]
WHEREFORE, judgment is hereby rendered:
1. directing all the respondents to pay complainant jointly and severally;
a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;
b) P50,000.00 as moral damages;
c) P40,000.00 as exemplary damages; and
d) Ten (10) percent of the total award as attorneys fees.
SO ORDERED.
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating:[20]
WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of jurisdiction. Complainant is hereby
enjoined to file his complaint with the POEA.
SO ORDERED.
On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution. He argued that the case
was not cognizable by the POEA as he was not an overseas contract worker.[21]
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter Emerson Tumanon to
hear the case on the question of whether private respondent was retrenched or dismissed.[22]
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and documentary evidence
presented to and heard by him.[23]
Subsequently, Labor Arbiter Tumanon was re-assigned as trial arbiter of the National Capital Region, Arbitration Branch, and the
case was transferred to Labor Arbiter Jose G. de Vera.[24]
On November 25, 1994, Labor Arbiter de Vera submitted his report. [25] He found that respondent Santos was illegally dismissed
from employment and recommended that he be paid actual damages equivalent to his salaries for the unexpired portion of his contract.
[26]

On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:[27]
WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by substantial evidence, judgment is
hereby rendered, directing the respondents to jointly and severally pay complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the un-expired portion of the parties contract; (2) US$3,600.00 as extra four (4) months salary for the
two (2) years period (sic) of the parties contract; (3) US$3,600.00 as 14th month pay for the aforesaid two (2) years contract stipulated
by the parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorneys fees of 10% of complainants total award.
SO ORDERED.
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Veras recommendation had no
basis in law and in fact.[28]
On March 30, 1995, the NLRC denied the motion for reconsideration.[29]
Hence, this petition.[30]
On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary restraining order and/or
writ of preliminary injunction and a motion for the annulment of the entry of judgment of the NLRC dated July 31, 1995. [31]
On November 20, 1995, the Court denied petitioners urgent motion. The Court required respondents to file their respective
comments, without giving due course to the petition.[32]
On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition and its annexes, they can
not defend and sustain the position taken by the NLRC in its assailed decision and orders. The Solicitor General prayed that he be
excused from filing a comment on behalf of the NLRC[33]
On April 30,1996, private respondent Santos filed his comment.[34]

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file its own comment to
the petition.[35]
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign
elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The Palace Hotel and
MHICL are foreign corporations. Not all cases involving our citizens can be tried here.
The employment contract.-- Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without the intervention of
the POEA or any authorized recruitment agency of the government.[36]
Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do
so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a
position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to
enforce its decision.[37] The conditions are unavailing in the case at bar.
Not Convenient.-- We fail to see how the NLRC is a convenient forum given that all the incidents of the case - from the time of
recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is compounded by the fact that the
proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither are they doing business in the
Philippines. Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law.-- Neither can an intelligent decision be made as to the law governing the employment
contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci contractus (the law of the
place where the contract was made).[38]
The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by writing a letter
while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the Peoples Republic of China.
No power to determine the facts.-- Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all
acts complained of took place in Beijing, Peoples Republic of China. The NLRC was not in a position to determine whether the
Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify respondent Santos retrenchment.
Principle of effectiveness, no power to execute decision.-- Even assuming that a proper decision could be reached by the
NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated
under the laws of China and was not even served with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign employers. Neither
are we saying that we do not have power over an employment contract executed in a foreign country. If Santos were an overseas
contract worker, a Philippine forum, specifically the POEA, not the NLRC, would protect him. [39] He is not an overseas contract
worker a fact which he admits with conviction.[40]
Even assuming that the NLRC was the proper forum, even on the merits, the NLRCs decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for Santos
retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough to pierce
the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend a crime. [41] It is done only when a corporation is a mere alter ego or business
conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,[42] we held that the mere ownership by a single stockholder or by another corporation
of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate
corporate personalities.
The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or complete
domination of the other corporations finances, policy and business practices with regard to the transaction attacked. There must be
proof that the other corporation had no separate mind, will or existence with respect the act complained of. Second, control must be
used by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the
injury or loss complained of. The absence of any of the elements prevents the piercing of the corporate veil.[43]
It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of any other
legal entity to which it may be related. [44] Clear and convincing evidence is needed to pierce the veil of corporate fiction. [45] In this
case, we find no evidence to show that MHICL and MHC are one and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICLs liability on the fact that MHICL signed his employment contract with the Palace
Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the employment
contract as a mere witness. He merely signed under the word noted.

When one notes a contract, one is not expressing his agreement or approval, as a party would. [46] In Sichangco v. Board of
Commissioners of Immigration,[47] the Court recognized that the term noted means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without exercising a judicious deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the witnessing part of the document. The witnessing part of the document is that which, in a deed or
other formal instrument is that part which comes after the recitals, or where there are no recitals, after the parties (emphasis ours).
[48]
As opposed to a party to a contract, a witness is simply one who, being present, personally sees or perceives a thing; a beholder, a
spectator, or eyewitness.[49] One who notes something just makes a brief written statement [50] a memorandum or observation.
Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. In
determining the existence of an employer-employee relationship, the following elements are considered: [51]
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power to dismiss; and
(4) the power to control employees conduct.
MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an employee
for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to
work. The terms of employment were negotiated and finalized through correspondence between respondent Santos, Mr. Schmidt and
Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof
that MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that
terminated respondent Santos services.
Neither is there evidence to suggest that MHICL was a labor-only contractor. [52] There is no proof that MHICL supplied
respondent Santos or even referred him for employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the Palace
Hotel is a member of the Manila Hotel Group is not enough to pierce the corporate veil between MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship existed
between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondents claim
in NLRC NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over the following:[53]
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can be resolved by reference to the Labor Code, or other labor statutes, or their collective
bargaining agreements.[54]
To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle that jurisdiction
over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein. [55]
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to dismiss the case
amounts to grave abuse of discretion.[56]
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of the National
Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91
(NLRC NCR Case No. 00-02-01058-90).
No costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 103493. June 19, 1997]

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS,

N.V., petitioners, vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT,
PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.
DECISION
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the same cause
of action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56, which, in
view of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition
to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala International Finance
Limited (hereafter called AYALA)[1] and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00,
secured by shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans,
private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducats obligation under an Agreement,
dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendors Lien by which it sold to petitioner Athona
Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC
and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The balance of
US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their
receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488,
Inc. all the shares of stock in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became due and
demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in
the United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the
Agreement. Originally instituted in the United States District Court of Texas, 165th Judicial District, where it was docketed as Case
No. 85-57746, the venue of the action was later transferred to the United States District Court for the Southern District of Texas,
where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an answer with

counterclaim, impleading private respondents herein as counterdefendants, for allegedly conspiring in selling the property at a price
over its market value. Private respondent Perlas, who had allegedly appraised the property, was later dropped as counterdefendant.
ATHONA sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of
sale of the property. For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their
person, but, as their motion was denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSECs own former president, for the rescission of the sale on the ground that the property had been overvalued. On
March 13, 1990, the United States District Court for the Southern District of Texas dismissed the counterclaim against Edgardo V.
Guevarra on the ground that it was frivolous and [was] brought against him simply to humiliate and embarrass him. For this reason,
the U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed a complaint For Sum of
Money with Damages and Writ of Preliminary Attachment against private respondents in the Regional Trial Court of Makati, where it
was docketed as Civil Case No. 16563. The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil
Action No. H-86-440 of the United States District Court of Southern Texas that private respondents committed fraud by selling the
property at a price 400 percent more than its true value of US$800,000.00. Petitioners claimed that, as a result of private respondents
fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and to purchase the
Houston property. Petitioners prayed that private respondents be ordered to return to ATHONA the excess payment of
US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and
personal properties of private respondents.[2]
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-a-vis Civil Action No.
H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to
state a cause of action. Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer, but
not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to extend financial accommodation to
ATHONA under a separate loan agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a joint
Special Appearance and Qualified Motion to Dismiss, contending that the action being in personam, extraterritorial service of
summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign
corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducats motion to dismiss, stating that the evidentiary requirements of the
controversy may be more suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international
law of forum non conveniens, even as it noted that Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daics motion to dismiss. On March 9, 1988, the trial court[3] granted
the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia considering that
the main factual element of the cause of action in this case which is the validity of the sale of real property in the United States
between defendant 1488 and plaintiff ATHONA is the subject matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine
the assessment and/or fluctuations of the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of the
transaction in 1983 up to the present and verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were non-residents and the action was not an
action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The trial court subsequently lifted the writ of
attachment it had earlier issued against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis pendentia
and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous attachment of shares of
stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals [4] affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc., and Daic
on the ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are Philsec, the Ayala International Finance Ltd.
(BPI-IFLs former name) and the Athona Holdings, NV. The case at bar involves the same parties. The transaction sued upon by the
parties, in both cases is the Warranty Deed executed by and between Athona Holdings and 1488 Inc. In the U.S. case, breach of
contract and the promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed by herein appellants, on the
marketability of Ducats securities given in exchange for the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the action before the Philippine court, which likewise
stems from the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of money for alleged
tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago
Daic. The dismissal of Civil Case No. 16563 on the ground of forum non conveniens was likewise affirmed by the Court of Appeals
on the ground that the case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main transaction, and involve foreign elements, to wit: 1) the property subject
matter of the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the buyer,
Athona Holdings, a foreign corporation which does not claim to be doing business in the Philippines, is wholly owned by Philsec, a
domestic corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was executed in
Texas, U.S.A.
In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES FOR THE SAME
CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL
COURTS DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT OF APPEALS IN
AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT
APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED IN NOT HOLDING
THAT PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE
TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY REASON
TO PROTECT AND VINDICATE PETITIONERS RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR
CONDUCT PRIVATE RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON
THEM HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.
First. It is important to note in connection with the first point that while the present case was pending in the Court of Appeals, the
United States District Court for the Southern District of Texas rendered judgment [5] in the case before it. The judgment, which was in
favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals. [6] Thus, the principal issue to be resolved in this
case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision
is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without
giving them an opportunity to impeach it on grounds stated in Rule 39, 50 of the Rules of Court, to wit: want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact.
Petitioners contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases,
it was after the parties opposed to the judgment had been given ample opportunity to repel them on grounds allowed under the law.
[8]
It is not necessary for this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is
essential is that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is
because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely
constitutes prima facie evidence of the justness of the claim of a party and, as such, is subject to proof to the contrary. [9] Rule 39, 50
provides:
[7]

SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the
judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors
in interest by a subsequent title; but the judgment may be repelled by evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd.,[10] which private
respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment was considered res
judicatabecause this Court found from the evidence as well as from appellants own pleadings [11] that the foreign court did not make a
clear mistake of law or fact or that its judgment was void for want of jurisdiction or because of fraud or collusion by the
defendants. Trial had been previously held in the lower court and only afterward was a decision rendered, declaring the judgment of
the Supreme Court of the State of Washington to have the effect of res judicata in the case before the lower court. In the same vein,
in Philippine International Shipping Corp. v. Court of Appeals,[12] this Court held that the foreign judgment was valid and enforceable
in the Philippines there being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law or
fact. The prima facie presumption under the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as
basis for declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the trial court were
summary.Neither the trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the
evidence presented thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly
the issues raised in this case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its
disputed order dated March 9, 1988:
On the plaintiffs claim in its Opposition that the causes of action of this case and the pending case in the United States are not
identical, precisely the Order of January 26, 1988 never found that the causes of action of this case and the case pending
before the USA Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners action is barred by the principle of res judicata.
Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was brushed aside by both the trial
court and the Court of Appeals.[13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment in the
Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the
proceedings were suspended because of the pendency of this case. To sustain the appellate courts ruling that the foreign judgment
constitutes res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from repelling the judgment in
the case for enforcement. An absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it
is invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is sought to
be enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore that:

[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in
the interest of justice, the complaint should be considered as a petition for the recognition of the Hongkong judgment under Section 50
(b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. [14]
Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be consolidated.
After all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas, this case being assigned to Branch
56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such
proceedings, petitioners should have the burden of impeaching the foreign judgment and only in the event they succeed in doing so
may they proceed with their action against private respondents.
[15]

Second. Nor is the trial courts refusal to take cognizance of the case justifiable under the principle of forum non
conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which does not include forum non conveniens.[16] The
propriety of dismissing a case based on this principle requires a factual determination, hence, it is more properly considered a matter
of defense. Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do
so only after vital facts are established, to determine whether special circumstances require the courts desistance. [17]
In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in
connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of
the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latters debt which was the object of the
transaction under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could
not be obtained because this is an action in personam and summons were served by extraterritorial service. Rule 14, 17 on
extraterritorial service provides that service of summons on a non-resident defendant may be effected out of the Philippines by leave
of Court where, among others, the property of the defendant has been attached within the Philippines. [18] It is not disputed that the
properties, real and personal, of the private respondents had been attached prior to service of summons under the Order of the trial
court dated April 20, 1987.[19]
Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in Civil Case
No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the
Court finds that the judgment sought to be enforced is severable from the main judgment under consideration in Civil Case
No. 16563. The separability of Guevarras claim is not only admitted by petitioners, [20] it appears from the pleadings that petitioners
only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. [21] Hence, the TRO should be lifted and Civil Case No. 921445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional
Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance with this decision. The
temporary restraining order issued on June 29, 1994 is hereby LIFTED.
SO ORDERED.