court where she was asked to sign a document written in
CONFLICT OF LAWS (I) Arabic. They told her that this was necessary to close the case
E. Foreign Element
G.R. No. 122191 October 8, 1998
SAUDI ARABIAN AIRLINES, petitioner,
vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON.
RODOLFO A. ORTIZ, in his capacity as Presiding Judge of Branch
89, Regional Trial Court of Quezon City, respondents.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court
seeks to annul and set aside the Resolution 1dated September 27, 1995
and the Decision 2 dated April 10, 1996 of the Court of Appeals 3 in CA-
G.R. SP No. 36533, 4and the Orders 5 dated August 29, 1994 6 and
February 2, 1995 7 that were issued by the trial court in Civil Case No.
Q-93-18394. 8
The pertinent antecedent facts which gave rise to the instant petition, as
stated in the questioned Decision 9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a
Flight Attendant for its airlines based in Jeddah, Saudi Arabia.
...
On April 27, 1990, while on a lay-over in Jakarta, Indonesia,
plaintiff went to a disco dance with fellow crew members
Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi
nationals. Because it was almost morning when they returned
to their hotels, they agreed to have breakfast together at the
room of Thamer. When they were in te (sic) room, Allah left
on some pretext. Shortly after he did, Thamer attempted to
rape plaintiff. Fortunately, a roomboy and several security
personnel heard her cries for help and rescued her. Later, the
Indonesian police came and arrested Thamer and Allah Al-
Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several
SAUDIA officials interrogated her about the Jakarta incident.
They then requested her to go back to Jakarta to help arrange
the release of Thamer and Allah. In Jakarta, SAUDIA Legal
Officer Sirah Akkad and base manager Baharini negotiated
with the police for the immediate release of the detained crew
members but did not succeed because plaintiff refused to
cooperate. She was afraid that she might be tricked into
something she did not want because of her inability to
understand the local dialect. She also declined to sign a blank
paper and a document written in the local dialect. Eventually,
SAUDIA allowed plaintiff to return to Jeddah but barred her
from the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi
Arabian government, the Indonesian authorities agreed to
deport Thamer and Allah after two weeks of detention.
Eventually, they were again put in service by defendant
SAUDI (sic). In September 1990, defendant SAUDIA
transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the
Jakarta incident was already behind her, her superiors
requested her to see Mr. Ali Meniewy, Chief Legal Officer of
SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her
passport and questioned her about the Jakarta incident.
Miniewy simply stood by as the police put pressure on her to
make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her
passport and allowed her to catch the afternoon flight out of
Jeddah.
One year and a half later or on lune 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to
Manila, plaintiff was not allowed to board the plane and
instead ordered to take a later flight to Jeddah to see Mr.
Miniewy, the Chief Legal Officer of SAUDIA. When she did, a
certain Khalid of the SAUDIA office brought her to a Saudi
against Thamer and Allah. As it turned out, plaintiff signed a
notice to her to appear before the court on June 27, 1993.
Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to
report to Jeddah once again and see Miniewy on June 27,
1993 for further investigation. Plaintiff did so after receiving
assurance from SAUDIA's Manila manager, Aslam Saleemi,
that the investigation was routinary and that it posed no
danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on
June 28, 1993, a Saudi judge interrogated plaintiff through an
interpreter about the Jakarta incident. After one hour of
interrogation, they let her go. At the airport, however, just as
her plane was about to take off, a SAUDIA officer told her that
the airline had forbidden her to take flight. At the Inflight
Service Office where she was told to go, the secretary of Mr.
Yahya Saddick took away her passport and told her to remain
in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff
to the same court where the judge, to her astonishment and
shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286
lashes. Only then did she realize that the Saudi court had tried
her, together with Thamer and Allah, for what happened in
Jakarta. The court found plaintiff guilty of (1) adultery; (2)
going to a disco, dancing and listening to the music in violation
of Islamic laws; and (3) socializing with the male crew, in
contravention of Islamic tradition. 10
Facing conviction, private respondent sought the help of her employer,
petitioner SAUDIA. Unfortunately, she was denied any assistance. She
then asked the Philippine Embassy in Jeddah to help her while her case
is on appeal. Meanwhile, to pay for her upkeep, she worked on the
domestic flight of SAUDIA, while Thamer and Allah continued to serve
in the international
flights. 11
Because she was wrongfully convicted, the Prince of Makkah dismissed
the case against her and allowed her to leave Saudi Arabia. Shortly
before her return to Manila, 12 she was terminated from the service by
SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint 13 for damages
against SAUDIA, and Khaled Al-Balawi ("Al-Balawi"), its country
manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss 14 which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against Saudia; (2) that defendant
Al-Balawi is not a real party in interest; (3) that the claim or demand set
forth in the Complaint has been waived, abandoned or otherwise
extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to
Dismiss) 15. Saudia filed a reply 16 thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-
Balawi was dropped as party defendant. On August 11, 1994, Saudia
filed its Manifestation and Motion to Dismiss Amended Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the
Motion to Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge 20 denying the Motion to Dismiss,
SAUDIA filed on September 20, 1994, its Motion for
Reconsideration 21 of the Order dated August 29, 1994. It alleged that
the trial court has no jurisdiction to hear and try the case on the basis of
Article 21 of the Civil Code, since the proper law applicable is the law of
the Kingdom of Saudi Arabia. On October 14, 1994, Morada filed her
Opposition 22 (To Defendant's Motion for Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA
alleged that since its Motion for Reconsideration raised lack of
jurisdiction as its cause of action, the Omnibus Motion Rule does not
apply, even if that ground is raised for the first time on appeal.
1
Additionally, SAUDIA alleged that the Philippines does not have any
substantial interest in the prosecution of the instant case, and hence,
without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order 24 dated
February 2, 1995, denying SAUDIA's Motion for Reconsideration. The
pertinent portion of the assailed Order reads as follows:
Acting on the Motion for Reconsideration of defendant Saudi
Arabian Airlines filed, thru counsel, on September 20, 1994,
and the Opposition thereto of the plaintiff filed, thru counsel,
on October 14, 1994, as well as the Reply therewith of
defendant Saudi Arabian Airlines filed, thru counsel, on
October 24, 1994, considering that a perusal of the plaintiffs
Amended Complaint, which is one for the recovery of actual,
moral and exemplary damages plus attorney's fees, upon the
basis of the applicable Philippine law, Article 21 of the New
Civil Code of the Philippines, is, clearly, within the jurisdiction
of this Court as regards the subject matter, and there being
nothing new of substance which might cause the reversal or
modification of the order sought to be reconsidered, the
motion for reconsideration of the defendant, is DENIED.
SO ORDERED. 25
Consequently, on February 20, 1995, SAUDIA filed its Petition
for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order 26 with the
Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary
Restraining Order 27 dated February 23, 1995, prohibiting the
respondent Judge from further conducting any proceeding, unless
otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now
assailed, the appellate court denied SAUDIA's Petition for the Issuance
of a Writ of Preliminary Injunction dated February 18, 1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction
is hereby DENIED, after considering the Answer, with Prayer
to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply
and Rejoinder, it appearing that herein petitioner is not clearly
entitled thereto (Unciano Paramedical College, et. Al., v.
Court of Appeals, et. Al., 100335, April 7, 1993, Second
Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the instant
Petition 29 for Review with Prayer for Temporary Restraining Order
dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court
of Appeals rendered the Decision 30 dated April 10, 1996, now also
assailed. It ruled that the Philippines is an appropriate forum considering
that the Amended Complaint's basis for recovery of damages is Article
21 of the Civil Code, and thus, clearly within the jurisdiction of
respondent Court. It further held that certiorari is not the proper remedy
in a denial of a Motion to Dismiss, inasmuch as the petitioner should
have proceeded to trial, and in case of an adverse ruling, find recourse
in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with
Prayer for Temporary Restraining Order31 dated April 30, 1996, given
due course by this Court. After both parties submitted their
Memoranda, 32 the instant case is now deemed submitted for decision.
Petitioner SAUDIA raised the following issues:
I Eventually, they were again put in service by defendant
The trial court has no jurisdiction to hear and try Civil Case
No. Q-93-18394 based on Article 21 of the New Civil Code
since the proper law applicable is the law of the Kingdom of
Saudi Arabia inasmuch as this case involves what is known in
private international law as a "conflicts problem". Otherwise,
the Republic of the Philippines will sit in judgment of the acts
done by another sovereign state which is abhorred.
II
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence
of leave of court is now moot and academic when this
Honorable Court required the respondents to comment on
petitioner's April 30, 1996 Supplemental Petition For Review
With Prayer For A Temporary Restraining Order Within Ten
(10) Days From Notice Thereof. Further, the Revised Rules of
Court should be construed with liberality pursuant to Section
2, Rule 1 thereof.
III
Petitioner received on April 22, 1996 the April 10, 1996
decision in CA-G.R. SP NO. 36533 entitled "Saudi Arabian
Airlines v. Hon. Rodolfo A. Ortiz, et al." and filed its April 30,
1996 Supplemental Petition For Review With Prayer For A
Temporary Restraining Order on May 7, 1996 at 10:29 a.m.
or within the 15-day reglementary period as provided for
under Section 1, Rule 45 of the Revised Rules of Court.
Therefore, the decision in CA-G.R. SP NO. 36533 has not yet
become final and executory and this Honorable Court can
take cognizance of this case. 33
From the foregoing factual and procedural antecedents, the
following issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE REGIONAL TRIAL COURT OF
QUEZON CITY HAS JURISDICTION TO HEAR AND TRY
CIVIL CASE NO. Q-93-18394 ENTITLED "MILAGROS P.
MORADA V. SAUDI ARABIAN AIRLINES".
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
RULING THAT IN THIS CASE PHILIPPINE LAW SHOULD
GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must
be settled at the outset. It maintains that private respondent's claim for
alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It
alleges that the existence of a foreign element qualifies the instant case
for the application of the law of the Kingdom of Saudi Arabia, by virtue
of the lex loci delicti commissi rule. 34
On the other hand, private respondent contends that since her Amended
Complaint is based on Articles 19 35 and 21 36 of the Civil Code, then the
instant case is properly a matter of domestic law. 37
Under the factual antecedents obtaining in this case, there is no dispute
that the interplay of events occurred in two states, the Philippines and
Saudi Arabia.
As stated by private respondent in her Amended Complaint 38 dated
June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a
foreign airlines corporation doing business in the Philippines.
It may be served with summons and other court processes at
Travel Wide Associated Sales (Phils.). Inc., 3rd Floor, Cougar
Building, 114 Valero St., Salcedo Village, Makati, Metro
Manila.
xxx xxx xxx
6. Plaintiff learned that, through the intercession of the Saudi
Arabian government, the Indonesian authorities agreed to
deport Thamer and Allah after two weeks of detention.
SAUDIA. In September 1990, defendant SAUDIA transferred
plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the
Jakarta incident was already behind her, her superiors
reauested her to see MR. Ali Meniewy, Chief Legal Officer of
SAUDIA in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her
passport and questioned her about the Jakarta incident.
Miniewy simply stood by as the police put pressure on her to
make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her
2
 passport and allowed her to catch the afternoon flight out of
Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh,
Saudi Arabia, a few minutes before the departure of her flight
to Manila, plaintiff was not allowed to board the plane and
instead ordered to take a later flight to Jeddah to see Mr.
Meniewy, the Chief Legal Officer of SAUDIA. When she did,
a certain Khalid of the SAUDIA office brought her to a Saudi
court where she was asked to sigh a document written in
Arabic. They told her that this was necessary to close the case
against Thamer and Allah. As it turned out, plaintiff signed a
notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff
to report to Jeddah once again and see Miniewy on June 27,
1993 for further investigation. Plaintiff did so after receiving
assurance from SAUDIA's Manila manger, Aslam Saleemi,
that the investigation was routinary and that it posed no
danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the
same Saudi court on June 27, 1993. Nothing happened then
but on June 28, 1993, a Saudi judge interrogated plaintiff
through an interpreter about the Jakarta incident. After one
hour of interrogation, they let her go. At the airport, however,
just as her plane was about to take off, a SAUDIA officer told
her that the airline had forbidden her to take that flight. At the
Inflight Service Office where she was told to go, the secretary
of Mr. Yahya Saddick took away her passport and told her to
remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted
plaintiff to the same court where the judge, to her
astonishment and shock, rendered a decision, translated to
her in English, sentencing her to five months imprisonment
and to 286 lashes. Only then did she realize that the Saudi
court had tried her, together with Thamer and Allah, for what
happened in Jakarta. The court found plaintiff guilty of (1)
adultery; (2) going to a disco, dancing, and listening to the
music in violation of Islamic laws; (3) socializing with the male
crew, in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case,
plaintiff sought the help of the Philippines Embassy in Jeddah.
The latter helped her pursue an appeal from the decision of
the court. To pay for her upkeep, she worked on the domestic
flights of defendant SAUDIA while, ironically, Thamer and
Allah freely served the international flights. 39
Where the factual antecedents satisfactorily establish the existence of a
foreign element, we agree with petitioner that the problem herein could
present a "conflicts" case.
A factual situation that cuts across territorial lines and is affected by the
diverse laws of two or more states is said to contain a "foreign element".
The presence of a foreign element is inevitable since social and
economic affairs of individuals and associations are rarely confined to
the geographic limits of their birth or conception. 40
The forms in which this foreign element may appear are many. 41 The
foreign element may simply consist in the fact that one of the parties to
a contract is an alien or has a foreign domicile, or that a contract between
nationals of one State involves properties situated in another State. In
other cases, the foreign element may assume a complex form. 42
In the instant case, the foreign element consisted in the fact that private
respondent Morada is a resident Philippine national, and that petitioner
SAUDIA is a resident foreign corporation. Also, by virtue of the
employment of Morada with the petitioner Saudia as a flight stewardess,
events did transpire during her many occasions of travel across national
borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia,
and vice versa, that caused a "conflicts" situation to arise.
We thus find private respondent's assertion that the case is purely
domestic, imprecise. A conflicts problem presents itself here, and the
question of jurisdiction 43 confronts the court a quo.
After a careful study of the private respondent's Amended
Complaint, 44 and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil
Code.
On one hand, Article 19 of the New Civil Code provides:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this
Court held that:
The aforecited provisions on human relations were intended
to expand the concept of torts in this jurisdiction by granting
adequate legal remedy for the untold number of moral wrongs
which is impossible for human foresight to specifically provide
in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives
flesh to its provisions. Thus, we agree with private respondent's
assertion that violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.
Based on the allegations 46 in the Amended Complaint, read in the light
of the Rules of Court on jurisdiction 47 we find that the Regional Trial
Court (RTC) of Quezon City possesses jurisdiction over the subject
matter of the suit. 48 Its authority to try and hear the case is provided for
under Section 1 of Republic Act No. 7691, to wit:
Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise
known as the "Judiciary Reorganization Act of 1980", is
hereby amended to read as follows:
Sec. 19. Jurisdiction in Civil Cases. Regional Trial Courts
shall exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest,
damages of whatever kind, attorney's fees, litigation
expenses, and cots or the value of the property in controversy
exceeds One hundred thousand pesos (P100,000.00) or, in
such other cases in Metro Manila, where the demand,
exclusive of the above-mentioned items exceeds Two
hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxx xxx xxx
And following Section 2 (b), Rule 4 of the Revised Rules of Court the
venue, Quezon City, is appropriate:
Sec. 2 Venue in Courts of First Instance. [Now Regional
Trial Court]
(a) xxx xxx xxx
(b) Personal actions. All other actions may be commenced
and tried where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the
plaintiff resides, at the election of the plaintiff.
Pragmatic considerations, including the convenience of the parties, also
weigh heavily in favor of the RTC Quezon City assuming jurisdiction.
Paramount is the private interest of the litigant. Enforceability of a
judgment if one is obtained is quite obvious. Relative advantages and
obstacles to a fair trial are equally important. Plaintiff may not, by choice
of an inconvenient forum, "vex", "harass", or "oppress" the
defendant, e.g. by inflicting upon him needless expense or disturbance.
But unless the balance is strongly in favor of the defendant, the plaintiffs
choice of forum should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a quo found it best
to hear the case in the Philippines. Had it refused to take cognizance of
the case, it would be forcing plaintiff (private respondent now) to seek
remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where
she no longer maintains substantial connections. That would have
caused a fundamental unfairness to her.
3
Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the parties.
The choice of forum of the plaintiff (now private respondent) should be
upheld.
Similarly, the trial court also possesses jurisdiction over the persons of
the parties herein. By filing her Complaint and Amended Complaint with
the trial court, private respondent has voluntary submitted herself to the
jurisdiction of the court.
The records show that petitioner SAUDIA has filed several
motions 50 praying for the dismissal of Morada's Amended Complaint.
SAUDIA also filed an Answer In Ex Abundante Cautelam dated
February 20, 1995. What is very patent and explicit from the motions
filed, is that SAUDIA prayed for other reliefs under the premises.
Undeniably, petitioner SAUDIA has effectively submitted to the trial
court's jurisdiction by praying for the dismissal of the Amended
Complaint on grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.: 51
We observe that the motion to dismiss filed on April 14, 1962,
aside from disputing the lower court's jurisdiction over
defendant's person, prayed for dismissal of the complaint on
the ground that plaintiff's cause of action has prescribed. By
interposing such second ground in its motion to dismiss, Ker
and Co., Ltd. availed of an affirmative defense on the basis of
which it prayed the court to resolve controversy in its favor.
For the court to validly decide the said plea of defendant Ker
& Co., Ltd., it necessarily had to acquire jurisdiction upon the
latter's person, who, being the proponent of the affirmative
defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction
of the court.
Similarly, the case of De Midgely vs. Ferandos, held that;
When the appearance is by motion for the purpose of
objecting to the jurisdiction of the court over the person, it
must be for the sole and separate purpose of objecting to the
jurisdiction of the court. If his motion is for any other purpose
than to object to the jurisdiction of the court over his person,
he thereby submits himself to the jurisdiction of the court. A
special appearance by motion made for the purpose of
objecting to the jurisdiction of the court over the person will be
held to be a general appearance, if the party in said motion
should, for example, ask for a dismissal of the action upon the
further ground that the court had no jurisdiction over the
subject matter. 52
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial
Court of Quezon City. Thus, we find that the trial court has jurisdiction
over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems
seek to answer two important questions: (1) What legal system should
control a given situation where some of the significant facts occurred in
two or more states; and (2) to what extent should the chosen legal
system regulate the situation. 53
Several theories have been propounded in order to identify the legal
system that should ultimately control. Although ideally, all choice-of-law
theories should intrinsically advance both notions of justice and
predictability, they do not always do so. The forum is then faced with the
problem of deciding which of these two important values should be
stressed. 54
Before a choice can be made, it is necessary for us to determine under
what category a certain set of facts or rules fall. This process is known
as "characterization", or the "doctrine of qualification". It is the "process
of deciding whether or not the facts relate to the kind of question
specified in a conflicts rule." 55 The purpose of "characterization" is to
enable the forum to select the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual
situation, event, or operative fact. 57 An essential element of conflict
rules is the indication of a "test" or "connecting factor" or "point of
contact". Choice-of-law rules invariably consist of a factual relationship
(such as property right, contract claim) and a connecting factor or point
of contact, such as the situs of the res, the place of celebration, the
place of performance, or the place of wrongdoing. 58
Note that one or more circumstances may be present to serve as the
possible test for the determination of the applicable law. 59 These "test
factors" or "points of contact" or "connecting factors" could be any of the
following:
(1) The nationality of a person, his domicile, his residence, his
place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a
corporation;
(3) the situs of a thing, that is, the place where a thing is, or is
deemed to be situated. In particular, the lex situs is decisive
when real rights are involved;
(4) the place where an act has been done, the locus actus,
such as the place where a contract has been made, a
marriage celebrated, a will signed or a tort committed. The lex
loci actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g.,
the place of performance of contractual duties, or the place
where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that
should govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are
instituted or done. The lex fori the law of the forum is
particularly important because, as we have seen earlier,
matters of "procedure" not going to the substance of the claim
involved are governed by it; and because the lex fori applies
whenever the content of the otherwise applicable foreign law
is excluded from application in a given case for the reason that
it falls under one of the exceptions to the applications of
foreign law; and
(8) the flag of a ship, which in many cases is decisive of
practically all legal relationships of the ship and of its master
or owner as such. It also covers contractual relationships
particularly contracts of affreightment. 60 (Emphasis ours.)
After a careful study of the pleadings on record, including allegations in
the Amended Complaint deemed admitted for purposes of the motion to
dismiss, we are convinced that there is reasonable basis for private
respondent's assertion that although she was already working in Manila,
petitioner brought her to Jeddah on the pretense that she would merely
testify in an investigation of the charges she made against the two
SAUDIA crew members for the attack on her person while they were in
Jakarta. As it turned out, she was the one made to face trial for very
serious charges, including adultery and violation of Islamic laws and
tradition.
There is likewise logical basis on record for the claim that the "handing
over" or "turning over" of the person of private respondent to Jeddah
officials, petitioner may have acted beyond its duties as employer.
Petitioner's purported act contributed to and amplified or even
proximately caused additional humiliation, misery and suffering of
private respondent. Petitioner thereby allegedly facilitated the arrest,
detention and prosecution of private respondent under the guise of
petitioner's authority as employer, taking advantage of the trust,
confidence and faith she reposed upon it. As purportedly found by the
Prince of Makkah, the alleged conviction and imprisonment of private
respondent was wrongful. But these capped the injury or harm allegedly
inflicted upon her person and reputation, for which petitioner could be
liable as claimed, to provide compensation or redress for the wrongs
done, once duly proven.
Considering that the complaint in the court a quo is one involving torts,
the "connecting factor" or "point of contact" could be the place or places
where the tortious conduct or lex loci actus occurred. And applying the
torts principle in a conflicts case, we find that the Philippines could be
said as a situs of the tort (the place where the alleged tortious conduct
took place). This is because it is in the Philippines where petitioner
allegedly deceived private respondent, a Filipina residing and working
here. According to her, she had honestly believed that petitioner would,
in the exercise of its rights and in the performance of its duties, "act with
justice, give her due and observe honesty and good faith." Instead,
petitioner failed to protect her, she claimed. That certain acts or parts of
the injury allegedly occurred in another country is of no moment. For in
our view what is important here is the place where the over-all harm or
the totality of the alleged injury to the person, reputation, social standing
4
and human rights of complainant, had lodged, according to the plaintiff
below (herein private respondent). All told, it is not without basis to
identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci
delicti commissi, modern theories and rules on tort liability 61 have been
advanced to offer fresh judicial approaches to arrive at just results. In
keeping abreast with the modern theories on tort liability, we find here
an occasion to apply the "State of the most significant relationship" rule,
which in our view should be appropriate to apply now, given the factual
context of this case.
In applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury occurred;
(b) the place where the conduct causing the injury occurred; (c) the
domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if any,
between the parties is centered. 62
As already discussed, there is basis for the claim that over-all injury
occurred and lodged in the Philippines. There is likewise no question
that private respondent is a resident Filipina national, working with
petitioner, a resident foreign corporation engaged here in the business
of international air carriage. Thus, the "relationship" between the parties
was centered here, although it should be stressed that this suit is not
based on mere labor law violations. From the record, the claim that the
Philippines has the most significant contact with the matter in this
dispute, 63 raised by private respondent as plaintiff below against
defendant (herein petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the tort
complained of and the place "having the most interest in the problem",
we find, by way of recapitulation, that the Philippine law on tort liability
should have paramount application to and control in the resolution of the
legal issues arising out of this case. Further, we hold that the respondent
Regional Trial Court has jurisdiction over the parties and the subject
matter of the complaint; the appropriate venue is in Quezon City, which
could properly apply Philippine law. Moreover, we find untenable
petitioner's insistence that "[s]ince private respondent instituted this suit,
she has the burden of pleading and proving the applicable Saudi law on
the matter." 64 As aptly said by private respondent, she has "no
obligation to plead and prove the law of the Kingdom of Saudi Arabia
since her cause of action is based on Articles 19 and 21" of the Civil
Code of the Philippines. In her Amended Complaint and subsequent
pleadings, she never alleged that Saudi law should govern this
case. 65 And as correctly held by the respondent appellate court,
"considering that it was the petitioner who was invoking the applicability
of the law of Saudi Arabia, then the burden was on it [petitioner] to plead
and to establish what the law of Saudi Arabia is". 66
Lastly, no error could be imputed to the respondent appellate court in
upholding the trial court's denial of defendant's (herein petitioner's)
motion to dismiss the case. Not only was jurisdiction in order and venue
properly laid, but appeal after trial was obviously available, and
expeditious trial itself indicated by the nature of the case at hand.
Indubitably, the Philippines is the state intimately concerned with the
ultimate outcome of the case below, not just for the benefit of all the
litigants, but also for the vindication of the country's system of law and
justice in a transnational setting. With these guidelines in mind, the trial
court must proceed to try and adjudge the case in the light of relevant
Philippine law, with due consideration of the foreign element or elements
involved. Nothing said herein, of course, should be construed as
prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED.
Civil Case No. Q-93-18394 entitled "Milagros P. Morada vs. Saudi
Arabia Airlines" is hereby REMANDED to Regional Trial Court of
Quezon City, Branch 89 for further proceedings.
SO ORDERED.
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL
MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO
MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS
PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA,
AMBASSADOR RAMON DEL ROSARIO, et al., as members of the
PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE
GOVERNMENT PROPERTIES IN JAPAN, respondents.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents,
their representatives and agents from proceeding with the bidding for
the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome
Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted
the prayer for a temporary restraining order effective February 20, 1990.
One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of
mandamus to compel the respondents to fully disclose to the public the
basis of their decision to push through with the sale of the Roppongi
property inspire of strong public opposition and to explain the
proceedings which effectively prevent the participation of Filipino
citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were
heard by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v.
Secretary Macaraig, et al. was filed, the respondents were required to
file a comment by the Court's resolution dated February 22, 1990. The
two petitions were consolidated on March 27, 1990 when the
memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the
respondents filed a motion for an extension of thirty (30) days to file
comment in G.R. No. 92047, followed by a second motion for an
extension of another thirty (30) days which we granted on May 8, 1990,
a third motion for extension of time granted on May 24, 1990 and a fourth
motion for extension of time which we granted on June 5, 1990 but
calling the attention of the respondents to the length of time the petitions
have been pending. After the comment was filed, the petitioner in G.R.
No. 92047 asked for thirty (30) days to file a reply. We noted his motion
and resolved to decide the two (2) cases.
I
The subject property in this case is one of the four (4) properties in Japan
acquired by the Philippine government under the Reparations
Agreement entered into with Japan on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku,
Tokyo which has an area of approximately 2,489.96 square meters, and
is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an
area of around 764.72 square meters and categorized as a commercial
lot now being used as a warehouse and parking lot for the consulate
staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho,
Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.
The properties and the capital goods and services procured from the
Japanese government for national development projects are part of the
indemnification to the Filipino people for their losses in life and property
and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550
million would be payable in twenty (20) years in accordance with annual
schedules of procurements to be fixed by the Philippine and Japanese
governments (Article 2, Reparations Agreement). Rep. Act No. 1789,
the Reparations Law, prescribes the national policy on procurement and
utilization of reparations and development loans. The procurements are
divided into those for use by the government sector and those for private
parties in projects as the then National Economic Council shall
determine. Those intended for the private sector shall be made available
by sale to Filipino citizens or to one hundred (100%) percent Filipino-
owned entities in national development projects.
The Roppongi property was acquired from the Japanese government
under the Second Year Schedule and listed under the heading
5
"Government Sector", through Reparations Contract No. 300 dated
June 27, 1958. The Roppongi property consists of the land and building
"for the Chancery of the Philippine Embassy" (Annex M-D to
Memorandum for Petitioner, p. 503). As intended, it became the site of
the Philippine Embassy until the latter was transferred to Nampeidai on
July 22, 1976 when the Roppongi building needed major repairs. Due to
the failure of our government to provide necessary funds, the Roppongi
property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former
Philippine Ambassador to Japan, Carlos J. Valdez, to make the property
the subject of a lease agreement with a Japanese firm - Kajima
Corporation which shall construct two (2) buildings in Roppongi and
one (1) building in Nampeidai and renovate the present Philippine
Chancery in Nampeidai. The consideration of the construction would be
the lease to the foreign corporation of one (1) of the buildings to be
constructed in Roppongi and the two (2) buildings in Nampeidai. The
other building in Roppongi shall then be used as the Philippine Embassy
Chancery. At the end of the lease period, all the three leased buildings
shall be occupied and used by the Philippine government. No change of
ownership or title shall occur. (See Annex "B" to Reply to Comment) The
Philippine government retains the title all throughout the lease period
and thereafter. However, the government has not acted favorably on this
proposal which is pending approval and ratification between the parties.
Instead, on August 11, 1986, President Aquino created a committee to
study the disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan through Administrative Order No. 3, followed by
Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling
non-Filipino citizens or entities to avail of separations' capital goods and
services in the event of sale, lease or disposition. The four properties in
Japan including the Roppongi were specifically mentioned in the first
"Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the
government has been pushing, with great vigor, its decision to sell the
reparations properties starting with the Roppongi lot. The property has
twice been set for bidding at a minimum floor price of $225 million. The
first bidding was a failure since only one bidder qualified. The second
one, after postponements, has not yet materialized. The last scheduled
bidding on February 21, 1990 was restrained by his Court. Later, the
rules on bidding were changed such that the $225 million floor price
became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues.
The petitioner in G.R. No. 92013 objects to the alienation of the
Roppongi property to anyone while the petitioner in G.R. No. 92047 adds
as a principal objection the alleged unjustified bias of the Philippine
government in favor of selling the property to non-Filipino citizens and
entities. These petitions have been consolidated and are resolved at the
same time for the objective is the same - to stop the sale of the Roppongi
property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the
Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority
and jurisdiction, to sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the
authority of the government to alienate the Roppongi property assails
the constitutionality of Executive Order No. 296 in making the property
available for sale to non-Filipino citizens and entities. He also questions
the bidding procedures of the Committee on the Utilization or Disposition
of Philippine Government Properties in Japan for being discriminatory
against Filipino citizens and Filipino-owned entities by denying them the
right to be informed about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property
and the related lots were acquired as part of the reparations from the
Japanese government for diplomatic and consular use by the Philippine
government. Vice-President Laurel states that the Roppongi property is
classified as one of public dominion, and not of private ownership under
Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under
"property intended for public service" in paragraph 2 of the above
provision. He states that being one of public dominion, no ownership by
any one can attach to it, not even by the State. The Roppongi and related
properties were acquired for "sites for chancery, diplomatic, and
consular quarters, buildings and other improvements" (Second Year
Reparations Schedule). The petitioner states that they continue to be
intended for a necessary service. They are held by the State in
anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
cannot be appropriated, is outside the commerce of man, or to put it in
more simple terms, it cannot be alienated nor be the subject matter of
contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]).
Noting the non-use of the Roppongi property at the moment, the
petitioner avers that the same remains property of public dominion so
long as the government has not used it for other purposes nor adopted
any measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by
saying that the subject property is not governed by our Civil Code but by
the laws of Japan where the property is located. They rely upon the rule
of lex situs which is used in determining the applicable law regarding the
acquisition, transfer and devolution of the title to a property. They also
invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the
Secretary of Justice which used the lex situs in explaining the
inapplicability of Philippine law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that
the Civil Code is applicable, the Roppongi property has ceased to
become property of public dominion. It has become patrimonial property
because it has not been used for public service or for diplomatic
purposes for over thirteen (13) years now (Citing Article 422, Civil Code)
and because the intention by the Executive Department and the
Congress to convert it to private use has been manifested by overt acts,
such as, among others: (1) the transfer of the Philippine Embassy to
Nampeidai (2) the issuance of administrative orders for the possibility of
alienating the four government properties in Japan; (3) the issuance of
Executive Order No. 296; (4) the enactment by the Congress of Rep.
Act No. 6657 [the Comprehensive Agrarian Reform Law] on June 10,
1988 which contains a provision stating that funds may be taken from
the sale of Philippine properties in foreign countries; (5) the holding of
the public bidding of the Roppongi property but which failed; (6) the
deferment by the Senate in Resolution No. 55 of the bidding to a future
date; thus an acknowledgment by the Senate of the government's
intention to remove the Roppongi property from the public service
purpose; and (7) the resolution of this Court dismissing the petition
in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to
enjoin the second bidding of the Roppongi property scheduled on March
30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule
on the constitutionality of Executive Order No. 296. He had earlier filed
a petition in G.R. No. 87478 which the Court dismissed on August 1,
1989. He now avers that the executive order contravenes the
constitutional mandate to conserve and develop the national patrimony
stated in the Preamble of the 1987 Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands
of the public domain to Filipino citizens. (Sections 2 and 3, Article XII,
Constitution; Sections 22 and 23 of Commonwealth Act 141).itc-asl
(2) The preference for Filipino citizens in the grant of rights, privileges
and concessions covering the national economy and patrimony (Section
10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition
and trade practices;
(4) The guarantee of the right of the people to information on all matters
of public concern (Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not
wholly owned by Filipino citizens of capital goods received by the
Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act
No. 1789); and
(6) The declaration of the state policy of full public disclosure of all
transactions involving public interest (Section 28, Article III,
Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of
an unconstitutional executive order is a misapplication of public funds
He states that since the details of the bidding for the Roppongi property
6
were never publicly disclosed until February 15, 1990 (or a few days
before the scheduled bidding), the bidding guidelines are available only
in Tokyo, and the accomplishment of requirements and the selection of
qualified bidders should be done in Tokyo, interested Filipino citizens or
entities owned by them did not have the chance to comply with Purchase
Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold
for a minimum price of $225 million from which price capital gains tax
under Japanese law of about 50 to 70% of the floor price would still be
deducted.
IV
The petitioners and respondents in both cases do not dispute the fact
that the Roppongi site and the three related properties were through
reparations agreements, that these were assigned to the government
sector and that the Roppongi property itself was specifically designated
under the Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly
spelled out. It is dictated by the terms of the Reparations Agreement and
the corresponding contract of procurement which bind both the
Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is
convincingly shown that the property has become patrimonial. This, the
respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the
commerce of man. It cannot be alienated. Its ownership is a special
collective ownership for general use and enjoyment, an application to
the satisfaction of collective needs, and resides in the social group. The
purpose is not to serve the State as a juridical person, but the citizens;
it is intended for the common and public welfare and cannot be the
object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino,
Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II,
p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private
ownership.
ART. 420. The following things are property of public
dominion
(1) Those intended for public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by the State,
banks shores roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public
use, and are intended for some public service or for the
development of the national wealth.
ART. 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial
property.
The Roppongi property is correctly classified under paragraph 2 of
Article 420 of the Civil Code as property belonging to the State and
intended for some public service.
Has the intention of the government regarding the use of the property
been changed because the lot has been Idle for some years? Has it
become patrimonial?
The fact that the Roppongi site has not been used for a long time for
actual Embassy service does not automatically convert it to patrimonial
property. Any such conversion happens only if the property is withdrawn
from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA
481 [1975]). A property continues to be part of the public domain, not
available for private appropriation or ownership until there is a formal
declaration on the part of the government to withdraw it from being such
(Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned
public officials insinuating a change of intention. We emphasize,
however, that an abandonment of the intention to use the Roppongi
property for public service and to make it patrimonial property under
Article 422 of the Civil Code must be definite Abandonment cannot be
inferred from the non-use alone specially if the non-use was attributable
not to the government's own deliberate and indubitable will but to a lack
of financial support to repair and improve the property (See Heirs of
Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must
be a certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not
relinquishment of the Roppongi property's original purpose. Even the
failure by the government to repair the building in Roppongi is not
abandonment since as earlier stated, there simply was a shortage of
government funds. The recent Administrative Orders authorizing a study
of the status and conditions of government properties in Japan were
merely directives for investigation but did not in any way signify a clear
intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell",
does not have a provision in its text expressly authorizing the sale of the
four properties procured from Japan for the government sector. The
executive order does not declare that the properties lost their public
character. It merely intends to make the properties available to
foreigners and not to Filipinos alone in case of a sale, lease or other
disposition. It merely eliminates the restriction under Rep. Act No. 1789
that reparations goods may be sold only to Filipino citizens and one
hundred (100%) percent Filipino-owned entities. The text of Executive
Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and
of other laws to the contrary notwithstanding, the above-mentioned
properties can be made available for sale, lease or any other manner of
disposition to non-Filipino citizens or to entities owned by non-Filipino
citizens.
Executive Order No. 296 is based on the wrong premise or assumption
that the Roppongi and the three other properties were earlier converted
into alienable real properties. As earlier stated, Rep. Act No. 1789
differentiates the procurements for the government sector and the
private sector (Sections 2 and 12, Rep. Act No. 1789). Only the private
sector properties can be sold to end-users who must be Filipinos or
entities owned by Filipinos. It is this nationality provision which was
amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as
one of the sources of funds for its implementation, the proceeds of the
disposition of the properties of the Government in foreign countries, did
not withdraw the Roppongi property from being classified as one of
public dominion when it mentions Philippine properties abroad. Section
63 (c) refers to properties which are alienable and not to those reserved
for public use or service. Rep Act No. 6657, therefore, does not
authorize the Executive Department to sell the Roppongi property. It
merely enumerates possible sources of future funding to augment (as
and when needed) the Agrarian Reform Fund created under Executive
Order No. 299. Obviously any property outside of the commerce of man
cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the
Roppongi property by insisting that Japanese law and not our Civil Code
should apply.
It is exceedingly strange why our top government officials, of all people,
should be the ones to insist that in the sale of extremely valuable
government property, Japanese law and not Philippine law should
prevail. The Japanese law - its coverage and effects, when enacted, and
exceptions to its provision is not presented to the Court It is simply
asserted that the lex loci rei sitae or Japanese law should apply without
stating what that law provides. It is a ed on faith that Japanese law would
allow the sale.
We see no reason why a conflict of law rule should apply when no
conflict of law situation exists. A conflict of law situation arises only
when: (1) There is a dispute over the title or ownership of an immovable,
such that the capacity to take and transfer immovables, the formalities
of conveyance, the essential validity and effect of the transfer, or the
interpretation and effect of a conveyance, are to be determined (See
Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A
foreign law on land ownership and its conveyance is asserted to conflict
with a domestic law on the same matters. Hence, the need to determine
which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is
no question that the property belongs to the Philippines. The issue is the
authority of the respondent officials to validly dispose of property
belonging to the State. And the validity of the procedures adopted to
7
effect its sale. This is governed by Philippine Law. The rule of lex
situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on
the relevance of the lex situsrule is misplaced. The opinion does not
tackle the alienability of the real properties procured through reparations
nor the existence in what body of the authority to sell them. In discussing
who are capableof acquiring the lots, the Secretary merely explains that
it is the foreign law which should determine who can acquire the
properties so that the constitutional limitation on acquisition of lands of
the public domain to Filipino citizens and entities wholly owned by
Filipinos is inapplicable. We see no point in belaboring whether or not
this opinion is correct. Why should we discuss who can acquire the
Roppongi lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of
the recommendation by the investigating committee to sell the Roppongi
property was premature or, at the very least, conditioned on a valid
change in the public character of the Roppongi property. Moreover, the
approval does not have the force and effect of law since the President
already lost her legislative powers. The Congress had already convened
for more than a year.
Assuming for the sake of argument, however, that the Roppongi
property is no longer of public dominion, there is another obstacle to its
sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government is
a party. In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the title
to real estate or to any other property the value of which is in excess of
one hundred thousand pesos, the respective Department Secretary
shall prepare the necessary papers which, together with the proper
recommendations, shall be submitted to the Congress of the Philippines
for approval by the same. Such deed, instrument, or contract shall be
executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the Government of the Philippines
unless the authority therefor be expressly vested by law in another
officer. (Emphasis supplied)
The requirement has been retained in Section 48, Book I of the
Administrative Code of 1987 (Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the
deed of conveyance shall be executed in behalf of the government by
the following:
(1) For property belonging to and titled in the name of the Republic of
the Philippines, by the President, unless the authority therefor is
expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
It is not for the President to convey valuable real property of the
government on his or her own sole will. Any such conveyance must be
authorized and approved by a law enacted by the Congress. It requires
executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the
deferment of the sale of the Roppongi property does not withdraw the
property from public domain much less authorize its sale. It is a mere
resolution; it is not a formal declaration abandoning the public character
of the Roppongi property. In fact, the Senate Committee on Foreign
Relations is conducting hearings on Senate Resolution No. 734 which
raises serious policy considerations and calls for a fact-finding
investigation of the circumstances behind the decision to sell the
Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al.,
supra, did not pass upon the constitutionality of Executive Order No.
296. Contrary to respondents' assertion, we did not uphold the authority
of the President to sell the Roppongi property. The Court stated that the
constitutionality of the executive order was not the real issue and that
resolving the constitutional question was "neither necessary nor finally
determinative of the case." The Court noted that "[W]hat petitioner
ultimately questions is the use of the proceeds of the disposition of the
Roppongi property." In emphasizing that "the decision of the Executive
to dispose of the Roppongi property to finance the CARP ... cannot be
questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did
not acknowledge the fact that the property became alienable nor did it
indicate that the President was authorized to dispose of the Roppongi
property. The resolution should be read to mean that in case the
Roppongi property is re-classified to be patrimonial and alienable by
authority of law, the proceeds of a sale may be used for national
economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us
question the proposed 1990 sale of the Roppongi property. We are
resolving the issues raised in these petitions, not the issues raised in
1989.
Having declared a need for a law or formal declaration to withdraw the
Roppongi property from public domain to make it alienable and a need
for legislative authority to allow the sale of the property, we see no
compelling reason to tackle the constitutional issues raised by petitioner
Ojeda.
The Court does not ordinarily pass upon constitutional questions unless
these questions are properly raised in appropriate cases and their
resolution is necessary for the determination of the case (People v. Vera,
65 Phil. 56 [1937]). The Court will not pass upon a constitutional
question although properly presented by the record if the case can be
disposed of on some other ground such as the application of a statute
or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175,
[1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property
should not be sold:
The Roppongi property is not just like any piece of property. It
was given to the Filipino people in reparation for the lives and
blood of Filipinos who died and suffered during the Japanese
military occupation, for the suffering of widows and orphans
who lost their loved ones and kindred, for the homes and other
properties lost by countless Filipinos during the war. The
Tokyo properties are a monument to the bravery and sacrifice
of the Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino heroes, we
do not expect economic or financial benefits from them. But
who would think of selling these monuments? Filipino honor
and national dignity dictate that we keep our properties in
Japan as memorials to the countless Filipinos who died and
suffered. Even if we should become paupers we should not
think of selling them. For it would be as if we sold the lives and
blood and tears of our countrymen. (Rollo- G.R. No. 92013,
p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the
Japanese government in atonement for its past belligerence for
the valiant sacrifice of life and limb and for deaths, physical
dislocation and economic devastation the whole Filipino people
endured in World War II.
It is for what it stands for, and for what it could never bring back
to life, that its significance today remains undimmed, inspire of
the lapse of 45 years since the war ended, inspire of the
passage of 32 years since the property passed on to the
Philippine government.
Roppongi is a reminder that cannot should not be
dissipated ... (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much
because of the inflated prices fetched by real property in Tokyo but more
so because of its symbolic value to all Filipinos veterans and civilians
alike. Whether or not the Roppongi and related properties will eventually
be sold is a policy determination where both the President and Congress
must concur. Considering the properties' importance and value, the laws
on conversion and disposition of property of public dominion must be
faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are
GRANTED. A writ of prohibition is issued enjoining the respondents from
proceeding with the sale of the Roppongi property in Tokyo, Japan. The
8
February 20, 1990 Temporary Restraining Order is made
PERMANENT.
SO ORDERED.
Separate Opinions
CRUZ, J., concurring:
I concur completely with the excellent ponencia of Mr. Justice Gutierrez
and will add the following observations only for emphasis.
It is clear that the respondents have failed to show the President's legal
authority to sell the Roppongi property. When asked to do so at the
hearing on these petitions, the Solicitor General was at best ambiguous,
although I must add in fairness that this was not his fault. The fact is that
there is -no such authority. Legal expertise alone cannot conjure that
statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative, double talk,
does not contain such authority. Neither does Rep. Act No. 6657, which
simply allows the proceeds of the sale of our properties abroad to be
used for the comprehensive agrarian reform program. Senate Res. No.
55 was a mere request for the deferment of the scheduled sale of tile
Roppongi property, possibly to stop the transaction altogether; and ill
any case it is not a law. The sale of the said property may be authorized
only by Congress through a duly enacted statute, and there is no such
law.
Once again, we have affirmed the principle that ours is a government of
laws and not of men, where every public official, from the lowest to the
highest, can act only by virtue of a valid authorization. I am happy to
note that in the several cases where this Court has ruled against her,
the President of the Philippines has submitted to this principle with
becoming grace.
PADILLA, J., concurring:
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish
to make a few observations which could help in further clarifying the
issues.
Under our tripartite system of government ordained by the Constitution,
it is Congress that lays down or determines policies. The President
executes such policies. The policies determined by Congress are
embodied in legislative enactments that have to be approved by the
President to become law. The President, of course, recommends to
Congress the approval of policies but, in the final analysis, it is Congress
that is the policy - determining branch of government.
The judiciary interprets the laws and, in appropriate cases, determines
whether the laws enacted by Congress and approved by the President,
and presidential acts implementing such laws, are in accordance with
the Constitution.
The Roppongi property was acquired by the Philippine government
pursuant to the reparations agreement between the Philippine and
Japanese governments. Under such agreement, this property was
acquired by the Philippine government for a specific purpose, namely,
to serve as the site of the Philippine Embassy in Tokyo, Japan.
Consequently, Roppongi is a property of public dominion and intended
for public service, squarely falling within that class of property under Art.
420 of the Civil Code, which provides:
Art. 420. The following things are property of public dominion
(1) ...
(2) Those which belong to the State, without being for public
use, and are intended for some public service or for the
development of the national wealth. (339a)
Public dominion property intended for public service cannot be alienated
unless the property is first transformed into private property of the state
otherwise known as patrimonial property of the state. 1 The
transformation of public dominion property to state patrimonial property
involves, to my mind, a policy decision. It is a policy decision because
the treatment of the property varies according to its classification.
Consequently, it is Congress which can decide and declare the
conversion of Roppongi from a public dominion property to a state
patrimonial property. Congress has made no such decision or
declaration.
Moreover, the sale of public property (once converted from public
dominion to state patrimonial property) must be approved by Congress,
for this again is a matter of policy (i.e. to keep or dispose of the property).
Sec. 48, Book 1 of the Administrative Code of 1987 provides:
SEC. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is authorized by
law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the
Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines
but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)
But the record is bare of any congressional decision or approval to sell
Roppongi. The record is likewise bare of any congressional authority
extended to the President to sell Roppongi thru public bidding or
otherwise.
It is therefore, clear that the President cannot sell or order the sale of
Roppongi thru public bidding or otherwise without a prior congressional
approval, first, converting Roppongi from a public dominion property to
a state patrimonial property, and, second, authorizing the President to
sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to make
PERMANENT the temporary restraining order earlier issued by this
Court.
SARMIENTO, J., concurring:
The central question, as I see it, is whether or not the so-called
"Roppongi property' has lost its nature as property of public dominion,
and hence, has become patrimonial property of the State. I understand
that the parties are agreed that it was property intended for "public
service" within the contemplation of paragraph (2), of Article 430, of the
Civil Code, and accordingly, land of State dominion, and beyond human
commerce. The lone issue is, in the light of supervening developments,
that is non-user thereof by the National Government (for diplomatic
purposes) for the last thirteen years; the issuance of Executive Order
No. 296 making it available for sale to any interested buyer; the
promulgation of Republic Act No. 6657, the Comprehensive Agrarian
Reform Law, making available for the program's financing, State assets
sold; the approval by the President of the recommendation of the
investigating committee formed to study the property's utilization; and
the issuance of Resolution No. 55 of the Philippine Senate requesting
for the deferment of its disposition it, "Roppongi", is still property of the
public dominion, and if it is not, how it lost that character.
When land of the public dominion ceases to be one, or when the change
takes place, is a question our courts have debated early. In a 1906
decision, 1 it was held that property of the public dominion, a public plaza
in this instance, becomes patrimonial upon use thereof for purposes
other than a plaza. In a later case, 2 this ruling was reiterated. Likewise,
it has been held that land, originally private property, has become of
public dominion upon its donation to the town and its conversion and
use as a public plaza. 3 It is notable that under these three cases, the
character of the property, and any change occurring therein, depends
on the actual use to which it is dedicated. 4
Much later, however, the Court held that "until a formal declaration on
the part of the Government, through the executive department or the
Legislative, to the effect that the land . . . is no longer needed for [public]
service- for public use or for special industries, [it] continue[s] to be part
of the public [dominion], not available for private expropriation or
ownership." 5 So also, it was ruled that a political subdivision (the City of
Cebu in this case) alone may declare (under its charter) a city road
abandoned and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal declaration to withdraw
the Roppongi property from public domain to make it alienable and a
land for legislative authority to allow the sale of the property" 7the
majority lays stress to the fact that: (1) An affirmative act executive or
legislative is necessary to reclassify property of the public dominion,
and (2) a legislative decree is required to make it alienable. It also clears
the uncertainties brought about by earlier interpretations that the nature
of property-whether public or patrimonial is predicated on the manner it
9
is actually used, or not used, and in the same breath, repudiates the
Government's position that the continuous non-use of "Roppongi",
among other arguments, for "diplomatic purposes", has turned it into
State patrimonial property.
I feel that this view corresponds to existing pronouncements of this
Court, among other things, that: (1) Property is presumed to be State
property in the absence of any showing to the contrary; 8 (2) With
respect to forest lands, the same continue to be lands of the public
dominion unless and until reclassified by the Executive Branch of the
Government; 9 and (3) All natural resources, under the Constitution, and
subject to exceptional cases, belong to the State. 10
I am elated that the Court has banished previous uncertainties.
FELICIANO, J., dissenting
With regret, I find myself unable to share the conclusions reached by Mr.
Justice Hugo E. Gutierrez, Jr.
For purposes of this separate opinion, I assume that the piece of land
located in 306 Roppongi, 5-Chome, Minato-ku Tokyo, Japan
(hereinafter referred to as the "Roppongi property") may be
characterized as property of public dominion, within the meaning of
Article 420 (2) of the Civil Code:
[Property] which belong[s] to the State, without being for
public use, and are intended for some public service -.
It might not be amiss however, to note that the appropriateness of trying
to bring within the confines of the simple threefold classification found in
Article 420 of the Civil Code ("property for public use property "intended
for some public service" and property intended "for the development of
the national wealth") all property owned by the Republic of the
Philippines whether found within the territorial boundaries of the
Republic or located within the territory of another sovereign State,
is not self-evident. The first item of the classification property intended
for public use can scarcely be properly applied to property belonging
to the Republic but found within the territory of another State. The third
item of the classification property intended for the development of the
national wealth is illustrated, in Article 339 of the Spanish Civil Code of
1889, by mines or mineral properties. Again, mineral lands owned by a
sovereign State are rarely, if ever, found within the territorial base of
another sovereign State. The task of examining in detail the applicability
of the classification set out in Article 420 of our Civil Code to property
that the Philippines happens to own outside its own boundaries must,
however, be left to academicians.
For present purposes, too, I agree that there is no question of conflict of
laws that is, at the present time, before this Court. The issues before us
relate essentially to authority to sell the Roppongi property so far as
Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the
Roppongi property has been converted into patrimonial property or
property of the private domain of the State; and (b) assuming an
affirmative answer to (a), whether or not there is legal authority to
dispose of the Roppongi property.
I for public service, shall form part of the patrimonial property
Addressing the first issue of conversion of property of public dominion
intended for some public service, into property of the private domain of
the Republic, it should be noted that the Civil Code does not address the
question of who has authority to effect such conversion. Neither does
the Civil Code set out or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit pronouncements
on this point, as Justice Sarmiento has pointed out in his concurring
opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]), petitioner
Ignacio argued that if the land in question formed part of the public
domain, the trial court should have declared the same no longer
necessary for public use or public purposes and which would, therefore,
have become disposable and available for private ownership. Mr.
Justice Montemayor, speaking for the Court, said:
Article 4 of the Law of Waters of 1866 provides that when a
portion of the shore is no longer washed by the waters of the
sea and is not necessary for purposes of public utility, or for
the establishment of special industries, or for coast-guard
service, the government shall declare it to be the property of
the owners of the estates adjacent thereto and as an
increment thereof. We believe that only the executive and
possibly the legislative departments have the authority and
the power to make the declaration that any land so gained by
the sea, is not necessary for purposes of public utility, or for
the establishment of special industries, or for coast-guard
service. If no such declaration has been made by said
departments, the lot in question forms part of the public
domain. (Natividad v. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal
in the case of Vicente Joven y Monteverde v. Director of
Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).
... is undoubtedly that the courts are neither primarily called
upon, nor indeed in a position to determine whether any public
land are to be used for the purposes specified in Article 4 of
the Law of Waters. Consequently, until a formal declaration
on the part of the Government, through the executive
department or the Legislature, to the effect that the land in
question is no longer needed for coast-guard service, for
public use or for special industries, they continue to be part of
the public domain not available for private appropriation or
ownership.(108 Phil. at 338-339; emphasis supplied)
Thus, under Ignacio, either the Executive Department or the Legislative
Department may convert property of the State of public dominion into
patrimonial property of the State. No particular formula or procedure of
conversion is specified either in statute law or in case law. Article 422 of
the Civil Code simply states that: "Property of public dominion, when no
longer intended for public use or for public service, shall form part of the
patrimonial property of the State". I respectfully submit, therefore, that
the only requirement which is legitimately imposable is that the intent to
convert must be reasonably clear from a consideration of the acts or acts
of the Executive Department or of the Legislative Department which are
said to have effected such conversion.
The same legal situation exists in respect of conversion of property of
public dominion belonging to municipal corporations, i.e., local
governmental units, into patrimonial property of such entities.
In CebuOxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City
Council of Cebu by resolution declared a certain portion of an existing
street as an abandoned road, "the same not being included in the city
development plan". Subsequently, by another resolution, the City
Council of Cebu authorized the acting City Mayor to sell the land through
public bidding. Although there was no formal and explicit declaration of
conversion of property for public use into patrimonial property, the
Supreme Court said:
xxx xxx xxx
(2) Since that portion of the city street subject of petitioner's
application for registration of title was withdrawn from public
use, it follows that such withdrawn portion becomes
patrimonial property which can be the object of an ordinary
contract.
Article 422 of the Civil Code expressly provides that "Property
of public dominion, when no longer intended for public use of
of the State."
Besides, the Revised Charter of the City of Cebu heretofore
quoted, in very clear and unequivocal terms, states that
"Property thus withdrawn from public servitude may be used
or conveyed for any purpose for which other real property
belonging to the City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from
public use and its subsequent sale to the petitioner is
valid. Hence, the petitioner has a registrable title over the lot
in question. (66 SCRA at 484-; emphasis supplied)
Thus, again as pointed out by Sarmiento J., in his separate opinion, in
the case of property owned by municipal corporations simple non-use or
the actual dedication of public property to some use other than "public
use" or some "public service", was sufficient legally to convert such
property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20
[1906]- Municipality of Hinunganan v. Director of Lands 24 Phil. 124
[1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22
SCRA 1334 (1968).
10
I would also add that such was the case not only in respect of' property
of municipal corporations but also in respect of property of the State
itself. Manresa in commenting on Article 341 of the 1889 Spanish Civil
Code which has been carried over verbatim into our Civil Code by Article
422 thereof, wrote:
La dificultad mayor en todo esto estriba, naturalmente, en fijar el
momento en que los bienes de dominio publico dejan de serlo. Si la
Administracion o la autoridad competente legislative realizan qun acto
en virtud del cual cesa el destino o uso publico de los bienes de que se
trata naturalmente la dificultad queda desde el primer momento
resuelta. Hay un punto de partida cierto para iniciar las relaciones
juridicas a que pudiera haber lugar Pero puede ocurrir que no haya
taldeclaracion expresa, legislativa or administrativa, y, sin embargo,
cesar de hecho el destino publico de los bienes; ahora bien, en este
caso, y para los efectos juridicos que resultan de entrar la cosa en el
comercio de los hombres,' se entedera que se ha verificado la
conversion de los bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por
la afirmativa, y por nuestra parte creemos que tal debe ser la soluciion.
El destino de las cosas no depende tanto de una declaracion expresa
como del uso publico de las mismas, y cuanda el uso publico cese con
respecto de determinados bienes, cesa tambien su situacion en el
dominio publico. Si una fortaleza en ruina se abandona y no se repara,
si un trozo de la via publica se abandona tambien por constituir otro
nuevo an mejores condiciones....ambos bienes cesan de estar Codigo,
y leyes especiales mas o memos administrativas. (3 Manresa,
Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis
supplied)
The majority opinion says that none of the executive acts pointed to by
the Government purported, expressly or definitely, to convert the
Roppongi property into patrimonial property of the Republic.
Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property
originally intended for and devoted to public service into patrimonial
property of the State, that is, property susceptible of disposition to and
appropration by private persons. These executive acts, in their totality if
not each individual act, make crystal clear the intent of the Executive
Department to effect such conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a
Committee to study the disposition/utilization of the Government's
property in Japan, The Committee was composed of officials of the
Executive Department: the Executive Secretary; the Philippine
Ambassador to Japan; and representatives of the Department of
Foreign Affairs and the Asset Privatization Trust. On 19 September
1988, the Committee recommended to the President the sale of one of
the lots (the lot specifically in Roppongi) through public bidding. On 4
October 1988, the President approved the recommendation of the
Committee.
On 14 December 1988, the Philippine Government by diplomatic note
informed the Japanese Ministry of Foreign Affairs of the Republic's
intention to dispose of the property in Roppongi. The Japanese
Government through its Ministry of Foreign Affairs replied that it
interposed no objection to such disposition by the Republic.
Subsequently, the President and the Committee informed the leaders of
the House of Representatives and of the Senate of the Philippines of the
proposed disposition of the Roppongi property.
(b) Executive Order No. 296, which was issued by the President on 25
July 1987. Assuming that the majority opinion is right in saying that
Executive Order No. 296 is insufficient to authorize the sale of the
Roppongi property, it is here submitted with respect that Executive Order
No. 296 is more than sufficient to indicate an intention to convert the
property previously devoted to public service into patrimonial property
that is capable of being sold or otherwise disposed of
(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or
for any other public purposes. Assuming (but only arguendo) that non-
use does not, by itself, automatically convert the property into
patrimonial property. I respectfully urge that prolonged non-
use, conjoined with the other factors here listed, was legally effective to
convert the lot in Roppongi into patrimonial property of the State.
Actually, as already pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the actual dedication
of public property to some use other than public use or public service,
was sufficient to convert such property into patrimonial property of the
local governmental entity concerned. Also as pointed out above,
Manresa reached the same conclusion in respect of conversion of
property of the public domain of the State into property of the private
domain of the State.
The majority opinion states that "abandonment cannot be inferred from
the non-use alone especially if the non-use was attributable not to the
Government's own deliberate and indubitable will but to lack of financial
support to repair and improve the property" (Majority Opinion, p. 13).
With respect, it may be stressed that there is no abandonment involved
here, certainly no abandonment of property or of property rights. What
is involved is the charge of the classification of the property from
property of the public domain into property of the private domain of the
State. Moreover, if for fourteen (14) years, the Government did not see
fit to appropriate whatever funds were necessary to maintain the
property in Roppongi in a condition suitable for diplomatic representation
purposes, such circumstance may, with equal logic, be construed as a
manifestation of the crystalizing intent to change the character of the
property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive
Department for the sale of the lot in Roppongi. The circumstance that
this bidding was not successful certainly does not argue against an
intent to convert the property involved into property that is disposable by
bidding.
The above set of events and circumstances makes no sense at all if it
does not, as a whole, show at least the intent on the part of the Executive
Department (with the knowledge of the Legislative Department) to
convert the property involved into patrimonial property that is susceptible
of being sold.
II
Having reached an affirmative answer in respect of the first issue, it is
necessary to address the second issue of whether or not there exists
legal authority for the sale or disposition of the Roppongi property.
The majority opinion refers to Section 79(f) of the Revised Administrative
Code of 1917 which reads as follows:
SEC. 79 (f). Conveyances and contracts to which the Government is a
party. In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the title
to real estate or to any other property the value of which is in excess of
one hundred thousand pesos, the respective Department Secretary
shall prepare the necessary papers which, together with the proper
recommendations, shall be submitted to the Congress of the Philippines
for approval by the same. Such deed, instrument, or contract shall be
executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the authority therefor be expressly
vested by law in another officer. (Emphasis supplied)
The majority opinion then goes on to state that: "[T]he requirement has
been retained in Section 4, Book I of the Administrative Code of 1987
(Executive Order No. 292)" which reads:
SEC. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the
deed of conveyance shall be executed in behalf of the government by
the following:
(1) For property belonging to and titled in the name of the Republic of
the Philippines, by the President, unless the authority therefor is
expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
Two points need to be made in this connection. Firstly, the requirement
of obtaining specific approval of Congress when the price of the real
property being disposed of is in excess of One Hundred Thousand
Pesos (P100,000.00) under the Revised Administrative Code of 1917,
has been deleted from Section 48 of the 1987 Administrative Code.
What Section 48 of the present Administrative Code refers to
isauthorization by law for the conveyance. Section 48 does not purport
to be itself a source of legal authority for conveyance of real property of
the Government. For Section 48 merely specifies the official authorized
to execute and sign on behalf of the Government the deed of
conveyance in case of such a conveyance.
11
Secondly, examination of our statute books shows that authorization by
law for disposition of real property of the private domain of the
Government, has been granted by Congress both in the form of (a) a
general, standing authorization for disposition of patrimonial property of
the Government; and (b) specific legislation authorizing the disposition
of particular pieces of the Government's patrimonial property.
Standing legislative authority for the disposition of land of the private
domain of the Philippines is provided by Act No. 3038, entitled "An Act
Authorizing the Secretary of Agriculture and Natural Resources to Sell
or Lease Land of the Private Domain of the Government of the Philippine
Islands (now Republic of the Philippines)", enacted on 9 March 1922.
The full text of this statute is as follows:
Be it enacted by the Senate and House of Representatives of the
Philippines in Legislature assembled and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural Resources (now
Secretary of the Environment and Natural Resources) is hereby
authorized to sell or lease land of the private domain of the Government
of the Philippine Islands, or any part thereof, to such persons,
corporations or associations as are, under the provisions of Act
Numbered Twenty-eight hundred and seventy-four, (now
Commonwealth Act No. 141, as amended) known as the Public Land
Act, entitled to apply for the purchase or lease or agricultural public land.
SECTION 2. The sale of the land referred to in the preceding
section shall, if such land is agricultural, be made in the manner and
subject to the limitations prescribed in chapters five and six, respectively,
of said Public Land Act, and if it be classified differently, in conformity
with the provisions of chapter nine of said Act: Provided, however, That
the land necessary for the public service shall be exempt from the
provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922. (Emphasis supplied)
Lest it be assumed that Act No. 3038 refers only to agricultural lands of
the private domain of the State, it must be noted that Chapter 9 of the
old Public Land Act (Act No. 2874) is now Chapter 9 of the present Public
Land Act (Commonwealth Act No. 141, as amended) and that both
statutes refer to: "any tract of land of the public domain which being
neither timber nor mineral land, is intended to be used forresidential
purposes or for commercial or industrial purposes other than
agricultural" (Emphasis supplied).itc-asl In other words, the statute authorities.
covers the sale or lease or residential, commercial or industrial land of
the private domain of the State.
Implementing regulations have been issued for the carrying out of the
provisions of Act No. 3038. On 21 December 1954, the then Secretary
of Agriculture and Natural Resources promulgated Lands Administrative
Orders Nos. 7-6 and 7-7 which were entitled, respectively:
"Supplementary Regulations Governing the Sale of the Lands of the
Private Domain of the Republic of the Philippines"; and "Supplementary
Regulations Governing the Lease of Lands of Private Domain of the
Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).
It is perhaps well to add that Act No. 3038, although now sixty-eight (68)
years old, is still in effect and has not been repealed. 1
Specific legislative authorization for disposition of particular patrimonial
properties of the State is illustrated by certain earlier statutes. The first
of these was Act No. 1120, enacted on 26 April 1904, which provided
for the disposition of the friar lands, purchased by the Government from
the Roman Catholic Church, to bona fide settlers and occupants thereof
or to other persons. In Jacinto v. Director of Lands(49 Phil. 853 [1926]),
these friar lands were held to be private and patrimonial properties of
the State. Act No. 2360, enacted on -28 February 1914, authorized the
sale of the San Lazaro Estate located in the City of Manila, which had
also been purchased by the Government from the Roman Catholic
Church. In January 1916, Act No. 2555 amended Act No. 2360 by
including therein all lands and buildings owned by the Hospital and the
Foundation of San Lazaro theretofor leased by private persons, and
which were also acquired by the Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears, to my
knowledge, to be only one statute authorizing the President to dispose
of a specific piece of property. This statute is Republic Act No. 905,
enacted on 20 June 1953, which authorized the
President to sell an Identified parcel of land of the private domain of the
National Government to the National Press Club of the Philippines, and
to other recognized national associations of professionals with academic
standing, for the nominal price of P1.00. It appears relevant to note that
Republic Act No. 905 was not an outright disposition in perpetuity of the
property involved- it provided for reversion of the property to the National
Government in case the National Press Club stopped using it for its
headquarters. What Republic Act No. 905 authorized was really
a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing
legislative authorization for disposition of the Roppongi property which,
in my view, has been converted into patrimonial property of the
Republic. 2
To some, the submission that Act No. 3038 applies not only to lands of
the private domain of the State located in the Philippines but also to
patrimonial property found outside the Philippines, may appear strange
or unusual. I respectfully submit that such position is not any more
unusual or strange than the assumption that Article 420 of the Civil Code
applies not only to property of the Republic located within Philippine
territory but also to property found outside the boundaries of the
Republic.
It remains to note that under the well-settled doctrine that heads of
Executive Departments are alter egosof the President (Villena v.
Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the
constitutional power of control exercised by the President over
department heads (Article VII, Section 17,1987 Constitution), the
President herself may carry out the function or duty that is specifically
lodged in the Secretary of the Department of Environment and Natural
Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very
least, the President retains the power to approve or disapprove the
exercise of that function or duty when done by the Secretary of
Environment and Natural Resources.
It is hardly necessary to add that the foregoing analyses and
submissions relate only to the austere question of existence of legal
power or authority. They have nothing to do with much debated
questions of wisdom or propriety or relative desirability either of the
proposed disposition itself or of the proposed utilization of the
anticipated proceeds of the property involved. These latter types of
considerations He within the sphere of responsibility of the political
departments of government the Executive and the Legislative
For all the foregoing, I vote to dismiss the Petitions for Prohibition in both
G.R. Nos. 92013 and 92047.
F. Resolution of Conflict Problems
1. Phases involved in resolving conflict problems
G.R. No. 149177 November 23, 2007
KAZUHIRO HASEGAWA and NIPPON ENGINEERING
CONSULTANTS CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the April 18, 2001 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001
Resolution2denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd.
(Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,3 entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.4 The agreement provides that
respondent was to extend professional services to Nippon for a year
starting on April 1, 1999.5 Nippon then assigned respondent to work as
the project manager of the Southern Tagalog Access Road (STAR)
Project in the Philippines, following the company's consultancy contract
with the Philippine Government.6
12
When the STAR Project was near completion, the Department of Public
Works and Highways (DPWH) engaged the consultancy services of
Nippon, on January 28, 2000, this time for the detailed engineering and
construction supervision of the Bongabon-Baler Road Improvement
(BBRI) Project.7 Respondent was named as the project manager in the
contract's Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general
manager for its International Division, informed respondent that the
company had no more intention of automatically renewing his ICA. His
services would be engaged by the company only up to the substantial
completion of the STAR Project on March 31, 2000, just in time for the
ICA's expiry.9
Threatened with impending unemployment, respondent, through his
lawyer, requested a negotiation conference and demanded that he be
assigned to the BBRI project. Nippon insisted that respondents contract
was for a fixed term that had already expired, and refused to negotiate
for the renewal of the ICA.10
As he was not able to generate a positive response from the petitioners,
respondent consequently initiated on June 1, 2000 Civil Case No. 00-
0264 for specific performance and damages with the Regional Trial
Court of Lipa City.11
For their part, petitioners, contending that the ICA had been perfected in
Japan and executed by and between Japanese nationals, moved to
dismiss the complaint for lack of jurisdiction. They asserted that the
claim for improper pre-termination of respondent's ICA could only be
heard and ventilated in the proper courts of Japan following the
principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's
request for the replacement of Kitamura by a certain Y. Kotake as project
manager of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government
v. Frank14 that matters connected with the performance of contracts are
regulated by the law prevailing at the place of performance,15 denied the
motion to dismiss.16 The trial court subsequently denied petitioners'
motion for reconsideration,17 prompting them to file with the appellate
court, on August 14, 2000, their first Petition for Certiorari under Rule
65 [docketed as CA-G.R. SP No. 60205].18 On August 23, 2000, the CA
resolved to dismiss the petition on procedural groundsfor lack of
statement of material dates and for insufficient verification and
certification against forum shopping.19 An Entry of Judgment was later
issued by the appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on
September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating therein
the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the same
issues as those in the first, was docketed as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered
the assailed April 18, 2001 Decision22finding no grave abuse of
discretion in the trial court's denial of the motion to dismiss. The CA
ruled, among others, that the principle of lex loci celebrationis was not
applicable to the case, because nowhere in the pleadings was the
validity of the written agreement put in issue. The CA thus declared that
the trial court was correct in applying instead the principle of lex loci
solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the
CA in the assailed July 25, 2001 Resolution.24
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review
on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE
CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A
QUO WAS ENTERED INTO BY AND BETWEEN TWO
JAPANESE NATIONALS, WRITTEN WHOLLY IN THE
JAPANESE LANGUAGE AND EXECUTED IN TOKYO,
JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN OVERLOOKING THE NEED TO REVIEW OUR
ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT
DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether
the subject matter jurisdiction of Philippine courts in civil cases for
specific performance and damages involving contracts executed outside
the country by foreign nationals may be assailed on the principles of lex
loci celebrationis, lex contractus, the "state of the most significant
relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the
procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in
CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the
same issues as those in the first one) and the instant petition for review
thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum shopping, it
was a dismissal without prejudice.27 The same holds true in the CA's
dismissal of the said case due to defects in the formal requirement of
verification28 and in the other requirement in Rule 46 of the Rules of
Court on the statement of the material dates.29 The dismissal being
without prejudice, petitioners can re-file the petition, or file a second
petition attaching thereto the appropriate verification and certification
as they, in fact didand stating therein the material dates, within the
prescribed period30 in Section 4, Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a
decision on the merits and leaves the parties free to litigate the matter
in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the merits
does not bar another action involving the same parties, on the same
subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has
no res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the first
had already been dismissed on procedural grounds,33 petitioners are no
longer required by the Rules to indicate in their certification of non-forum
shopping in the instant petition for review of the second certiorari
petition, the status of the aforesaid first petition before the CA. In any
case, an omission in the certificate of non-forum shopping about any
event that will not constitute res judicata and litis pendentia, as in the
present case, is not a fatal defect. It will not warrant the dismissal and
nullification of the entire proceedings, considering that the evils sought
to be prevented by the said certificate are no longer present. 34
The Court also finds no merit in respondent's contention that petitioner
Hasegawa is only authorized to verify and certify, on behalf of Nippon,
the certiorari petition filed with the CA and not the instant petition. True,
the Authorization35 dated September 4, 2000, which is attached to the
second certiorari petition and which is also attached to the instant
petition for review, is limited in scopeits wordings indicate that
Hasegawa is given the authority to sign for and act on behalf of the
company only in the petition filed with the appellate court, and that
authority cannot extend to the instant petition for review.36 In a plethora
of cases, however, this Court has liberally applied the Rules or even
suspended its application whenever a satisfactory explanation and a
subsequent fulfillment of the requirements have been made.37 Given
that petitioners herein sufficiently explained their misgivings on this point
and appended to their Reply38 an updated Authorization39 for Hasegawa
to act on behalf of the company in the instant petition, the Court finds
the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed out,
and to which we agree, Hasegawa is truly not authorized to act on behalf
of Nippon in this case. The aforesaid September 4, 2000 Authorization
and even the subsequent August 17, 2001 Authorization were issued
only by Nippon's president and chief executive officer, not by the
company's board of directors. In not a few cases, we have ruled that
corporate powers are exercised by the board of directors; thus, no
person, not even its officers, can bind the corporation, in the absence of
authority from the board.40Considering that Hasegawa verified and
certified the petition only on his behalf and not on behalf of the other
13
petitioner, the petition has to be denied pursuant to Loquias v. Office of
the Ombudsman.41 Substantial compliance will not suffice in a matter
that demands strict observance of the Rules.42 While technical rules of
procedure are designed not to frustrate the ends of justice, nonetheless,
they are intended to effect the proper and orderly disposition of cases
and effectively prevent the clogging of court dockets.43
Further, the Court has observed that petitioners incorrectly filed a Rule
65 petition to question the trial court's denial of their motion to dismiss.
It is a well-established rule that an order denying a motion to dismiss is
interlocutory, and cannot be the subject of the extraordinary petition
for certiorari or mandamus. The appropriate recourse is to file an
answer and to interpose as defenses the objections raised in the motion,
to proceed to trial, and, in case of an adverse decision, to elevate the
entire case by appeal in due course.44 While there are recognized
exceptions to this rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners
question its jurisdiction to hear and resolve the civil case for specific
performance and damages filed by the respondent. The ICA subject of
the litigation was entered into and perfected in Tokyo, Japan, by
Japanese nationals, and written wholly in the Japanese language. Thus,
petitioners posit that local courts have no substantial relationship to the
parties46following the [state of the] most significant relationship rule in
Private International Law.47
The Court notes that petitioners adopted an additional but different
theory when they elevated the case to the appellate court. In the Motion
to Dismiss48 filed with the trial court, petitioners never contended that the
RTC is an inconvenient forum. They merely argued that the applicable
law which will determine the validity or invalidity of respondent's claim is
that of Japan, following the principles of lex loci celebrationis and lex
contractus.49 While not abandoning this stance in their petition before
the appellate court, petitioners on certiorari significantly invoked the
defense of forum non conveniens.50 On petition for review before this
Court, petitioners dropped their other arguments, maintained the forum
non conveniens defense, and introduced their new argument that the
applicable principle is the [state of the] most significant relationship
rule.51
Be that as it may, this Court is not inclined to deny this petition merely
on the basis of the change in theory, as explained in Philippine Ports
Authority v. City of Iloilo.52 We only pointed out petitioners' inconstancy
in their arguments to emphasize their incorrect assertion of conflict of
laws principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation be
initiated? (2) Which law will the court apply? and (3) Where can the
resulting judgment be enforced?53
Analytically, jurisdiction and choice of law are two distinct
concepts.54 Jurisdiction considers whether it is fair to cause a defendant
to travel to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the
case is fair to both parties. The power to exercise jurisdiction does not
automatically give a state constitutional authority to apply forum law.
While jurisdiction and the choice of the lex fori will often coincide, the
"minimum contacts" for one do not always provide the necessary
"significant contacts" for the other.55 The question of whether the law of
a state can be applied to a transaction is different from the question of
whether the courts of that state have jurisdiction to enter a judgment.56
In this case, only the first phase is at issue
jurisdiction.1wphi1 Jurisdiction, however, has various aspects. For a
court to validly exercise its power to adjudicate a controversy, it must
have jurisdiction over the plaintiff or the petitioner, over the defendant or
the respondent, over the subject matter, over the issues of the case and,
in cases involving property, over the res or the thing which is the subject
of the litigation.57 In assailing the trial court's jurisdiction herein,
petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred
by the sovereign authority which establishes and organizes the court. It
is given only by law and in the manner prescribed by law. 58 It is further
determined by the allegations of the complaint irrespective of whether
the plaintiff is entitled to all or some of the claims asserted therein. 59 To
succeed in its motion for the dismissal of an action for lack of jurisdiction
over the subject matter of the claim,60 the movant must show that the
court or tribunal cannot act on the matter submitted to it because no law
grants it the power to adjudicate the claims.61
In the instant case, petitioners, in their motion to dismiss, do not claim
that the trial court is not properly vested by law with jurisdiction to hear
the subject controversy for, indeed, Civil Case No. 00-0264 for specific
performance and damages is one not capable of pecuniary estimation
and is properly cognizable by the RTC of Lipa City. 62What they rather
raise as grounds to question subject matter jurisdiction are the principles
of lex loci celebrationisand lex contractus, and the "state of the most
significant relationship rule."
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the "law of the place of the
ceremony"63 or the law of the place where a contract is made. 64 The
doctrine of lex contractus or lex loci contractus means the "law of the
place where a contract is executed or to be performed." 65 It controls the
nature, construction, and validity of the contract66 and it may pertain to
the law voluntarily agreed upon by the parties or the law intended by
them either expressly or implicitly.67 Under the "state of the most
significant relationship rule," to ascertain what state law to apply to a
dispute, the court should determine which state has the most substantial
connection to the occurrence and the parties. In a case involving a
contract, the court should consider where the contract was made, was
negotiated, was to be performed, and the domicile, place of business, or
place of incorporation of the parties.68 This rule takes into account
several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved. 69
Since these three principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the second phase, the
choice of law.70 They determine which state's law is to be applied in
resolving the substantive issues of a conflicts problem. 71 Necessarily, as
the only issue in this case is that of jurisdiction, choice-of-law rules are
not only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is
exposed by the fact that they have not yet pointed out any conflict
between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation requiring
the application of the conflict of laws rules. 72 Also, when the law of a
foreign country is invoked to provide the proper rules for the solution of
a case, the existence of such law must be pleaded and proved. 73
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are
three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over the case and
apply the internal law of the forum; or (3) assume jurisdiction over the
case and take into account or apply the law of some other State or
States.74 The courts power to hear cases and controversies is derived
from the Constitution and the laws. While it may choose to recognize
laws of foreign nations, the court is not limited by foreign sovereign law
short of treaties or other formal agreements, even in matters regarding
rights provided by foreign sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used
to deprive the trial court of its jurisdiction herein. First, it is not a proper
basis for a motion to dismiss because Section 1, Rule 16 of the Rules of
Court does not include it as a ground.77 Second, whether a suit should
be entertained or dismissed on the basis of the said doctrine depends
largely upon the facts of the particular case and is addressed to the
sound discretion of the trial court.78 In this case, the RTC decided to
assume jurisdiction. Third, the propriety of dismissing a case based on
this principle requires a factual determination; hence, this conflicts
principle is more properly considered a matter of defense. 79
Accordingly, since the RTC is vested by law with the power to entertain
and hear the civil case filed by respondent and the grounds raised by
petitioners to assail that jurisdiction are inappropriate, the trial and
appellate courts correctly denied the petitioners motion to dismiss.
WHEREFORE, premises considered, the petition for review
on certiorari is DENIED.
SO ORDERED.
14
 2. Jurisdiction
G.R. No. 111685 August 20, 2001
DAVAO LIGHT & POWER CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS, HON. RODOLFO M.
BELLAFLOR, Presiding Judge of Branch 11, RTC-Cebu and
FRANCISCO TESORERO, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari assailing the Decision
dated August 31, 1993 rendered by the Sixteenth Division1 of the Court
of Appeals in CA-G.R. SP No. 29996, the dispositive portion of which
states:
WHEREFORE, the petition for review filed by Davao Light &
Power Co., Inc. is hereby DENIED DUE COURSE and the
same is DISMISSED.
IT IS SO ORDERED.
The antecedent facts are:
On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a
complaint for damages2 against private respondent Francisco Tesorero
before the Regional Trial Court of Cebu City, Branch 11. Docketed as
CEB-11578, the complaint prayed for damages in the amount of
P11,000,000.00.
In lieu of an answer, private respondent filed a motion to
dismiss3 claiming that: (a) the complaint did not state a cause of action;
(b) the plaintiff's claim has been extinguished or otherwise rendered
moot and academic; (c) there was non-joinder of indispensable parties;
and (d) venue was improperly laid. Of these four (4) grounds, the last
mentioned is most material in this case at bar.
On August 3, 1992, the trial court issued a Resolution4 dismissing
petitioner's complaint on the ground of improper venue. The trial court
stated that:
The plaintiff being a private corporation undoubtedly Banilad,
Cebu City is the plaintiff's principal place of business as
alleged in the complaint and which for purposes of venue is
considered as its residence. x x x.
However, in defendant's motion to dismiss, it is alleged and
submitted that the principal office of plaintiff is at "163-165 P.
Reyes Street, Davao City as borne out by the Contract of
Lease (Annex 2 of the motion) and another Contract of Lease
of Generating Equipment (Annex 3 of the motion) executed by
the plaintiff with the NAPOCOR.
The representation made by the plaintiff in the 2
aforementioned Lease Contracts stating that its principal
office is at "163-165 P. Reyes Street, Davao City" bars the
plaintiff from denying the same.
The choice of venue should not be left to plaintiff's whim or
caprises [sic]. He may be impelled by some ulterior motivation
in choosing to file a case in a court even if not allowed by the
rules of venue.
Another factor considered by the Courts in deciding
controversies regarding venue are considerations of judicial
economy and administration, as well as the convenience of
the parties for which the rules of procedure and venue were
formulated x x x.
Considering the foregoing, the Court is of the opinion that the
principal office of plaintiff is at Davao City which for purposes
of venue is the residence of plaintiff.
Hence, the case should be filed in Davao City.
The motion on the ground of improper venue is granted and
the complaint DISMISSED on that ground.
SO ORDERED.
Petitioner's motion for reconsideration5 was denied in an Order6 dated
October 1, 1992.
From the aforesaid resolution and order, petitioner originally filed before
this Court on November 20, 1992 a petition for review on certiorari
docketed as G.R. No. 107381.7 We declined to take immediate
cognizance of the case, and in a Resolution dated January 11,
1993,8 referred the same to the Court of Appeals for resolution. The
petition was docketed in the appellate court as CA-G.R. SP No. 29996.
On August 31, 1993, the Court of Appeals rendered the assailed
judgment9 denying due course and dismissing the petition. Counsel for
petitioner received a copy of the decision on September 6,
1993.10 Without filing a motion for reconsideration, petitioner filed the
instant petition, assailing the judgment of the Court of Appeals on the
following grounds:
5.01. Respondent Court of Appeals denied petitioner
procedural due process by failing to resolve the third of the
above-stated issues.
5.02. Petitioner's right to file its action for damages against
private respondent in Cebu City where its principal office is
located, and for which it paid P55,398.50 in docket fees, may
not be negated by a supposed estoppel absent the essential
elements of the false statement having been made to private
respondent and his reliance on good faith on the truth thereof,
and private respondent's action or inaction based thereon of
such character as to change his position or status to his injury,
detriment or prejudice.
The principal issue in the case at bar involves a question of venue. It is
to be distinguished from jurisdiction, as follows:
Venue and jurisdiction are entirely distinct matters.
Jurisdiction may not be conferred by consent or waiver upon
a court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed
by statute may be changed by the consent of the parties and
an objection that the plaintiff brought his suit in the wrong
county may be waived by the failure of the defendant to make
a timely objection. In either case, the court may render a valid
judgment. Rules as to jurisdiction can never be left to the
consent or agreement of the parties, whether or not a
prohibition exists against their alteration.11
It is private respondent's contention that the proper venue is Davao City,
and not Cebu City where petitioner filed Civil Case No. CEB-11578.
Private respondent argues that petitioner is estopped from claiming that
its residence is in Cebu City, in view of contradictory statements made
by petitioner prior to the filing of the action for damages. First, private
respondent adverts to several contracts12 entered into by petitioner with
the National Power Corporation (NAPOCOR) where in the description
of personal circumstances, the former states that its principal office is at
"163-165 P. Reyes St., Davao City." According to private respondent the
petitioner's address in Davao City, as given in the contracts, is an
admission which should bind petitioner.
In addition, private respondent points out that petitioner made several
judicial admissions as to its principal office in Davao City consisting
principally of allegations in pleadings filed by petitioner in a number of
civil cases pending before the Regional Trial Court of Davao in which it
was either a plaintiff or a defendant.13
Practically the same issue was addressed in Young Auto Supply Co. v.
Court of Appeals.14 In the aforesaid case, the defendant therein sought
the dismissal of an action filed by the plaintiff, a corporation, before the
Regional Trial Court of Cebu City, on the ground of improper venue. The
trial court denied the motion to dismiss; on certiorari before the Court of
Appeals, the denial was reversed and the case was dismissed.
According to the appellate tribunal, venue was improperly laid since the
address of the plaintiff was supposedly in Pasay City, as evidenced by
a contract of sale, letters and several commercial documents sent by
the plaintiff to the defendant, even though the plaintiff's articles of
incorporation stated that its principal office was in Cebu City. On appeal,
we reversed the Court of Appeals. We reasoned out thus:
In the Regional Trial Courts, all personal actions are
commenced and tried in the province or city where the
defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff x x x.
15
 There are two plaintiffs in the case at bench: a natural person
and a domestic corporation. Both plaintiffs aver in their
complaint that they are residents of Cebu City, thus:
xxx xxx xxx
The Article of Incorporation of YASCO (SEC Reg. No. 22083)
states:
"THIRD. That the place where the principal office of the
corporation is to be established or located is at Cebu City,
Philippines (as amended on December 20, 1980 and further
amended on December 20, 1984)" x x x.
A corporation has no residence in the same sense in which
this term is applied to a natural person. But for practical
purposes, a corporation is in a metaphysical sense a resident
of the place where its principal office is located as stated in
the articles of incorporation (Cohen v. Benguet Commercial
Co., Ltd., 34 Phil. 526 [1916] Clavecilla Radio System v.
Antillo, 19 SCRA 379 [1967]). The Corporation Code precisely
requires each corporation to specify in its articles of
incorporation the "place where the principal office of the
corporation is to be located which must be within the
Philippines" (Sec. 14[3]). The purpose of this requirement is
to fix the residence of a corporation in a definite place, instead
of allowing it to be ambulatory.
In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]),
this Court explained why actions cannot be filed against a
corporation in any place where the corporation maintains its
branch offices. The Court ruled that to allow an action to be
instituted in any place where the corporation has branch
offices, would create confusion and work untold
inconvenience to said entity. By the same token, a corporation
cannot be allowed to file personal actions in a place other than
its principal place of business unless such a place is also the
residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter
questioned the venue on the ground that its principal place of
business was in Cebu City, Roxas could argue that YASCO
was in estoppel because it misled Roxas to believe that Pasay
City was its principal place of business. But this is not the case
before us.
With the finding that the residence of YASCO for purposes of
venue is in Cebu City, where its principal place of business is
located, it becomes unnecessary to decide whether Garcia is
also a resident of Cebu City and whether Roxas was in
estoppel from questioning the choice of Cebu City as the
venue. [emphasis supplied]
The same considerations apply to the instant case. It cannot be disputed
that petitioner's principal office is in Cebu City, per its amended articles
of incorporation15 and by-laws.16 An action for damages being a
personal action,17 venue is determined pursuant to Rule 4, section 2 of
the Rules of Court, to wit:
Venue of personal actions. All other actions may be
commenced and tied where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the
plaintiff.18
Private respondent is not a party to any of the contracts presented
before us. He is a complete stranger to the covenants executed between
petitioner and NAPOCOR, despite his protestations that he is privy
thereto, on the rather flimsy ground that he is a member of the public for
whose benefit the electric generating equipment subject of the contracts
were leased or acquired. We are likewise not persuaded by his
argument that the allegation or representation made by petitioner in
either the complaints or answers it filed in several civil cases that its
residence is in Davao City should estop it from filing the damage suit
before the Cebu courts. Besides there is no showing that private
respondent is a party in those civil cases or that he relied on such
representation by petitioner.
WHEREFORE, the instant petition is hereby GRANTED. The appealed
decision is hereby REVERSED and SET ASIDE. The Regional Trial
Court of Cebu City, Branch 11 is hereby directed to proceed with Civil
Case No. CEB-11578 with all deliberate dispatch. No pronouncement
as to costs.
WE CONCUR:
SO ORDERED.
3. Choice of Law/Characterization
a. Doctrine of Qualification
G.R. No. 122191 October 8, 1998
SAUDI ARABIAN AIRLINES, petitioner,
vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON.
RODOLFO A. ORTIZ, in his capacity as Presiding Judge of Branch
89, Regional Trial Court of Quezon City, respondents.
See above
b. Considerations of Public Policy
G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B.
EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS,
thru and by their Attorney-in-fact, Atty. GERARDO A. DEL
MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S
ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION,
BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA
INTERNATIONAL BUILDERS CORPORATION, respondents.
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al.
v. Philippine Overseas Employment Administration's Administrator, et.
al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the
National Labor Relations Commission (NLRC) in POEA
Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2)
to render a new decision: (i) declaring private respondents as
in default; (ii) declaring the said labor cases as a class suit;
(iii) ordering Asia International Builders Corporation (AIBC)
and Brown and Root International Inc. (BRII) to pay the claims
of the 1,767 claimants in said labor cases; (iv) declaring Atty.
Florante M. de Castro guilty of forum-shopping; and (v)
dismissing POEA Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin,
et. al., v. Hon. National Labor Relations Commission, et. al.," was filed
under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of
NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-
10-799 and
L-86-05-460 insofar as it: (i) applied the three-year
prescriptive period under the Labor Code of the Philippines
instead of the ten-year prescriptive period under the Civil
Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of
petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders
Corporation, et. al., v. National Labor Relations Commission, et. al." was
filed under Rule 65 of the Revised Rules of Court:
16
 (1) to reverse the Resolution dated September 2, 1991 of
NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-
10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants;
and
(2) to reverse the Resolution dated March 21, 1992 of NLRC
insofar as it denied the motions for reconsideration of AIBC
and BRII (Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the
decision of POEA in four labor cases: (1) awarded monetary benefits
only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to
conduct hearings and to receive evidence on the claims dismissed by
the POEA for lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third
Division while G.R. Nos. 104911-14 were raffled to the Second Division.
In the Resolution dated July 26, 1993, the Second Division referred G.R.
Nos. 104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p.
895).
In the Resolution dated September 29, 1993, the Third Division granted
the motion filed in G.R. Nos. 104911-14 for the consolidation of said
cases with G.R. Nos. 104776 and 105029-32, which were assigned to
the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos.
105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated
October 27, 1993, the First Division granted the motion to consolidate
G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-
14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).
I reversal of the said order of the POEA Administrator. Claimants opposed
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato
B. Evangelista, in their own behalf and on behalf of 728 other overseas
contract workers (OCWs) instituted a class suit by filing an "Amended
Complaint" with the Philippine Overseas Employment Administration
(POEA) for money claims arising from their recruitment by AIBC and
employment by BRII (POEA Case No. L-84-06-555). The claimants were
represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and
is engaged in construction; while AIBC is a domestic corporation
licensed as a service contractor to recruit, mobilize and deploy Filipino
workers for overseas employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired
portion of the employment contracts, which was terminated prematurely,
and secondarily, the payment of the interest of the earnings of the Travel
and Reserved Fund, interest on all the unpaid benefits; area wage and
salary differential pay; fringe benefits; refund of SSS and premium not
remitted to the SSS; refund of withholding tax not remitted to the BIR;
penalties for committing prohibited practices; as well as the suspension
of the license of AIBC and the accreditation of BRII (G.R. No.
104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the
complaint and was given, together with BRII, up to July 5, 1984 to file its
answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII,
ordered the claimants to file a bill of particulars within ten days from
receipt of the order and the movants to file their answers within ten days
from receipt of the bill of particulars. The POEA Administrator also
scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and
Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out of
the Records", the "Complaint" and the "Compliance and Manifestation."
On July 25, 1984, the claimants filed their "Rejoinder and Comments,"
averring, among other matters, the failure of AIBC and BRII to file their
answers and to attend the pre-trial conference on July 25, 1984. The
claimants alleged that AIBC and BRII had waived their right to present
evidence and had defaulted by failing to file their answers and to attend
the pre-trial conference.
On October 2, 1984, the POEA Administrator denied the "Motion to
Strike Out of the Records" filed by AIBC but required the claimants to
correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply
with the Order of October 2, 1984 and filed an "Urgent Manifestation,"
praying that the POEA Administrator direct the parties to submit
simultaneously their position papers, after which the case should be
deemed submitted for decision. On the same day, Atty. Florante de
Castro filed another complaint for the same money claims and benefits
in behalf of several claimants, some of whom were also claimants in
POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order
dated October 2, 1984 and an "Urgent Manifestation," praying that the
POEA direct the parties to submit simultaneously their position papers
after which the case would be deemed submitted for decision. On the
same day, AIBC asked for time to file its comment on the "Compliance"
and "Urgent Manifestation" of claimants. On November 6, 1984, it filed
a second motion for extension of time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its
motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions for
extension of time and asked that AIBC and BRII be declared in default
for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying,
among other reliefs, that claimants should be ordered to amend their
complaint.
On December 27, 1984, the POEA Administrator issued an order
directing AIBC and BRII to file their answers within ten days from receipt
of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the
the appeal, claiming that it was dilatory and praying that AIBC and BRII
be declared in default.
On April 2, 1985, the original claimants filed an "Amended Complaint
and/or Position Paper" dated March 24, 1985, adding new demands:
namely, the payment of overtime pay, extra night work pay, annual leave
differential pay, leave indemnity pay, retirement and savings benefits
and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On
April 15, 1985, the POEA Administrator directed AIBC to file its answer
to the amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary
Judgment." On the same day, the POEA issued an order directing AIBC
and BRII to file their answers to the "Amended Complaint," otherwise,
they would be deemed to have waived their right to present evidence
and the case would be resolved on the basis of complainant's evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper
Class Suit and Motion for Bill of Particulars Re: Amended Complaint
dated March 24, 1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive
to AIBC and BRII to file their answers in POEA Case No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC,
together with a petition for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the POEA Administrator from
hearing the labor cases and suspended the period for the filing of the
answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to
include additional claimants in the case and to investigate alleged
wrongdoings of BRII, AIBC and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a
complaint (POEA Case No. L-85-10-777) against AIBC and BRII with
the POEA, demanding monetary claims similar to those subject of POEA
Case No. L-84-06-555. In the same month, Solomon Reyes also filed
his own complaint (POEA Case No. L-85-10-779) against AIBC and
BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates
asked for the substitution of the original counsel of record and the
cancellation of the special powers of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the
claim to enforce attorney's lien.
17
On May 29, 1986, Atty. De Castro filed a complaint for money claims
(POEA Case No. 86-05-460) in behalf of 11 claimants including
Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on
February 27, 1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA
Administrator, it is not amiss to mention that two cases were filed in the
Supreme Court by the claimants, namely G.R. No. 72132 on
September 26, 1985 and Administrative Case No. 2858 on March 18,
1986. On May 13, 1987, the Supreme Court issued a resolution in
Administrative Case No. 2858 directing the POEA Administrator to
resolve the issues raised in the motions and oppositions filed in POEA
Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases
with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489),
questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the
amended complaint in POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the petition by informing AIBC
that all its technical objections may properly be resolved in the hearings
before the POEA.
Complaints were also filed before the Ombudsman. The first was filed
on September 22, 1988 by claimant Hermie Arguelles and 18 co-
claimants against the POEA Administrator and several NLRC
Commissioners. The Ombudsman merely referred the complaint to the
Secretary of Labor and Employment with a request for the early
disposition of POEA Case No. L-84-06-555. The second was filed on
April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta
charging AIBC and BRII for violation of labor and social legislations. The
third was filed by Jose R. Santos, Maximino N. Talibsao and Amado B.
Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the
NLRC Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator
its motion for suspension of the period for filing an answer or motion for
extension of time to file the same until the resolution of its motion for
reconsideration of the order of the NLRC dismissing the two appeals.
On April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the
complaint. At the same hearing, the parties were given a period of 15
days from said date within which to submit their respective position
papers. On June 24, 1987 claimants filed their "Urgent Motion to Strike
Out Answer," alleging that the answer was filed out of time. On June 29,
1987, claimants filed their "Supplement to Urgent Manifestational
Motion" to comply with the POEA Order of June 19, 1987. On February
24, 1988, AIBC and BRII submitted their position paper. On March 4,
1988, claimants filed their "Ex-Parte Motion to Expunge from the
Records" the position paper of AIBC and BRII, claiming that it was filed
out of time.
On September 1, 1988, the claimants represented by Atty. De Castro
filed their memorandum in POEA Case No. L-86-05-460. On September
6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On
September 12, 1988, BRII filed its "Reply to Complainant's
Memorandum." On October 26, 1988, claimants submitted their "Ex-
Parte Manifestational Motion and Counter-Supplemental Motion,"
together with 446 individual contracts of employments and service
records. On October 27, 1988, AIBC and BRII filed a "Consolidated
Reply."
On January 30, 1989, the POEA Administrator rendered his decision in
POEA Case No. L-84-06-555 and the other consolidated cases, which
awarded the amount of $824,652.44 in favor of only 324 complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum
For Partial Appeal" from the decision of the POEA. On the same day,
AIBC also filed its motion for reconsideration and/or appeal in addition
to the "Notice of Appeal" filed earlier on February 6, 1989 by another
counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying
for the dismissal of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants'
Appeal Memorandum," together with their "newly discovered evidence"
consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their
"Manifestation," stating among other matters that there were only 728
named claimants. On April 20, 1989, the claimants filed their "Counter-
Manifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of
the Decision dated January 30, 1989 on the grounds that BRII had failed
to appeal on time and AIBC had not posted the supersedeas bond in the
amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the
labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion,"
praying that all the 1,767 claimants be awarded their monetary claims
for failure of private respondents to file their answers within the
reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as
follows:
WHEREFORE, premises considered, the Decision of the
POEA in these consolidated cases is modified to the extent
and in accordance with the following dispositions:
1. The claims of the 94 complainants identified and listed in
Annex "A" hereof are dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are hereby ordered,
jointly and severally, to pay the 149 complainants, identified
and listed in Annex "B" hereof, the peso equivalent, at the time
of payment, of the total amount in US dollars indicated
opposite their respective names;
3. The awards given by the POEA to the 19 complainants
classified and listed in Annex "C" hereof, who appear to have
worked elsewhere than in Bahrain are hereby set aside.
4. All claims other than those indicated in Annex "B", including
those for overtime work and favorably granted by the POEA,
are hereby dismissed for lack of substantial evidence in
support thereof or are beyond the competence of this
Commission to pass upon.
In addition, this Commission, in the exercise of its powers and
authority under Article 218(c) of the Labor Code, as amended
by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco
of this Commission to summon parties, conduct hearings and
receive evidence, as expeditiously as possible, and thereafter
submit a written report to this Commission (First Division) of
the proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached
and made an integral part of this Resolution, whose claims
were dismissed by the POEA for lack of proof of employment
in Bahrain (these complainants numbering 683, are listed in
pages 13 to 23 of the decision of POEA, subject of the
appeals) and,
(b) complainants identified and listed in Annex "E" attached
and made an integral part of this Resolution, whose awards
decreed by the POEA, to Our mind, are not supported by
substantial evidence" (G.R. No. 104776; Rollo, pp. 113-115;
G.R. Nos. 104911-14, pp. 85-87; G.R. Nos. 105029-31, pp.
120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a petition
for certiorari with the Supreme Court (G.R. Nos. 120741-44). The
petition was dismissed in a resolution dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution
of the NLRC were filed. The first, by the claimants represented by Atty.
Del Mundo; the second, by the claimants represented by Atty. De
Castro; and the third, by AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the motions for
reconsideration.
18
Hence, these petitions filed by the claimants represented by Atty. Del
Mundo (G.R. No. 104776), the claimants represented by Atty. De Castro
(G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and
AIBC and BRII have submitted, from time to time, compromise
agreements for our approval and jointly moved for the dismissal of their
respective petitions insofar as the claimants-parties to the compromise
agreements were concerned (See Annex A for list of claimants who
signed quitclaims).
Thus the following manifestations that the parties had arrived at a
compromise agreement and the corresponding motions for the approval
of the agreements were filed by the parties and approved by the Court:
1) Joint Manifestation and Motion involving claimant Emigdio
Abarquez and 47 co-claimants dated September 2, 1992
(G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-
32, Rollo, pp.
470-615);
2) Joint Manifestation and Motion involving petitioner
Bienvenido Cadalin and 82 co-petitioners dated September 3,
1992 (G.R. No. 104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose
M. Aban and 36 co-claimants dated September 17, 1992
(G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No.
104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp.
407-516);
4) Joint Manifestation and Motion involving claimant Antonio
T. Anglo and 17 co-claimants dated October 14, 1992 (G.R.
Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp.
650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio
Bobongo and 6 co-claimants dated January 15, 1993 (G.R.
No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo,
pp. 629-652);
6) Joint Manifestation and Motion involving claimant Valerio
A. Evangelista and 4 co-claimants dated March 10, 1993
(G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No.
104776, Rollo, pp. 1815-1829);
7) Joint Manifestation and Motion involving claimants
Palconeri Banaag and 5 co-claimants dated March 17, 1993
(G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-
14, Rollo, pp. 655-675);
8) Joint Manifestation and Motion involving claimant Benjamin
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R.
Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-
14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-
1814);
9) Joint Manifestation and Motion involving Valerio
Evangelista and 3 co-claimants dated May 10, 1993 (G.R. No.
104776, Rollo, pp. 1815-1829);
10) Joint Manifestation and Motion involving petitioner
Quiterio R. Agudo and 36 co-claimants dated June 14, 1993
(G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos.
104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp.
1066-1183);
11) Joint Manifestation and Motion involving claimant Arnaldo
J. Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo,
pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving claimant Ricardo
C. Dayrit and 2 co-claimants dated September 7, 1993 (G.R.
Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo,
pp. 1243-1254; G.R. Nos. 104911-14,Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante
C. Aceres and 37 co-claimants dated September 8, 1993
(G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-
14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp.
1280-1397);
14) Joint Manifestation and Motion involving Vivencio V.
Abella and 27 co-claimants dated January 10, 1994 (G.R.
Nos. 105029-32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving Domingo B.
Solano and six co-claimants dated August 25, 1994 (G.R.
Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than
fifty volumes now comprising the records of these cases.
From the records, it appears that the complainants-appellants
allege that they were recruited by respondent-appellant AIBC
for its accredited foreign principal, Brown & Root, on various
dates from 1975 to 1983. They were all deployed at various
projects undertaken by Brown & Root in several countries in
the Middle East, such as Saudi Arabia, Libya, United Arab
Emirates and Bahrain, as well as in Southeast Asia, in
Indonesia and Malaysia.
Having been officially processed as overseas contract
workers by the Philippine Government, all the individual
complainants signed standard overseas employment
contracts (Records, Vols. 25-32. Hereafter, reference to the
records would be sparingly made, considering their chaotic
arrangement) with AIBC before their departure from the
Philippines. These overseas employment contracts invariably
contained the following relevant terms and conditions.
PART B
(1) Employment Position Classification :
(Code) :
(2) Company Employment Status :
(3) Date of Employment to Commence on :
(4) Basic Working Hours Per Week :
(5) Basic Working Hours Per Month :
(6) Basic Hourly Rate :
(7) Overtime Rate Per Hour :
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND COMPENSATION
a) The Employee is employed at the hourly rate and overtime
rate as set out in Part B of this Document.
b) The hours of work shall be those set forth by the Employer,
and Employer may, at his sole option, change or adjust such
hours as maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this
agreement, the Employer may, at his sole discretion,
terminate employee's service with cause, under this
agreement at any time. If the Employer terminates the
services of the Employee under this Agreement because of
the completion or termination, or suspension of the work on
which the Employee's services were being utilized, or
because of a reduction in force due to a decrease in scope of
such work, or by change in the type of construction of such
work. The Employer will be responsible for his return
transportation to his country of origin. Normally on the most
expeditious air route, economy class accommodation.
xxx xxx xxx
10. VACATION/SICK LEAVE BENEFITS
19
a) After one (1) year of continuous service and/or satisfactory
completion of contract, employee shall be entitled to 12-days
vacation leave with pay. This shall be computed at the basic
wage rate. Fractions of a year's service will be computed on
a pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for
every year of service for non-work connected injuries or
illness. If the employee failed to avail of such leave benefits,
the same shall be forfeited at the end of the year in which said
sick leave is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be
accrued and payable only upon satisfactory completion of this
contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of
rest with 8 hours regular pay. If work is performed on this day,
all hours work shall be paid at the premium rate. However, this
offday pay provision is applicable only when the laws of the
Host Country require payments for rest day.
In the State of Bahrain, where some of the individual
complainants were deployed, His Majesty Isa Bin Salman Al
Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on
June 16, 1976, otherwise known as the Labour Law for the
Private Sector (Records, Vol. 18). This decree took effect on
August 16, 1976. Some of the provisions of Amiri Decree No.
23 that are relevant to the claims of the complainants-
appellants are as follows (italics supplied only for emphasis):
Art. 79: . . . A worker shall receive payment for each extra hour
equivalent to his wage entitlement increased by a minimum of
twenty-five per centum thereof for hours worked during the
day; and by a minimum of fifty per centum thereof for hours
worked during the night which shall be deemed to being from
seven o'clock in the evening until seven o'clock in the
morning. . . .
Art. 80: Friday shall be deemed to be a weekly day of rest on
full pay.
. . . an employer may require a worker, with his consent, to
work on his weekly day of rest if circumstances so require
and in respect of which an additional sum equivalent to 150%
of his normal wage shall be paid to him. . . .
Art. 81: . . . When conditions of work require the worker to
work on any official holiday, he shall be paid an additional sum
equivalent to 150% of his normal wage.
Art. 84: Every worker who has completed one year's
continuous service with his employer shall be entitled to leave
on full pay for a period of not less than 21 days for each year
increased to a period not less than 28 days after five
continuous years of service.
A worker shall be entitled to such leave upon a quantum
meruit in respect of the proportion of his service in that year.
Art. 107: A contract of employment made for a period of
indefinite duration may be terminated by either party thereto
after giving the other party thirty days' prior notice before such
termination, in writing, in respect of monthly paid workers and
fifteen days' notice in respect of other workers. The party
terminating a contract without giving the required notice shall
pay to the other party compensation equivalent to the amount
of wages payable to the worker for the period of such notice
or the unexpired portion thereof.
Art. 111: . . . the employer concerned shall pay to such worker,
upon termination of employment, a leaving indemnity for the
period of his employment calculated on the basis of fifteen
days' wages for each year of the first three years of service
and of one month's wages for each year of service thereafter.
Such worker shall be entitled to payment of leaving indemnity
upon a quantum meruit in proportion to the period of his
service completed within a year.
All the individual complainants-appellants have already been
repatriated to the Philippines at the time of the filing of these
cases (R.R. No. 104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: Whether or not complainants are entitled to the
benefits provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have worked in
Bahrain are entitled to the above-mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly
prescribing a more favorable treatment of alien employees)
bars complainants from enjoying its benefits.
Second: Assuming that Amiri Decree No. 23 of Bahrain is
applicable in these cases, whether or not complainants' claim
for the benefits provided therein have prescribed.
Third: Whether or not the instant cases qualify as a class
suit.
Fourth: Whether or not the proceedings conducted by the
POEA, as well as the decision that is the subject of these
appeals, conformed with the requirements of due process;
(a) Whether or not the respondent-appellant was denied its
right to due process;
(b) Whether or not the admission of evidence by the POEA
after these cases were submitted for decision was valid;
(c) Whether or not the POEA acquired jurisdiction over Brown
& Root International, Inc.;
(d) Whether or not the judgment awards are supported by
substantial evidence;
(e) Whether or not the awards based on the averages and
formula presented by the complainants-appellants are
supported by substantial evidence;
(f) Whether or not the POEA awarded sums beyond what the
complainants-appellants prayed for; and, if so, whether or not
these awards are valid.
Fifth: Whether or not the POEA erred in holding
respondents AIBC and Brown & Root jointly are severally
liable for the judgment awards despite the alleged finding that
the former was the employer of the complainants;
(a) Whether or not the POEA has acquired jurisdiction over
Brown & Root;
(b) Whether or not the undisputed fact that AIBC was a
licensed construction contractor precludes a finding that
Brown & Root is liable for complainants claims.
Sixth: Whether or not the POEA Administrator's failure to
hold respondents in default constitutes a reversible error.
Seventh: Whether or not the POEA Administrator erred in
dismissing the following claims:
a. Unexpired portion of contract;
b. Interest earnings of Travel and Reserve Fund;
c. Retirement and Savings Plan benefits;
d. War Zone bonus or premium pay of at least 100% of basic
pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to SSS;
j. Refund of withholding tax not remitted to BIR;
20
 k. Fringe benefits under B & R's "A Summary of Employee
Benefits" (Annex "Q" of Amended Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the judgment
award;
n. Other reliefs, like suspending and/or cancelling the license
to recruit of AIBC and the accreditation of B & R issued by
POEA;
o. Penalty for violations of Article 34 (prohibited practices), not
excluding reportorial requirements thereof.
Eighth: Whether or not the POEA Administrator erred in not
dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29,
51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989
Revised Rules on Evidence governing the pleading and proof of a
foreign law and admitted in evidence a simple copy of the Bahrain's
Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC
invoked Article 221 of the Labor Code of the Philippines, vesting on the
Commission ample discretion to use every and all reasonable means to
ascertain the facts in each case without regard to the technicalities of
law or procedure. NLRC agreed with the POEA Administrator that the
Amiri Decree No. 23, being more favorable and beneficial to the workers,
should form part of the overseas employment contract of the
complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the
claimants, who worked in Bahrain, and set aside awards of the POEA
Administrator in favor of the claimants, who worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the
filing of the claims of the complainants was three years, as provided in
Article 291 of the Labor Code of the Philippines, and not ten years as
provided in Article 1144 of the Civil Code of the Philippines nor one year
as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the
labor cases cannot be treated as a class suit for the simple reason that
not all the complainants worked in Bahrain and therefore, the subject
matter of the action, the claims arising from the Bahrain law, is not of
common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal
rules of administrative due process: namely, (1) the failure of the POEA
Administrator to consider the evidence presented by AIBC and BRII; (2)
some findings of fact were not supported by substantial evidence; and
(3) some of the evidence upon which the decision was based were not
disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator
that BRII and AIBC are solidarily liable for the claims of the complainants
and held that BRII was the actual employer of the complainants, or at
the very least, the indirect employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA
Administrator through the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct
in denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based on
the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the
claims for refund of the SSS premiums and refund of
withholding taxes and the claimants should file their claims for
said refund with the appropriate government agencies;
(2) the claimants failed to establish that they are entitled to the
claims which are not based on the overseas employment
contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over
claims for moral and exemplary damages and nonetheless,
the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired
portion of their contract may be allowed if filed within the three-
year prescriptive period;
(5) that the allegation that complainants were prematurely
repatriated prior to the expiration of their overseas contract
was not established; and
(6) that the POEA Administrator has no jurisdiction over the
complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation
of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No.
(L) 86-65-460 should have been dismissed on the ground that the
claimants in said case were also claimants in POEA Case No. (L) 84-
06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEA
just resolved the corresponding claims in POEA Case No. (L) 84-06-
555. In other words, the POEA did not pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the
following grounds:
(1) that they were deprived by NLRC and the POEA of their
right to a speedy disposition of their cases as guaranteed by
Section 16, Article III of the 1987 Constitution. The POEA
Administrator allowed private respondents to file their
answers in two years (on June 19, 1987) after the filing of the
original complaint (on April 2, 1985) and NLRC, in total
disregard of its own rules, affirmed the action of the POEA
Administrator;
(2) that NLRC and the POEA Administrator should have
declared AIBC and BRII in default and should have rendered
summary judgment on the basis of the pleadings and
evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred in not holding
that the labor cases filed by AIBC and BRII cannot be
considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten
years; and
(5) that NLRC and the POEA Administrator should have
dismissed POEA Case No. L-86-05-460, the case filed by
Atty. Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the
disposition of the labor cases, considering the great difficulty
of getting all the records of the more than 1,500 claimants, the
piece-meal filing of the complaints and the addition of
hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants,
it was impossible to prepare the answers within the ten-day
period provided in the NLRC Rules, that when the motion to
declare AIBC in default was filed on July 19, 1987, said party
had already filed its answer, and that considering the
staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the
parties, the ten-day rule to answer was not fair and
reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter
of the controversy which was the applicability of the Amiri
Decree No. 23. Likewise, the nature of the claims varied,
some being based on salaries pertaining to the unexpired
portion of the contracts while others being for pure money
claims. Each claimant demanded separate claims peculiar
only to himself and depending upon the particular
circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that
prescribed by Article 291 of the Labor Code of the Philippines
21
 (three years) and not the one prescribed by Article 1144 of the
Civil Code of the Philippines (ten years); and
(5) that they are not concerned with the issue of whether
POEA Case No. L-86-05-460 should be dismissed, this being
a private quarrel between the two labor lawyers (Rollo, pp.
292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out
the joint manifestations and motions of AIBC and BRII dated September
2 and 11, 1992, claiming that all the claimants who entered into the
compromise agreements subject of said manifestations and motions
were his clients and that Atty. Florante M. de Castro had no right to
represent them in said agreements. He also claimed that the claimants
were paid less than the award given them by NLRC; that Atty. De Castro
collected additional attorney's fees on top of the 25% which he was
entitled to receive; and that the consent of the claimants to the
compromise agreements and quitclaims were procured by fraud (G.R.
No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23,
1992, the Court denied the motion to strike out the Joint Manifestations
and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-
14, Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to
Enforce Attorney's Lien," alleging that the claimants who entered into
compromise agreements with AIBC and BRII with the assistance of Atty.
De Castro, had all signed a retainer agreement with his law firm (G.R.
No. 104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo
to cite Atty. De Castro and Atty. Katz Tierra for contempt of court and for
violation of Canons 1, 15 and 16 of the Code of Professional
Responsibility. The said lawyers allegedly misled this Court, by making
it appear that the claimants who entered into the compromise
agreements were represented by Atty. De Castro, when in fact they were
represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-
1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against
Atty. De Castro for unethical practices and moved for the voiding of the
quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition
for certiorari on the grounds that NLRC gravely abused its discretion
when it: (1) applied the three-year prescriptive period under the Labor
Code of the Philippines; and (2) it denied the claimant's formula based
on an average overtime pay of three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during
the negotiation for an amicable settlement of their money claims in
Bahrain as shown in the Memorandum dated April 16, 1983 of the
Ministry of Labor of Bahrain (Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No.
104776 that the prescriptive period in the Labor Code of the Philippines,
a special law, prevails over that provided in the Civil Code of the
Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the method
of computing the overtime pay, BRII and AIBC claimed that they were
not bound by what appeared therein, because such memorandum was
proposed by a subordinate Bahrain official and there was no showing
that it was approved by the Bahrain Minister of Labor. Likewise, they
claimed that the averaging method was discussed in the course of the
negotiation for the amicable settlement of the dispute and any offer
made by a party therein could not be used as an admission by him
(Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused
its discretion when it: (1) enforced the provisions of the Amiri Decree No.
23 of 1976 and not the terms of the employment contracts; (2) granted
claims for holiday, overtime and leave indemnity pay and other benefits,
on evidence admitted in contravention of petitioner's constitutional right
to due process; and (3) ordered the POEA Administrator to hold new
hearings for the 683 claimants whose claims had been dismissed for
lack of proof by the POEA Administrator or NLRC itself. Lastly, they
allege that assuming that the Amiri Decree No. 23 of 1976 was
applicable, NLRC erred when it did not apply the one-year prescription
provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they
disagreed as to the time that should be embraced within the prescriptive
period.
To the POEA Administrator, the prescriptive period was ten years,
applying Article 1144 of the Civil Code of the Philippines. NLRC believed
otherwise, fixing the prescriptive period at three years as provided in
Article 291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking
different grounds, insisted that NLRC erred in ruling that the prescriptive
period applicable to the claims was three years, instead of ten years, as
found by the POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive
period was one year as prescribed by the Amiri Decree No. 23 of 1976
but he deferred to the ruling of NLRC that Article 291 of the Labor Code
of the Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code)
refer to those arising from the employer's violation of the
employee's right as provided by the Labor Code.
In the instant case, what the respondents violated are not the
rights of the workers as provided by the Labor Code, but the
provisions of the Amiri Decree No. 23 issued in Bahrain,
which ipso factoamended the worker's contracts of
employment. Respondents consciously failed to conform to
these provisions which specifically provide for the increase of
the worker's rate. It was only after June 30, 1983, four months
after the brown builders brought a suit against B & R in
Bahrain for this same claim, when respondent AIBC's
contracts have undergone amendments in Bahrain for the
new hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable law of
prescription to this instant case is Article 1144 of the Civil
Code of the Philippines, which provides:
Art. 1144. The following actions may be brought within ten
years from the time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the
respondents shall prescribe in ten years from August 16,
1976. Inasmuch as all claims were filed within the ten-year
prescriptive period, no claim suffered the infirmity of being
prescribed (G.R. No. 104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the prescriptive
period is three years as provided in Article 291 of the Labor Code of the
Philippines, the NLRC argued as follows:
The Labor Code provides that "all money claims arising from
employer-employee relations . . . shall be filed within three
years from the time the cause of action accrued; otherwise
they shall be forever barred" (Art. 291, Labor Code, as
amended). This three-year prescriptive period shall be the
one applied here and which should be reckoned from the date
of repatriation of each individual complainant, considering the
fact that the case is having (sic) filed in this country. We do
not agree with the POEA Administrator that this three-year
prescriptive period applies only to money claims specifically
recoverable under the Philippine Labor Code. Article 291
gives no such indication. Likewise, We can not consider
complainants' cause/s of action to have accrued from a
violation of their employment contracts. There was no
violation; the claims arise from the benefits of the law of the
22
 country where they worked. (G.R. No. 104776, Rollo, pp.
90-91).
Anent the applicability of the one-year prescriptive period as provided by
the Amiri Decree No. 23 of 1976, NLRC opined that the applicability of
said law was one of characterization, i.e., whether to characterize the
foreign law on prescription or statute of limitation as "substantive" or
"procedural." NLRC cited the decision in Bournias v. Atlantic Maritime
Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the
applicability of the Panama Labor Code in a case filed in the State of
New York for claims arising from said Code. In said case, the claims
would have prescribed under the Panamanian Law but not under the
Statute of Limitations of New York. The U.S. Circuit Court of Appeals
held that the Panamanian Law was procedural as it was not "specifically
intended to be substantive," hence, the prescriptive period provided in
the law of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of
limitations of a foreign country, and it is not clear on the face
of the statute that its purpose was to limit the enforceability,
outside as well as within the foreign country concerned, of the
substantive rights to which the statute pertains, we think that
as a yardstick for determining whether that was the purpose
this test is the most satisfactory one. It does not lead American
courts into the necessity of examining into the unfamiliar
peculiarities and refinements of different foreign legal
systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is
entitled to succeed, for the respondents have failed to satisfy
us that the Panamanian period of limitation in question was
specifically aimed against the particular rights which the
libelant seeks to enforce. The Panama Labor Code is a statute
having broad objectives, viz: "The present Code regulates the
relations between capital and labor, placing them on a basis
of social justice, so that, without injuring any of the parties,
there may be guaranteed for labor the necessary conditions
for a normal life and to capital an equitable return to its
investment." In pursuance of these objectives the Code gives
laborers various rights against their employers. Article 623
establishes the period of limitation for all such rights, except
certain ones which are enumerated in Article 621. And there
is nothing in the record to indicate that the Panamanian
legislature gave special consideration to the impact of Article
623 upon the particular rights sought to be enforced here, as
distinguished from the other rights to which that Article is also
applicable. Were we confronted with the question of whether
the limitation period of Article 621 (which carves out particular
rights to be governed by a shorter limitation period) is to be
regarded as "substantive" or "procedural" under the rule of
"specifity" we might have a different case; but here on the
surface of things we appear to be dealing with a "broad," and
not a "specific," statute of limitations (G.R. No. 104776, Rollo,
pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the
Labor Code of the Philippines, which was applied by NLRC, refers only
to claims "arising from the employer's violation of the employee's right
as provided by the Labor Code." They assert that their claims are based
on the violation of their employment contracts, as amended by the Amiri
Decree No. 23 of 1976 and therefore the claims may be brought within
ten years as provided by Article 1144 of the Civil Code of the Philippines
(Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine
Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed
under the Amiri Decree No. 23 of 1976, argue that there is in force in the
Philippines a "borrowing law," which is Section 48 of the Code of Civil
Procedure and that where such kind of law exists, it takes precedence
over the common-law conflicts rule (G.R. No. 104776,Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription of
action based on the Amiri Decree No. 23 of 1976 or a Philippine law on
prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be
actionable after the lapse of one year from the date of the
expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the
forum. Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed by
the laws of the forum. This is true even if the action is based upon a
foreign substantive law (Restatement of the Conflict of Laws, Sec. 685;
Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the
sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American
court applied the statute of limitations of New York, instead of the
Panamanian law, after finding that there was no showing that the
Panamanian law on prescription was intended to be substantive. Being
considered merely a procedural law even in Panama, it has to give way
to the law of the forum on prescription of actions.
However, the characterization of a statute into a procedural or
substantive law becomes irrelevant when the country of the forum has a
"borrowing statute." Said statute has the practical effect of treating the
foreign statute of limitation as one of substance (Goodrich, Conflict of
Laws 152-153 [1938]). A "borrowing statute" directs the state of the
forum to apply the foreign statute of limitations to the pending claims
based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are
several kinds of "borrowing statutes," one form provides that an action
barred by the laws of the place where it accrued, will not be enforced in
the forum even though the local statute has not run against it (Goodrich
and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code
of Civil Procedure is of this kind. Said Section provides:
If by the laws of the state or country where the cause of action
arose, the action is barred, it is also barred in the Philippines
Islands.
Section 48 has not been repealed or amended by the Civil Code of the
Philippines. Article 2270 of said Code repealed only those provisions of
the Code of Civil Procedures as to which were inconsistent with it. There
is no provision in the Civil Code of the Philippines, which is inconsistent
with or contradictory to Section 48 of the Code of Civil Procedure (Paras,
Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be
enforced ex proprio vigore insofar as it ordains the application in this
jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to
the forum's public policy (Canadian Northern Railway Co. v. Eggen, 252
U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year
prescriptive period of the Amiri Decree No. 23 of 1976 as regards the
claims in question would contravene the public policy on the protection
to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution
emphasized that:
The state shall promote social justice in all phases of national
development. (Sec. 10).
The state affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare
(Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987 Constitution
provides:
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
Having determined that the applicable law on prescription is the
Philippine law, the next question is whether the prescriptive period
governing the filing of the claims is three years, as provided by the Labor
Code or ten years, as provided by the Civil Code of the Philippines.
The claimants are of the view that the applicable provision is Article 1144
of the Civil Code of the Philippines, which provides:
23
 The following actions must be brought within ten years from
the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is Article
291 of the Labor Code of the Philippines, which in pertinent part
provides:
Money claims-all money claims arising from employer-
employee relations accruing during the effectivity of this Code
shall be filed within three (3) years from the time the cause of
action accrued, otherwise they shall be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine Air
Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in G.R. Nos.
104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said
case involved the correct computation of overtime pay as provided in the
collective bargaining agreements and not the Eight-Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not make
any reference as to the computation for overtime work under the Eight-
Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that
work computation provided in the collective bargaining agreements
between the parties be observed. Since the claim for pay differentials is
primarily anchored on the written contracts between the litigants, the ten-
year prescriptive period provided by Art. 1144(1) of the New Civil Code
should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by
R.A. No. 19933) provides:
Any action to enforce any cause of action under this Act shall
be commenced within three years after the cause of action
accrued otherwise such action shall be forever barred, . . . .
The court further explained:
The three-year prescriptive period fixed in the Eight-Hour
Labor Law (CA No. 444 as amended) will apply, if the claim
for differentials for overtime work is solely based on said law,
and not on a collective bargaining agreement or any other
contract. In the instant case, the claim for overtime
compensation is not so much because of Commonwealth Act
No. 444, as amended but because the claim is demandable
right of the employees, by reason of the above-mentioned
collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period
for filing "actions to enforce any cause of action under said law." On the
other hand, Article 291 of the Labor Code of the Philippines provides the
prescriptive period for filing "money claims arising from employer-
employee relations." The claims in the cases at bench all arose from the
employer-employee relations, which is broader in scope than claims
arising from a specific law or from the collective bargaining agreement.
The contention of the POEA Administrator, that the three-year
prescriptive period under Article 291 of the Labor Code of the Philippines
applies only to money claims specifically recoverable under said Code,
does not find support in the plain language of the provision. Neither is
the contention of the claimants in G.R. Nos. 104911-14 that said Article
refers only to claims "arising from the employer's violation of the
employee's right," as provided by the Labor Code supported by the facial
reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776,
claimants aver: (1) that while their complaints were filed on June 6, 1984
with POEA, the case was decided only on January 30, 1989, a clear
denial of their right to a speedy disposition of the case; and (2) that
NLRC and the POEA Administrator should have declared AIBC and BRII
in default (Rollo,pp.31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution,
which provides:
Sec. 16. All persons shall have the right to a speedy
disposition of their cases before all judicial, quasi-judicial, or
administrative bodies.
It is true that the constitutional right to "a speedy disposition of cases" is
not limited to the accused in criminal proceedings but extends to all
parties in all cases, including civil and administrative cases, and in all
proceedings, including judicial and quasi-judicial hearings. Hence, under
the Constitution, any party to a case may demand expeditious action on
all officials who are tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987),
"speedy disposition of cases" is a relative term. Just like the
constitutional guarantee of "speedy trial" accorded to the accused in all
criminal proceedings, "speedy disposition of cases" is a flexible concept.
It is consistent with delays and depends upon the circumstances of each
case. What the Constitution prohibits are unreasonable, arbitrary and
oppressive delays which render rights nugatory.
Caballero laid down the factors that may be taken into consideration in
determining whether or not the right to a "speedy disposition of cases"
has been violated, thus:
In the determination of whether or not the right to a "speedy
trial" has been violated, certain factors may be considered and
balanced against each other. These are length of delay,
reason for the delay, assertion of the right or failure to assert
it, and prejudice caused by the delay. The same factors may
also be considered in answering judicial inquiry whether or not
a person officially charged with the administration of justice
has violated the speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we
held:
It must be here emphasized that the right to a speedy
disposition of a case, like the right to speedy trial, is deemed
violated only when the proceeding is attended by vexatious,
capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when
without cause or justified motive a long period of time is
allowed to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a
copy of the amended complaint, claimants had been asking that AIBC
and BRII be declared in default for failure to file their answers within the
ten-day period provided in Section 1, Rule III of Book VI of the Rules
and Regulations of the POEA. At that time, there was a pending motion
of AIBC and BRII to strike out of the records the amended complaint and
the "Compliance" of claimants to the order of the POEA, requiring them
to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their
final disposition in the administrative level after seven years from their
inception, cannot be said to be attended by unreasonable, arbitrary and
oppressive delays as to violate the constitutional rights to a speedy
disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767
claimants. Said complaint had undergone several amendments, the first
being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They
were deployed in different areas, one group in and the other groups
outside of, Bahrain. The monetary claims totalling more than US$65
million according to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic
pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
24
 9. Refund of SSS premiums not remitted to Social Security
System;
10. Refund of Withholding Tax not remitted to Bureau of
Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of
Employees Benefits consisting of 43 pages (Annex "Q" of
Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license
to recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not
excluding reportorial requirements thereof (NLRC Resolution,
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp.
73-74).
Inasmuch as the complaint did not allege with sufficient definiteness and
clarity of some facts, the claimants were ordered to comply with the
motion of AIBC for a bill of particulars. When claimants filed their
"Compliance and Manifestation," AIBC moved to strike out the complaint
from the records for failure of claimants to submit a proper bill of
particulars. While the POEA Administrator denied the motion to strike
out the complaint, he ordered the claimants "to correct the deficiencies"
pointed out by AIBC.
Before an intelligent answer could be filed in response to the complaint,
the records of employment of the more than 1,700 claimants had to be
retrieved from various countries in the Middle East. Some of the records
dated as far back as 1975.
The hearings on the merits of the claims before the POEA Administrator
were interrupted several times by the various appeals, first to NLRC and
then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases were
filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29,
1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted that
the exact number of claimants had never been completely established
(Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the three
new cases were consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating
the proceedings, thus:
These cases could have been spared the long and arduous
route towards resolution had the parties and their counsel
been more interested in pursuing the truth and the merits of
the claims rather than exhibiting a fanatical reliance on
technicalities. Parties and counsel have made these cases a
litigation of emotion. The intransigence of parties and counsel
is remarkable. As late as last month, this Commission made
a last and final attempt to bring the counsel of all the parties
(this Commission issued a special order directing respondent
Brown & Root's resident agent/s to appear) to come to a more
conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in
the disposition of the cases, to the lament of NLRC, which complained:
It is very evident from the records that the protagonists in
these consolidated cases appear to be not only the individual
complainants, on the one hand, and AIBC and Brown & Root,
on the other hand. The two lawyers for the complainants, Atty.
Gerardo Del Mundo and Atty. Florante De Castro, have yet to
settle the right of representation, each one persistently
claiming to appear in behalf of most of the complainants. As a
result, there are two appeals by the complainants. Attempts
by this Commission to resolve counsels' conflicting claims of
their respective authority to represent the complainants prove
futile. The bickerings by these two counsels are reflected in
their pleadings. In the charges and countercharges of
falsification of documents and signatures, and in the
disbarment proceedings by one against the other. All these
have, to a large extent, abetted in confounding the issues
raised in these cases, jumble the presentation of evidence,
and even derailed the prospects of an amicable settlement. It
would not be far-fetched to imagine that both counsel,
unwittingly, perhaps, painted a rainbow for the complainants,
with the proverbial pot of gold at its end containing more than
US$100 million, the aggregate of the claims in these cases. It
is, likewise, not improbable that their misplaced zeal and
exuberance caused them to throw all caution to the wind in
the matter of elementary rules of procedure and evidence
(Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing
of some of the complainants in both petitions filed by the two lawyers.
As noted by NLRC, "the problem created by this situation is that if one
of the two petitions is dismissed, then the parties and the public
respondents would not know which claim of which petitioner was
dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated in
a "class suit" because "all the named complainants have similar money
claims and similar rights sought irrespective of whether they worked in
Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in any part of
the Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one
of common or general interest to many and the parties are so numerous
that it is impracticable to bring them all before the court (Revised Rules
of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law,
many of the claimants worked outside Bahrain. Some of the claimants
were deployed in Indonesia and Malaysia under different terms and
conditions of employment.
NLRC and the POEA Administrator are correct in their stance that
inasmuch as the first requirement of a class suit is not present (common
or general interest based on the Amiri Decree of the State of Bahrain),
it is only logical that only those who worked in Bahrain shall be entitled
to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of
the claims is the same (for employee's benefits), there is no common
question of law or fact. While some claims are based on the Amiri Law
of Bahrain, many of the claimants never worked in that country, but were
deployed elsewhere. Thus, each claimant is interested only in his own
demand and not in the claims of the other employees of defendants. The
named claimants have a special or particular interest in specific benefits
completely different from the benefits in which the other named
claimants and those included as members of a "class" are claiming
(Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each claimant
is only interested in collecting his own claims. A claimants has no
concern in protecting the interests of the other claimants as shown by
the fact, that hundreds of them have abandoned their co-claimants and
have entered into separate compromise settlements of their respective
claims. A principle basic to the concept of "class suit" is that plaintiffs
brought on the record must fairly represent and protect the interests of
the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590
[1957]). For this matter, the claimants who worked in Bahrain can not be
allowed to sue in a class suit in a judicial proceeding. The most that can
be accorded to them under the Rules of Court is to be allowed to join as
plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the
exceptions to the condition sine qua non, requiring the joinder of all
indispensable parties.
In an improperly instituted class suit, there would be no problem if the
decision secured is favorable to the plaintiffs. The problem arises when
the decision is adverse to them, in which case the others who were
impleaded by their self-appointed representatives, would surely claim
denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA
Administrator and NLRC should have declared Atty. Florante De Castro
guilty of "forum shopping, ambulance chasing activities, falsification,
duplicity and other unprofessional activities" and his appearances as
counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended
to put a stop to the practice of some parties of filing multiple petitions
and complaints involving the same issues, with the result that the courts
or agencies have to resolve the same issues. Said Rule, however,
25
applies only to petitions filed with the Supreme Court and the Court of
Appeals. It is entitled "Additional Requirements For Petitions Filed with
the Supreme Court and the Court of Appeals To Prevent Forum
Shopping or Multiple Filing of Petitioners and Complainants." The first
sentence of the circular expressly states that said circular applies to an
governs the filing of petitions in the Supreme Court and the Court of
Appeals.
While Administrative Circular No. 04-94 extended the application of the
anti-forum shopping rule to the lower courts and administrative
agencies, said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical
conduct against Atty. De Castro because NLRC and POEA have no
jurisdiction to investigate charges of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14,
1992 was filed by Atty. Gerardo A. Del Mundo to protect his claim for
attorney's fees for legal services rendered in favor of the claimants (G.R.
No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court or
administrative agency which renders and executes the money judgment
secured by the lawyer for his clients. The lawyer shall cause written
notice thereof to be delivered to his clients and to the adverse party
(Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim
for the charging lien of Atty. Del Mundo should have been filed with the
administrative agency that rendered and executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De
Castro and Atty. Katz Tierra for violation of the Code of Professional
Responsibility should be filed in a separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting
their formula of "Three Hours Average Daily Overtime" in computing the
overtime payments. They claim that it was BRII itself which proposed
the formula during the negotiations for the settlement of their claims in
Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp.
21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain
dated April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President
and the Area Manager, Middle East, of Brown & Root Co. and
the Summary of the compensation offered by the Company to
the employees in respect of the difference of pay of the wages
of the overtime and the difference of vacation leave and the
perusal of the documents attached thereto i.e., minutes of the
meetings between the Representative of the employees and
the management of the Company, the complaint filed by the
employees on 14/2/83 where they have claimed as
hereinabove stated, sample of the Service Contract executed
between one of the employees and the company through its
agent in (sic)Philippines, Asia International Builders
Corporation where it has been provided for 48 hours of work
per week and an annual leave of 12 days and an overtime
wage of 1 & 1/4 of the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following
averages:
A. 1. The average duration of the actual service of the
employee is 35 months for the Philippino (sic) employees . . .
. applicable laws establish that fringe benefits, or other such
2. The average wage per hour for the Philippino (sic)
employee is US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all
public holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as
compensation for the difference of the wages of the overtime
done for each Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared
by them but by a subordinate official in the Bahrain Department of Labor;
(2) that there was no showing that the Bahrain Minister of Labor had
approved said memorandum; and (3) that the offer was made in the
course of the negotiation for an amicable settlement of the claims and
therefore it was not admissible in evidence to prove that anything is due
to the claimants.
While said document was presented to the POEA without observing the
rule on presenting official documents of a foreign government as
provided in Section 24, Rule 132 of the 1989 Revised Rules on
Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said
memorandum, and they could easily verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as contained
in the memorandum is another matter. Under Section 27, Rule 130 of
the 1989 Revised Rules on Evidence, an offer to settle a claim is not an
admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. In civil cases, an offer
of compromise is not an admission of any liability, and is not
admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the
record with unwanted evidence but a statement of public policy. There
is great public interest in having the protagonists settle their differences
amicable before these ripen into litigation. Every effort must be taken to
encourage them to arrive at a settlement. The submission of offers and
counter-offers in the negotiation table is a step in the right direction. But
to bind a party to his offers, as what claimants would make this Court
do, would defeat the salutary purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for
greater benefits than those stipulated in the overseas-employment
contracts of the claimants. It was of the belief that "where the laws of the
host country are more favorable and beneficial to the workers, then the
laws of the host country shall form part of the overseas employment
contract." It quoted with approval the observation of the POEA
Administrator that ". . . in labor proceedings, all doubts in the
implementation of the provisions of the Labor Code and its implementing
regulations shall be resolved in favor of labor" (Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically
when it refused to enforce the overseas-employment contracts, which
became the law of the parties. They contend that the principle that a law
is deemed to be a part of a contract applies only to provisions of
Philippine law in relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and
BRII themselves, provided that the laws of the host country became
applicable to said contracts if they offer terms and conditions more
favorable that those stipulated therein. It was stipulated in said contracts
that:
The Employee agrees that while in the employ of the
Employer, he will not engage in any other business or
occupation, nor seek employment with anyone other than the
Employer; that he shall devote his entire time and attention
and his best energies, and abilities to the performance of such
duties as may be assigned to him by the Employer; that he
shall at all times be subject to the direction and control of the
Employer; and that the benefits provided to Employee
hereunder are substituted for and in lieu of all other benefits
provided by any applicable law, provided of course, that total
remuneration and benefits do not fall below that of the host
country regulation or custom, it being understood that should
benefits additional to the compensation herein agreed cannot
be waived, Employee agrees that such compensation will be
adjusted downward so that the total compensation hereunder,
plus the non-waivable benefits shall be equivalent to the
compensation herein agreed (Rollo, pp. 352-353).
The overseas-employment contracts could have been drafted more
felicitously. While a part thereof provides that the compensation to the
employee may be "adjusted downward so that the total computation
(thereunder) plus the non-waivable benefits shall be equivalent to the
26
compensation" therein agreed, another part of the same provision
categorically states "that total remuneration and benefits do not fall
below that of the host country regulation and custom."
Any ambiguity in the overseas-employment contracts should be
interpreted against AIBC and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257
[1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where
there is already a prepared form containing the stipulations of the
employment contract and the employees merely "take it or leave it." The
presumption is that there was an imposition by one party against the
other and that the employees signed the contracts out of necessity that
reduced their bargaining power (Fieldmen's Insurance Co., Inc. v.
Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment
contracts in question as adopting the provisions of the Amiri Decree No.
23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be governed
(Cheshire, Private International Law, 187 [7th ed.]). In such a case, the
foreign law is adopted as a "system" to regulate the relations of the
parties, including questions of their capacity to enter into the contract,
the formalities to be observed by them, matters of performance, and so
forth (16 Am Jur 2d,150-161).
Instead of adopting the entire mass of the foreign law, the parties may
just agree that specific provisions of a foreign statute shall be deemed
incorporated into their contract "as a set of terms." By such reference to
the provisions of the foreign law, the contract does not become a foreign
contract to be governed by the foreign law. The said law does not
operate as a statute but as a set of contractual terms deemed written in
the contract (Anton, Private International Law, 197 [1967]; Dicey and
Morris, The Conflict of Laws, 702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties
(Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal of
Transnational Law 1, 21 [1977]). Such party expectation is protected by
giving effect to the parties' own choice of the applicable law (Fricke v.
Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law
must, however, bear some relationship to the parties or their transaction
(Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no
question that the contracts sought to be enforced by claimants have a
direct connection with the Bahrain law because the services were
rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA
486 (1982), the "Employment Agreement," between Norse Management
Co. and the late husband of the private respondent, expressly provided
that in the event of illness or injury to the employee arising out of and in
the course of his employment and not due to his own misconduct,
"compensation shall be paid to employee in accordance with and subject
to the limitation of the Workmen's Compensation Act of the Republic of
the Philippines or the Worker's Insurance Act of registry of the vessel,
whichever is greater." Since the laws of Singapore, the place of registry
of the vessel in which the late husband of private respondent served at
the time of his death, granted a better compensation package, we
applied said foreign law in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor
Relations Commission, 135 SCRA 278 (1985), relied upon by AIBC and
BRII is inapposite to the facts of the cases at bench. The issue in that
case was whether the amount of the death compensation of a Filipino
seaman should be determined under the shipboard employment
contract executed in the Philippines or the Hongkong law. Holding that
the shipboard employment contract was controlling, the court
differentiated said case from Norse Management Co. in that in the latter
case there was an express stipulation in the employment contract that
the foreign law would be applicable if it afforded greater compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to
due process when said administrative agency granted Friday-pay
differential, holiday-pay differential, annual-leave differential and leave
indemnity pay to the claimants listed in Annex B of the Resolution. At
first, NLRC reversed the resolution of the POEA Administrator granting
these benefits on a finding that the POEA Administrator failed to
consider the evidence presented by AIBC and BRII, that some findings
of fact of the POEA Administrator were not supported by the evidence,
and that some of the evidence were not disclosed to AIBC and BRII
(Rollo, pp. 35-36; 106-107). But instead of remanding the case to the
POEA Administrator for a new hearing, which means further delay in the
termination of the case, NLRC decided to pass upon the validity of the
claims itself. It is this procedure that AIBC and BRII complain of as being
irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence submitted
on appeal, the same evidence which NLRC found to have been
"unilaterally submitted by the claimants and not disclosed to the adverse
parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted
to the POEA administrator by the claimants after the cases were
deemed submitted for resolution and which were taken cognizance of
by the POEA Administrator in resolving the cases. While AIBC and BRII
had no opportunity to refute said evidence of the claimants before the
POEA Administrator, they had all the opportunity to rebut said evidence
and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII
themselves were able to present before NLRC additional evidence
which they failed to present before the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined
to "use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the
evidence of both parties submitted before the POEA Administrator and
NLRC, the latter considered that it was not expedient to remand the
cases to the POEA Administrator for that would only prolong the already
protracted legal controversies.
Even the Supreme Court has decided appealed cases on the merits
instead of remanding them to the trial court for the reception of evidence,
where the same can be readily determined from the uncontroverted facts
on record (Development Bank of the Philippines v. Intermediate
Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor
Relations Commission, 127 SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion when it
ordered the POEA Administrator to hold new hearings for 683 claimants
listed in Annex D of the Resolution dated September 2, 1991 whose
claims had been denied by the POEA Administrator "for lack of proof"
and for 69 claimants listed in Annex E of the same Resolution, whose
claims had been found by NLRC itself as not "supported by evidence"
(Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of the
Philippines, which empowers it "[to] conduct investigation for the
determination of a question, matter or controversy, within its jurisdiction,
. . . ."
It is the posture of AIBC and BRII that NLRC has no authority under
Article 218(c) to remand a case involving claims which had already been
dismissed because such provision contemplates only situations where
there is still a question or controversy to be resolved (Rollo, pp. 41-42).
A principle well embedded in Administrative Law is that the technical
rules of procedure and evidence do not apply to the proceedings
conducted by administrative agencies (First Asian Transport & Shipping
Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing
House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined
in Article 221 of the Labor Code of the Philippines and is now the
bedrock of proceedings before NLRC.
Notwithstanding the non-applicability of technical rules of procedure and
evidence in administrative proceedings, there are cardinal rules which
must be observed by the hearing officers in order to comply with the due
process requirements of the Constitution. These cardinal rules are
collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).
VIII
The three petitions were filed under Rule 65 of the Revised Rules of
Court on the grounds that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in issuing the questioned
orders. We find no such abuse of discretion.
27
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED.
c. Doctrine of Processual Presumption
G.R. No. 112573 February 9, 1995
NORTHWEST ORIENT AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY
INC., respondents.
PADILLA, JR., J.:
This petition for review on certiorari seeks to set aside the decision of
the Court of Appeals affirming the dismissal of the petitioner's complaint
to enforce the judgment of a Japanese court. The principal issue here is
whether a Japanese court can acquire jurisdiction over a Philippine
corporation doing business in Japan by serving summons through
diplomatic channels on the Philippine corporation at its principal office in
Manila after prior attempts to serve summons in Japan had failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a
corporation organized under the laws of the State of Minnesota, U.S.A.,
sought to enforce in Civil Case No. 83-17637 of the Regional Trial Court
(RTC), Branch 54, Manila, a judgment rendered in its favor by a
Japanese court against private respondent C.F. Sharp & Company, Inc.,
(hereinafter SHARP), a corporation incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10
November 1993, 1 the following are the factual and procedural
antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant
C.F. Sharp & Company, through its Japan branch, entered
into an International Passenger Sales Agency Agreement,
whereby the former authorized the latter to sell its air
transportation tickets. Unable to remit the proceeds of the
ticket sales made by defendant on behalf of the plaintiff under
the said agreement, plaintiff on March 25, 1980 sued
defendant in Tokyo, Japan, for collection of the unremitted
proceeds of the ticket sales, with claim for damages.
On April 11, 1980, a writ of summons was issued by the 36th
Civil Department, Tokyo District Court of Japan against
defendant at its office at the Taiheiyo Building, 3rd floor, 132,
Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture.
The attempt to serve the summons was unsuccessful
because the bailiff was advised by a person in the office that
Mr. Dinozo, the person believed to be authorized to receive
court processes was in Manila and would be back on April 24,
1980.
On April 24, 1980, bailiff returned to the defendant's office to
serve the summons. Mr. Dinozo refused to accept the same
claiming that he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge
of the Tokyo District Court decided to have the complaint and
the writs of summons served at the head office of the
defendant in Manila. On July 11, 1980, the Director of the
Tokyo District Court requested the Supreme Court of Japan
to serve the summons through diplomatic channels upon the
defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff
Rolando Balingit the writ of summons (p. 276, Records).
Despite receipt of the same, defendant failed to appear at the
scheduled hearing. Thus, the Tokyo Court proceeded to hear
the plaintiff's complaint and on [January 29, 1981], rendered
judgment ordering the defendant to pay the plaintiff the sum
of 83,158,195 Yen and damages for delay at the rate of 6%
per annum from August 28, 1980 up to and until payment is
completed (pp. 12-14, Records).
On March 24, 1981, defendant received from Deputy Sheriff
Balingit copy of the judgment. Defendant not having appealed
the judgment, the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence,
on May 20, 1983, a suit for enforcement of the judgment was
filed by plaintiff before the Regional Trial Court of Manila
Branch 54. 2
On July 16, 1983, defendant filed its answer averring that the
judgment of the Japanese Court sought to be enforced is null
and void and unenforceable in this jurisdiction having been
rendered without due and proper notice to the defendant
and/or with collusion or fraud and/or upon a clear mistake of
law and fact (pp. 41-45, Rec.).
Unable to settle the case amicably, the case was tried on the
merits. After the plaintiff rested its case, defendant on April 21,
1989, filed a Motion for Judgment on a Demurrer to Evidence
based on two grounds:
(1) the foreign judgment sought to be enforced is null and void
for want of jurisdiction and (2) the said judgment is contrary to
Philippine law and public policy and rendered without due
process of law. Plaintiff filed its opposition after which the
court a quo rendered the now assailed decision dated June
21, 1989 granting the demurrer motion and dismissing the
complaint (Decision, pp. 376-378, Records). In granting the
demurrer motion, the trial court held that:
The foreign judgment in the Japanese Court sought in this
action is null and void for want of jurisdiction over the person
of the defendant considering that this is an action in
personam; the Japanese Court did not acquire jurisdiction
over the person of the defendant because jurisprudence
requires that the defendant be served with summons in Japan
in order for the Japanese Court to acquire jurisdiction over it,
the process of the Court in Japan sent to the Philippines which
is outside Japanese jurisdiction cannot confer jurisdiction over
the defendant in the case before the Japanese Court of the
case at bar. Boudard versus Tait 67 Phil. 170. The plaintiff
contends that the Japanese Court acquired jurisdiction
because the defendant is a resident of Japan, having four (4)
branches doing business therein and in fact had a permit from
the Japanese government to conduct business in Japan
(citing the exhibits presented by the plaintiff); if this is so then
service of summons should have been made upon the
defendant in Japan in any of these alleged four branches; as
admitted by the plaintiff the service of the summons issued by
the Japanese Court was made in the Philippines thru a
Philippine Sheriff. This Court agrees that if the defendant in a
foreign court is a resident in the court of that foreign court such
court could acquire jurisdiction over the person of the
defendant but it must be served upon the defendant in the
territorial jurisdiction of the foreign court. Such is not the case
here because the defendant was served with summons in the
Philippines and not in Japan.
Unable to accept the said decision, plaintiff on July 11, 1989
moved for reconsideration of the decision, filing at the same
time a conditional Notice of Appeal, asking the court to treat
the said notice of appeal "as in effect after and upon issuance
of the court's denial of the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a
Reply dated August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court disregarded the Motion
for Reconsideration and gave due course to the plaintiff's
Notice of Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It agreed
with the latter in its reliance upon Boudard vs. Tait 4 wherein it was held
that "the process of the court has no extraterritorial effect and no
jurisdiction is acquired over the person of the defendant by serving him
beyond the boundaries of the state." To support its position, the Court of
Appeals further stated:
In an action strictly in personam, such as the instant case,
personal service of summons within the forum is required for
the court to acquire jurisdiction over the defendant
(Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer
jurisdiction on the court, personal or substituted service of
summons on the defendant not extraterritorial service is
necessary (Dial Corp vs. Soriano, 161 SCRA 739).
28
 But while plaintiff-appellant concedes that the collection suit
filed is an action in personam, it is its theory that a distinction
must be made between an action in personam against a
resident defendant and an action in personam against a non-
resident defendant. Jurisdiction is acquired over a non-
resident defendant only if he is served personally within the
jurisdiction of the court and over a resident defendant if by
personal, substituted or constructive service conformably to
statutory authorization. Plaintiff-appellant argues that since
the defendant-appellee maintains branches in Japan it is
considered a resident defendant. Corollarily, personal,
substituted or constructive service of summons when made in
compliance with the procedural rules is sufficient to give the
court jurisdiction to render judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully
be served outside the territorial limits of the jurisdiction of the
court from which it issues (Carter vs. Carter; 41 S.E. 2d 532,
201) and this isregardless of the residence or citizenship of
the party thus served (Iowa-Rahr vs. Rahr, 129 NW 494, 150
Iowa 511, 35 LRC, NS, 292, Am. Case 1912 D680). There
must be actual service within the proper territorial limits on
defendant or someone authorized to accept service for him.
Thus, a defendant, whether a resident or not in the forum
where the action is filed, must be served with summons within
that forum.
But even assuming a distinction between a resident defendant
and non-resident defendant were to be adopted, such
distinction applies only to natural persons and not in the
corporations. This finds support in the concept that "a
corporation has no home or residence in the sense in which
those terms are applied to natural persons" (Claude Neon
Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited
by the defendant-appellee in its brief:
Residence is said to be an attribute of a natural person, and
can be predicated on an artificial being only by more or less
imperfect analogy. Strictly speaking, therefore, a corporation
can have no local residence or habitation. It has been said
that a corporation is a mere ideal existence, subsisting only in
contemplation of law an invisible being which can have, in
fact, no locality and can occupy no space, and therefore
cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing
Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v. Hartfold F.
Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character
of a corporation is to be determined by the place of its origin
where its charter was granted and not by the location of its
business activities (Jennings v. Idaho Rail Light & P. Co., 26
Idaho 703, 146 p. 101), A corporation is a "resident" and an
inhabitant of the state in which it is incorporated and no other
(36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly
organized under the Philippine laws. Clearly, its residence is
the Philippines, the place of its incorporation, and not Japan.
While defendant-appellee maintains branches in Japan, this
will not make it a resident of Japan. A corporation does not
become a resident of another by engaging in business there
even though licensed by that state and in terms given all the
rights and privileges of a domestic corporation (Galveston H.
& S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct.
401).
On this premise, defendant appellee is a non-resident
corporation. As such, court processes must be served upon it
at a place within the state in which the action is brought and
not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1
S. Ct. 354). 5
It then concluded that the service of summons effected in Manila or
beyond the territorial boundaries of Japan was null and did not confer
jurisdiction upon the Tokyo District Court over the person of SHARP;
hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST
elevated the case to this Court contending that the respondent court
erred in holding that SHARP was not a resident of Japan and that
summons on SHARP could only be validly served within that country.
A foreign judgment is presumed to be valid and binding in the country
from which it comes, until the contrary is shown. It is also proper to
presume the regularity of the proceedings and the giving of due notice
therein. 6
Under Section 50, Rule 39 of the Rules of Court, a judgment in an
action in personam of a tribunal of a foreign country having jurisdiction
to pronounce the same is presumptive evidence of a right as between
the parties and their successors-in-interest by a subsequent title. The
judgment may, however, be assailed by evidence of want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of law or
fact. Also, under Section 3 of Rule 131, a court, whether of the
Philippines or elsewhere, enjoys the presumption that it was acting in
the lawful exercise of jurisdiction and has regularly performed its official
duty.
Consequently, the party attacking a foreign judgment has the burden of
overcoming the presumption of its validity. 7 Being the party challenging
the judgment rendered by the Japanese court, SHARP had the duty to
demonstrate the invalidity of such judgment. In an attempt to discharge
that burden, it contends that the extraterritorial service of summons
effected at its home office in the Philippines was not only ineffectual but
also void, and the Japanese Court did not, therefore acquire jurisdiction
over it.
It is settled that matters of remedy and procedure such as those relating
to the service of process upon a defendant are governed by the lex
fori or the internal law of the forum. 8 In this case, it is the procedural law
of Japan where the judgment was rendered that determines the validity
of the extraterritorial service of process on SHARP. As to what this law
is is a question of fact, not of law. It may not be taken judicial notice of
and must be pleaded and proved like any other fact. 9 Sections 24 and
25, Rule 132 of the Rules of Court provide that it may be evidenced by
an official publication or by a duly attested or authenticated copy thereof.
It was then incumbent upon SHARP to present evidence as to what that
Japanese procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the presumption
of validity and regularity of the service of summons and the decision
thereafter rendered by the Japanese court must stand.
Alternatively in the light of the absence of proof regarding Japanese
law, the presumption of identity or similarity or the so-called processual
presumption 10 may be invoked. Applying it, the Japanese law on the
matter is presumed to be similar with the Philippine law on service of
summons on a private foreign corporation doing business in the
Philippines. Section 14, Rule 14 of the Rules of Court provides that if the
defendant is a foreign corporation doing business in the Philippines,
service may be made: (1) on its resident agent designated in accordance
with law for that purpose, or, (2) if there is no such resident agent, on
the government official designated by law to that effect; or (3) on any of
its officers or agents within the Philippines.
If the foreign corporation has designated an agent to receive summons,
the designation is exclusive, and service of summons is without force
and gives the court no jurisdiction unless made upon him. 11
Where the corporation has no such agent, service shall be made on the
government official designated by law, to wit: (a) the Insurance
Commissioner in the case of a foreign insurance company; (b) the
Superintendent of Banks, in the case of a foreign banking corporation;
and (c) the Securities and Exchange Commission, in the case of other
foreign corporations duly licensed to do business in the Philippines.
Whenever service of process is so made, the government office or
official served shall transmit by mail a copy of the summons or other
legal proccess to the corporation at its home or principal office. The
sending of such copy is a necessary part of the service. 12
SHARP contends that the laws authorizing service of process upon the
Securities and Exchange Commission, the Superintendent of Banks,
and the Insurance Commissioner, as the case may be, presuppose a
situation wherein the foreign corporation doing business in the country
no longer has any branches or offices within the Philippines. Such
contention is belied by the pertinent provisions of the said laws. Thus,
Section 128 of the Corporation Code13 and Section 190 of the Insurance
Code 14 clearly contemplate two situations: (1) if the corporation had left
the Philippines or had ceased to transact business therein, and (2) if the
corporation has no designated agent. Section 17 of the General Banking
29
Act 15 does not even speak a corporation which had ceased to transact
business in the Philippines.
Nowhere in its pleadings did SHARP profess to having had a resident
agent authorized to receive court processes in Japan. This silence could
only mean, or least create an impression, that it had none. Hence,
service on the designated government official or on any of SHARP's
officers or agents in Japan could be availed of. The respondent,
however, insists that only service of any of its officers or employees in
its branches in Japan could be resorted to. We do not agree. As found
by the respondent court, two attempts at service were made at SHARP's
Yokohama branch. Both were unsuccessful. On the first attempt, Mr.
Dinozo, who was believed to be the person authorized to accept court
process, was in Manila. On the second, Mr. Dinozo was present, but to
accept the summons because, according to him, he was no longer an
employee of SHARP. While it may be true that service could have been
made upon any of the officers or agents of SHARP at its three other
branches in Japan, the availability of such a recourse would not preclude
service upon the proper government official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court which
ordered that summons for SHARP be served at its head office in the
Philippine's after the two attempts of service had failed. 16 The Tokyo
District Court requested the Supreme Court of Japan to cause the
delivery of the summons and other legal documents to the Philippines.
Acting on that request, the Supreme Court of Japan sent the summons
together with the other legal documents to the Ministry of Foreign Affairs
of Japan which, in turn, forwarded the same to the Japanese Embassy
in Manila . Thereafter, the court processes were delivered to the Ministry
(now Department) of Foreign Affairs of the Philippines, then to the
Executive Judge of the Court of First Instance (now Regional Trial Court)
of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to
serve the same on SHARP at its principal office in Manila. This service
is equivalent to service on the proper government official under Section
14, Rule 14 of the Rules of Court, in relation to Section 128 of the
Corporation Code. Hence, SHARP's contention that such manner of
service is not valid under Philippine laws holds no water. 17
In deciding against the petitioner, the respondent court sustained the
trial court's reliance on Boudard vs. Tait 18where this Court held:
The fundamental rule is that jurisdiction in personam over
nonresidents, so as to sustain a money judgment, must be
based upon personal service within the state which renders
the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial effect, and no
jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state. Nor has a
judgment of a court of a foreign country against a resident of
this country having no property in such foreign country based
on process served here, any effect here against either the
defendant personally or his property situated here.
Process issuing from the courts of one state or country cannot
run into another, and although a nonresident defendant may
have been personally served with such process in the state or
country of his domicile, it will not give such jurisdiction as to
authorize a personal judgment against him.
It further availed of the ruling in Magdalena Estate,
Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the principle
laid down by the Iowa Supreme Court in the 1911 case of Raher
vs. Raher. 21
The first three cases are, however, inapplicable. Boudard involved the
enforcement of a judgment of the civil division of the Court of First
Instance of Hanoi, French Indo-China. The trial court dismissed the case
because the Hanoi court never acquired jurisdiction over the person of
the defendant considering that "[t]he, evidence adduced at the trial
conclusively proves that neither the appellee [the defendant] nor his
agent or employees were ever in Hanoi, French Indo-China; and that the
deceased Marie Theodore Jerome Boudard had never, at any time,
been his employee." In Magdalena Estate, what was declared invalid
resulting in the failure of the court to acquire jurisdiction over the person
of the defendants in an action in personam was the service of summons
through publication against non-appearing resident defendants. It was
claimed that the latter concealed themselves to avoid personal service
of summons upon them. In Dial, the defendants were foreign
corporations which were not, domiciled and licensed to engage in
business in the Philippines and which did not have officers or agents,
places of business, or properties here. On the other hand, in the instant
case, SHARP was doing business in Japan and was maintaining four
branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of the past.
In that case, a divided Supreme Court of Iowa declared that the principle
that there can be no jurisdiction in a court of a territory to render a
personal judgment against anyone upon service made outside its limits
was applicable alike to cases of residents and non-residents. The
principle was put at rest by the United States Supreme Court when it
ruled in the 1940 case ofMilliken vs. Meyer 22 that domicile in the state
is alone sufficient to bring an absent defendant within the reach of the
state's jurisdiction for purposes of a personal judgment by means of
appropriate substituted service or personal service without the state.
This principle is embodied in section 18, Rule 14 of the Rules of Court
which allows service of summons on residents temporarily out of the
Philippines to be made out of the country. The rationale for this rule was
explained inMilliken as follows:
[T]he authority of a state over one of its citizens is not
terminated by the mere fact of his absence from the state. The
state which accords him privileges and affords protection to
him and his property by virtue of his domicile may also exact
reciprocal duties. "Enjoyment of the privileges of residence
within the state, and the attendant right to invoke the
protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that
citizenship arise out of the relationship to the state which
domicile creates. That relationship is not dissolved by mere
absence from the state. The attendant duties, like the rights
and privileges incident to domicile, are not dependent on
continuous presence in the state. One such incident of
domicile is amenability to suit within the state even during
sojourns without the state, where the state has provided and
employed a reasonable method for apprising such an absent
party of the proceedings against him. 23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can have
only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain
purposes, be regarded a resident in another state in which it has offices
and transacts business. This is the rule in our jurisdiction
and apropos thereto, it may be necessery to quote what we stated
in State Investment House, Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may
be considered "residents of the Philippine Islands" as that
term is used in Section 20 of the Insolvency Law . . . or
residents of the state under the laws of which they were
respectively incorporated. The answer cannot be found in the
Insolvency Law itself, which contains no definition of the
term, resident, or any clear indication of its meaning. There
are however other statutes, albeit of subsequent enactment
and effectivity, from which enlightening notions of the term
may be derived.
The National Internal Revenue Code declares that the term
"'resident foreign corporation' applies to a foreign corporation
engaged in trade or business within the Philippines," as
distinguished from a "'non-resident foreign corporation' . . .
(which is one) not engaged in trade or bussiness within the
Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034,
states "that branches, subsidiaries, affiliation, extension
offices or any other units of corporation or juridical person
organized under the laws of any foreign country operating in
the Philippines shall be considered residents of the
Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places
"branches and agencies in the Philippines of foreign banks . .
. (which are) called Philippine branches," in the same category
as "commercial banks, savings associations, mortgage
banks, development banks, rural banks, stock savings and
loan associations" (which have been formed and organized
30
 under Philippine laws), making no distinction between the
former and the latter in so far as the terms "banking
institutions" and "bank" are used in the Act [Sec. 2], declaring
on the contrary that in "all matters not specifically covered by
special provisions applicable only to foreign banks, or their
branches and agencies in the Philippines, said foreign banks
or their branches and agencies lawfully doing business in the
Philippines "shall be bound by all laws, rules, and regulations
applicable to domestic banking corporations of the same
class, except such laws, rules and regulations as provided for
the creation, formation, organization, or dissolution of
corporations or as fix the relation, liabilities, responsibilities, or
duties of members, stockholders or officers of corporation.
[Sec. 18].
This court itself has already had occasion to hold [Claude
Neon Lights, Fed. Inc. vs. Philippine Advertising Corp., 57
Phil. 607] that a foreign corporation licitly doing business in
the Philippines, which is a defendant in a civil suit, may not be
considered a non-resident within the scope of the legal
provision authorizing attachment against a defendant not
residing in the Philippine Islands; [Sec. 424, in relation to Sec.
412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f),
Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57, Rules of
1964] in other words, a preliminary attachment may not be
applied for and granted solely on the asserted fact that the
defendant is a foreign corporation authorized to do business
in the Philippines and is consequently and necessarily, "a
party who resides out of the Philippines." Parenthetically, if it
may not be considered as a party not residing in the
Philippines, or as a party who resides out of the country, then,
logically, it must be considered a party who does reside in the
Philippines, who is a resident of the country. Be this as it may,
this Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to
assimilate foreign corporations, duly licensed to do business
here, to the status of domestic corporations. (Cf. Section 73,
Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser &
Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil. 385,
411) We think it would be entirely out of line with this policy
should we make a discrimination against a foreign
corporation, like the petitioner, and subject its property to the
harsh writ of seizure by attachment when it has complied not
only with every requirement of law made specially of foreign
corporations, but in addition with every requirement of law
made of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized
to do business in the Philippines "to the status
of domestic corporations, subsumes their being found and
operating as corporations, hence,residing, in the country.
The same principle is recognized in American law: that the
residence of a corporation, if it can be said to have a
residence, is necessarily where it exercises corporate
functions . . .;" that it is considered as dwelling "in the place
where its business is done . . .," as being "located where its
franchises are exercised . . .," and as being "present where it
is engaged in the prosecution of the corporate enterprise;"
that a "foreign corporation licensed to do business in a state
is a resident of any country where it maintains an office or
agent for transaction of its usual and customary business for
venue purposes;" and that the "necessary element in its
signification is locality of existence." [Words and Phrases,
Permanent Ed., vol. 37, pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan through
its four duly registered branches at the time the collection suit against it
was filed, then in the light of the processual presumption, SHARP may
be deemed a resident of Japan, and, as such, was amenable to the
jurisdiction of the courts therein and may be deemed to have assented
to the said courts' lawful methods of serving process. 27
Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual presumption
but also because of the presumption of regularity of performance of
official duty.
We find NORTHWEST's claim for attorney's fees, litigation expenses,
and exemplary damages to be without merit. We find no evidence that
would justify an award for attorney's fees and litigation expenses under
Article 2208 of the Civil Code of the Philippines. Nor is an award for
exemplary damages warranted. Under Article 2234 of the Civil Code,
before the court may consider the question of whether or not exemplary
damages should be awarded, the plaintiff must show that he is entitled
to moral, temperate, or compensatory damaged. There being no such
proof presented by NORTHWEST, no exemplary damages may be
adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the
challenged decision is AFFIRMED insofar as it denied NORTHWEST's
claims for attorneys fees, litigation expenses, and exemplary damages
but REVERSED insofar as in sustained the trial court's dismissal of
NORTHWEST's complaint in Civil Case No. 83-17637 of Branch 54 of
the Regional Trial Court of Manila, and another in its stead is hereby
rendered ORDERING private respondent C.F. SHARP L COMPANY,
INC. to pay to NORTHWEST the amounts adjudged in the foreign
judgment subject of said case, with interest thereon at the legal rate from
the filing of the complaint therein until the said foreign judgment is fully
satisfied.
Costs against the private respondent.
SO ORDERED.
4. Enforcement of Judgments
G.R. No. 114323 July 23, 1998
OIL AND NATURAL GAS COMMISSION, petitioner,
vs.
COURT OF APPEALS and PACIFIC CEMENT COMPANY,
INC., respondents.
MARTINEZ, J.:
This proceeding involves the enforcement of a foreign judgment
rendered by the Civil Judge of Dehra Dun, India in favor of the petitioner,
OIL AND NATURAL GAS COMMISSION and against the private
respondent, PACIFIC CEMENT COMPANY, INCORPORATED.
The petitioner is a foreign corporation owned and controlled by the
Government of India while the private respondent is a private
corporation duly organized and existing under the laws of the
Philippines. The present conflict between the petitioner and the private
respondent has its roots in a contract entered into by and between both
parties on February 26, 1983 whereby the private respondent undertook
to supply the petitioner FOUR THOUSAND THREE HUNDRED (4,300)
metric tons of oil well cement. In consideration therefor, the petitioner
bound itself to pay the private respondent the amount of FOUR
HUNDRED SEVENTY-SEVEN THOUSAND THREE HUNDRED U.S.
DOLLARS ($477,300.00) by opening an irrevocable, divisible, and
confirmed letter of credit in favor of the latter. The oil well cement was
loaded on board the ship MV SURUTANA NAVA at the port of Surigao
City, Philippines for delivery at Bombay and Calcutta, India. However,
due to a dispute between the shipowner and the private respondent, the
cargo was held up in Bangkok and did not reach its point destination.
Notwithstanding the fact that the private respondent had already
received payment and despite several demands made by the petitioner,
the private respondent failed to deliver the oil well cement. Thereafter,
negotiations ensued between the parties and they agreed that the
private respondent will replace the entire 4,300 metric tons of oil well
cement with Class "G" cement cost free at the petitioner's designated
port. However, upon inspection, the Class "G" cement did not conform
to the petitioner's specifications. The petitioner then informed the private
respondent that it was referring its claim to an arbitrator pursuant to
Clause 16 of their contract which stipulates:
Except where otherwise provided in the supply order/contract
all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items
ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply
31
 order/contract design, drawing, specification, instruction or
these conditions or otherwise concerning the materials or the
execution or failure to execute the same during
stipulated/extended period or after the
completion/abandonment thereof shall be referred to the sole
arbitration of the persons appointed by Member of the
Commission at the time of dispute. It will be no objection to
any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter
to which the supply or contract relates and that in the course
of his duties as Commission's employee he had expressed
views on all or any of the matter in dispute or difference.
The arbitrator to whom the matter is originally referred being
transferred or vacating his office or being unable to act for any
reason the Member of the Commission shall appoint another
person to act as arbitrator in accordance with the terms of the
contract/supply order. Such person shall be entitled to
proceed with reference from the stage at which it was left by
his predecessor. Subject as aforesaid the provisions of the
Arbitration Act, 1940, or any Statutory modification or re-
enactment there of and the rules made there under and for
the time being in force shall apply to the arbitration
proceedings under this clause.
The arbitrator may with the consent of parties enlarge the
time, from time to time, to make and publish the award.
The venue for arbitration shall be at Dehra dun. 1*
On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra,
resolved the dispute in petitioner's favor setting forth the arbitral award
as follows:
NOW THEREFORE after considering all facts of the case, the
evidence, oral and documentarys adduced by the claimant
and carefully examining the various written statements,
submissions, letters, telexes, etc. sent by the respondent, and
the oral arguments addressed by the counsel for the
claimants, I, N.N. Malhotra, Sole Arbitrator, appointed under
clause 16 of the supply order dated 26.2.1983, according to
which the parties, i.e. M/S Oil and Natural Gas Commission
and the Pacific Cement Co., Inc. can refer the dispute to the
sole arbitration under the provision of the Arbitration Act.
1940, do hereby award and direct as follows:
The Respondent will pay the following to the claimant:
1. Amount received by the Respondent
against the letter of credit No. 11/19
dated 28.2.1983 US $ 477,300.00
2. Re-imbursement of expenditure incurred
by the claimant on the inspection team's
visit to Philippines in August 1985 US $ 3,881.00
3. L.C. Establishment charges incurred
by the claimant US $ 1,252.82
4. Loss of interest suffered by claimant
from 21.6.83 to 23.7.88 US $ 417,169.95
Total amount of award US $ 899,603.77
In addition to the above, the respondent would also be liable
to pay to the claimant the interest at the rate of 6% on the
above amount, with effect from 24.7.1988 up to the actual
date of payment by the Respondent in full settlement of the
claim as awarded or the date of the decree, whichever is
earlier.
I determine the cost at Rs. 70,000/- equivalent to US $5,000
towards the expenses on Arbitration, legal expenses, stamps
duly incurred by the claimant. The cost will be shared by the
parties in equal proportion.
2
Pronounced at Dehra Dun to-day, the 23rd of July 1988.
To enable the petitioner to execute the above award in its
favor, it filed a Petition before the Court of the Civil Judge in
Dehra Dun. India (hereinafter referred to as the foreign court
for brevity), praying that the decision of the arbitrator be made
"the Rule of Court" in India. The foreign court issued notices
to the private respondent for filing objections to the petition.
The private respondent complied and sent its objections dated
January 16, 1989. Subsequently, the said court directed the
private respondent to pay the filing fees in order that the
latter's objections could be given consideration. Instead of
paying the required filing fees, the private respondent sent the
following communication addressed to the Civil judge of
Dehra Dun:
The Civil Judge
Dehra Dun (U.P.) India
Re: Misc. Case No. 5 of 1989
M/S Pacific Cement Co.,
Inc. vs. ONGC Case
Sir:
1. We received your letter dated 28 April 1989 only last 18
May 1989.
2. Please inform us how much is the court fee to be paid. Your
letter did not mention the amount to be paid.
3. Kindly give us 15 days from receipt of your letter advising
us how much to pay to comply with the same.
Thank you for your kind consideration.
Pacific Cement Co., Inc.
By:
Jose Cortes, Jr.
President 3
Without responding to the above communication, the foreign court
refused to admit the private respondent's objections for failure to pay the
required filing fees, and thereafter issued an Order on February 7, 1990,
to wit:
ORDER
Since objections filed by defendant have been rejected
through Misc. Suit No. 5 on 7.2.90, therefore, award should
be made Rule of the Court.
ORDER
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the
Court. On the basis of conditions of award decree is passed.
Award Paper No. 3/B-1 shall be a part of the decree. The
plaintiff shall also be entitled to get from defendant (US$
899,603.77 (US$ Eight Lakhs ninety nine thousand six
hundred and three point seventy seven only) along with 9%
interest per annum till the last date of realisation.4
Despite notice sent to the private respondent of the foregoing order and
several demands by the petitioner for compliance therewith, the private
respondent refused to pay the amount adjudged by the foreign court as
owing to the petitioner. Accordingly, the petitioner filed a complaint with
Branch 30 of the Regional Trial Court (RTC) of Surigao City for the
enforcement of the aforementioned judgment of the foreign court. The
private respondent moved to dismiss the complaint on the following
grounds: (1) plaintiffs lack of legal capacity to sue; (2) lack of cause of
action; and (3) plaintiffs claim or demand has been waived, abandoned,
or otherwise extinguished. The petitioner filed its opposition to the said
motion to dismiss, and the private respondent, its rejoinder thereto. On
January 3, 1992, the RTC issued an order upholding the petitioner's
legal capacity to sue, albeit dismissing the complaint for lack of a valid
cause of action. The RTC held that the rule prohibiting foreign
corporations transacting business in the Philippines without a license
from maintaining a suit in Philippine courts admits of an exception, that
is, when the foreign corporation is suing on an isolated transaction as in
this case. 5 Anent the issue of the sufficiency of the petitioner's cause of
action, however, the RTC found the referral of the dispute between the
32
parties to the arbitrator under Clause 16 of their contract erroneous.
According to the RTC,
[a] perusal of the shove-quoted clause (Clause 16) readily
shows that the matter covered by its terms is limited to "ALL
QUESTIONS AND DISPUTES, RELATING TO THE
MEANING OF THE SPECIFICATION, DESIGNS,
DRAWINGS AND INSTRUCTIONS HEREIN BEFORE
MENTIONED and as to the QUALITY OF WORKMANSHIP
OF THE ITEMS ORDERED or as to any other questions,
claim, right or thing whatsoever, but qualified to "IN ANY WAY
ARISING OR RELATING TO THE SUPPLY
ORDER/CONTRACT, DESIGN, DRAWING,
SPECIFICATION, etc.," repeating the enumeration in the
opening sentence of the clause.
The court is inclined to go along with the observation of the
defendant that the breach, consisting of the non-delivery of
the purchased materials, should have been properly litigated
before a court of law, pursuant to Clause No. 15 of the
Contract/Supply Order, herein quoted, to wit:
"JURISDICTION
All questions, disputes and differences, arising under out of or
in connection with this supply order, shall be subject to the
EXCLUSIVE JURISDICTION OF THE COURT, within the
local limits of whose jurisdiction and the place from which this
supply order is situated." 6
The RTC characterized the erroneous submission of the
dispute to the arbitrator as a "mistake of law or fact amounting
to want of jurisdiction". Consequently, the proceedings had
before the arbitrator were null and void and the foreign court
had therefore, adopted no legal award which could be the
source of an enforceable right. 7
The petitioner then appealed to the respondent Court of Appeals which
affirmed the dismissal of the complaint. In its decision, the appellate
court concurred with the RTC's ruling that the arbitrator did not have
jurisdiction over the dispute between the parties, thus, the foreign court
could not validly adopt the arbitrator's award. In addition, the appellate
court observed that the full text of the judgment of the foreign court
contains the dispositive portion only and indicates no findings of fact and
law as basis for the award. Hence, the said judgment cannot be enforced
by any Philippine court as it would violate the constitutional provision
that no decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which it is
based. 8 The appellate court ruled further that the dismissal of the
private respondent's objections for non-payment of the required legal
fees, without the foreign court first replying to the private respondent's
query as to the amount of legal fees to be paid, constituted want of notice
or violation of due process. Lastly, it pointed out that the arbitration
proceeding was defective because the arbitrator was appointed solely
by the petitioner, and the fact that the arbitrator was a former employee
of the latter gives rise to a presumed bias on his part in favor of the
petitioner. 9
A subsequent motion for reconsideration by the petitioner of the
appellate court's decision was denied, thus, this petition for review
on certiorari citing the following as grounds in support thereof:
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE LOWER COURT'S ORDER OF
DISMISSAL SINCE:
A. THE NON-DELIVERY OF THE CARGO WAS A MATTER
PROPERLY COGNIZABLE BY THE PROVISIONS OF
CLAUSE 16 OF THE CONTRACT;
B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN,
INDIA WAS AN AFFIRMATION OF THE FACTUAL AND
LEGAL FINDINGS OF THE ARBITRATOR AND
THEREFORE ENFORCEABLE IN THIS JURISDICTION;
C. EVIDENCE MUST BE RECEIVED TO REPEL THE
EFFECT OF A PRESUMPTIVE RIGHT UNDER A FOREIGN
JUDGMENT. 10
The threshold issue is whether or not the arbitrator had jurisdiction over
the dispute between the petitioner and the private respondent under
Clause 16 of the contract. To reiterate, Clause 16 provides as follows:
Except where otherwise provided in the supply order/contract
all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items
ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or
these conditions or otherwise concerning the materials or the
execution or failure to execute the same during
stipulated/extended period or after the
completion/abandonment thereof shall be referred to the sole
arbitration of the persons appointed by Member of the
Commission at the time of dispute. It will be no objection to
any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter
to which the supply or contract relates and that in the course
of his duties as Commission's employee he had expressed
views on all or any of the matter in dispute or difference. 11
The dispute between the parties had its origin in the non-delivery of the
4,300 metric tons of oil well cement to the petitioner. The primary
question that may be posed, therefore, is whether or not the non-delivery
of the said cargo is a proper subject for arbitration under the above-
quoted Clause 16. The petitioner contends that the same was a matter
within the purview of Clause 16, particularly the phrase, ". . . or as to any
other questions, claim, right or thing whatsoever, in any way arising or
relating to the supply order/contract, design, drawing, specification,
instruction . . .". 12 It is argued that the foregoing phrase allows
considerable latitude so as to include non-delivery of the cargo which
was a "claim, right or thing relating to the supply order/contract". The
contention is bereft of merit. First of all, the petitioner has misquoted the
said phrase, shrewdly inserting a comma between the words "supply
order/contract" and "design" where none actually exists. An accurate
reproduction of the phrase reads, ". . . or as to any other question, claim,
right or thing whatsoever, in any way arising out of or relating to
the supply order/contract design, drawing, specification, instruction or
these conditions . . .". The absence of a comma between the words
"supply order/contract" and "design" indicates that the former cannot be
taken separately but should be viewed in conjunction with the words
"design, drawing, specification, instruction or these conditions". It is thus
clear that to fall within the purview of this phrase, the "claim, right or thing
whatsoever" must arise out of or relate to the design, drawing,
specification, or instruction of the supply order/contract. The petitioner
also insists that the non-delivery of the cargo is not only covered by the
foregoing phrase but also by the phrase, ". . . or otherwise concerning
the materials or the execution or failure to execute the same during the
stipulated/extended period or after completion/abandonment thereof . .
.".
The doctrine of noscitur a sociis, although a rule in the construction of
statutes, is equally applicable in the ascertainment of the meaning and
scope of vague contractual stipulations, such as the aforementioned
phrase. According to the maxim noscitur a sociis, where a particular
word or phrase is ambiguous in itself or is equally susceptible of various
meanings, its correct construction may be made clear and specific by
considering the company of the words in which it is found or with which
it is associated, or stated differently, its obscurity or doubt may be
reviewed by reference to associated words. 13 A close examination of
Clause 16 reveals that it covers three matters which may be submitted
to arbitration namely,
(1) all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items ordered; or
(2) any other question, claim, right or thing whatsoever, in any way
arising out of or relating to the supply order/contract design, drawing,
specification, instruction or these conditions; or
(3) otherwise concerning the materials or the execution or failure to
execute the same during stipulated/extended period or after the
completion/abandonment thereof.
The first and second categories unmistakably refer to questions and
disputes relating to the design, drawing, instructions, specifications or
quality of the materials of the supply/order contract. In the third category,
the clause, "execution or failure to execute the same", may be read as
"execution or failure to execute the supply order/contract". But in
accordance with the doctrine of noscitur a sociis, this reference to the
supply order/contract must be construed in the light of the preceding
33
words with which it is associated, meaning to say, as being limited only
to the design, drawing, instructions, specifications or quality of the
materials of the supply order/contract. The non-delivery of the oil well
cement is definitely not in the nature of a dispute arising from the failure
to execute the supply order/contract design, drawing, instructions,
specifications or quality of the materials. That Clause 16 should pertain
only to matters involving the technical aspects of the contract is but a
logical inference considering that the underlying purpose of a referral to
arbitration is for such technical matters to be deliberated upon by a
person possessed with the required skill and expertise which may be
otherwise absent in the regular courts.
This Court agrees with the appellate court in its ruling that the non-
delivery of the oil well cement is a matter properly cognizable by the
regular courts as stipulated by the parties in Clause 15 of their contract:
All questions, disputes and differences, arising under out of or
in connection with this supply order, shall be subject to
the exclusive jurisdiction of the court, within the local limits of
whose jurisdiction and the place from which this supply order
is situated. 14
The following fundamental principles in the interpretation of
contracts and other instruments served as our guide in
arriving at the foregoing conclusion:
Art. 1373. If some stipulation of any contract should admit of
several meanings, it shall be understood as bearing that
import which is most adequate to render it effectual. 15
Art. 1374. The various stipulations of a contract shall be
interpreted together, attributing the doubtful ones that sense
which may result from all of them taken jointly. 16
Sec. 11. Instrument construed so as to give effect to all
provisions. In the construction of an instrument, where there
are several provisions or particulars, such a construction is, if
possible, to be adopted as will give effect to all. 17
Thus, this Court has held that as in statutes, the provisions of a contract
should not be read in isolation from the rest of the instrument but, on the
contrary, interpreted in the light of the other related provisions. 18 The
whole and every part of a contract must be considered in fixing the
meaning of any of its harmonious whole. Equally applicable is the canon
of construction that in interpreting a statute (or a contract as in this case),
care should be taken that every part thereof be given effect, on the
theory that it was enacted as an integrated measure and not as a hodge-
podge of conflicting provisions. The rule is that a construction that would
render a provision inoperative should be avoided; instead, apparently
inconsistent provisions should be reconciled whenever possible as parts
of a coordinated and harmonious whole. 19
The petitioner's interpretation that Clause 16 is of such latitude as to
contemplate even the non-delivery of the oil well cement would in effect
render Clause 15 a mere superfluity. A perusal of Clause 16 shows that
the parties did not intend arbitration to be the sole means of settling
disputes. This is manifest from Clause 16 itself which is prefixed with the
proviso, "Except where otherwise provided in the supply order/contract
. . .", thus indicating that the jurisdiction of the arbitrator is not all
encompassing, and admits of exceptions as may be provided elsewhere
in the supply order/contract. We believe that the correct interpretation to
give effect to both stipulations in the contract is for Clause 16 to be
confined to all claims or disputes arising from or relating to the design,
drawing, instructions, specifications or quality of the materials of the
supply order/contract, and for Clause 15 to cover all other claims or
disputes.
The petitioner then asseverates that granting, for the sake of argument,
that the non-delivery of the oil well cement is not a proper subject for
arbitration, the failure of the replacement cement to conform to the
specifications of the contract is a matter clearly falling within the ambit
of Clause 16. In this contention, we find merit. When the 4,300 metric
tons of oil well cement were not delivered to the petitioner, an agreement
was forged between the latter and the private respondent that Class "G"
cement would be delivered to the petitioner as replacement. Upon
inspection, however, the replacement cement was rejected as it did not
conform to the specifications of the contract. Only after this latter
circumstance was the matter brought before the arbitrator. Undoubtedly,
what was referred to arbitration was no longer the mere non-delivery of
the cargo at the first instance but also the failure of the replacement
cargo to conform to the specifications of the contract, a matter clearly
within the coverage of Clause 16.
The private respondent posits that it was under no legal obligation to
make replacement and that it undertook the latter only "in the spirit of
liberality and to foster good business relationship". 20 Hence, the
undertaking to deliver the replacement cement and its subsequent
failure to conform to specifications are not anymore subject of the supply
order/contract or any of the provisions thereof. We disagree.
As per Clause 7 of the supply order/contract, the private respondent
undertook to deliver the 4,300 metric tons of oil well cement at
"BOMBAY (INDIA) 2181 MT and CALCUTTA 2119 MT". 21 The failure
of the private respondent to deliver the cargo to the designated places
remains undisputed. Likewise, the fact that the petitioner had already
paid for the cost of the cement is not contested by the private
respondent. The private respondent claims, however, that it never
benefited from the transaction as it was not able to recover the cargo
that was unloaded at the port of Bangkok. 22 First of all, whether or not
the private respondent was able to recover the cargo is immaterial to its
subsisting duty to make good its promise to deliver the cargo at the
stipulated place of delivery. Secondly, we find it difficult to believe this
representation. In its Memorandum filed before this Court, the private
respondent asserted that the Civil Court of Bangkok had already ruled
that the non-delivery of the cargo was due solely to the fault of the
carrier. 23 It is, therefore, but logical to assume that the necessary
consequence of this finding is the eventual recovery by the private
respondent of the cargo or the value thereof. What inspires credulity is
not that the replacement was done in the spirit of liberality but that it was
undertaken precisely because of the private respondent's recognition of
its duty to do so under the supply order/contract, Clause 16 of which
remains in force and effect until the full execution thereof.
We now go to the issue of whether or not the judgment of the foreign
court is enforceable in this jurisdiction in view of the private respondent's
allegation that it is bereft of any statement of facts and law upon which
the award in favor of the petitioner was based. The pertinent portion of
the judgment of the foreign court reads:
ORDER
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the
Court. On the basis of conditions of award decree is passed.
Award Paper No. 3/B-1 shall be a part of the decree. The
plaintiff shall also be entitled to get from defendant (US$
899,603.77 (US$ Eight Lakhs ninety nine thousand six
hundred and three point seventy seven only) along with 9%
interest per annum till the last date of realisation.24
As specified in the order of the Civil Judge of Dehra Dun, "Award Paper
No. 3/B-1 shall be a part of the decree". This is a categorical declaration
that the foreign court adopted the findings of facts and law of the
arbitrator as contained in the latter's Award Paper. Award Paper No. 3/B-
1, contains an exhaustive discussion of the respective claims and
defenses of the parties, and the arbitrator's evaluation of the same.
Inasmuch as the foregoing is deemed to have been incorporated into
the foreign court's judgment the appellate court was in error when it
described the latter to be a "simplistic decision containing literally, only
the dispositive portion". 25
The constitutional mandate that no decision shall be rendered by any
court without expressing therein dearly and distinctly the facts and the
law on which it is based does not preclude the validity of "memorandum
decisions" which adopt by reference the findings of fact and conclusions
of law contained in the decisions of inferior tribunals. In Francisco v.
Permskul, 26 this Court held that the following memorandum decision of
the Regional Trial Court of Makati did not transgress the requirements
of Section 14, Article VIII of the Constitution:
MEMORANDUM DECISION
After a careful perusal, evaluation and study of the records of
this case, this Court hereby adopts by reference the findings
of fact and conclusions of law contained in the decision of the
Metropolitan Trial Court of Makati, Metro Manila, Branch
63 and finds that there is no cogent reason to disturb the
same.
WHEREFORE, judgment appealed from is hereby affirmed in
toto. 27 (Emphasis supplied.)
34
 This Court had occasion to make a similar pronouncement in he had to deal with the matter to which the supply or contract
the earlier case of Romero v. Court of Appeals, 28 where the relates and that in the course of his duties as Commission's
assailed decision of the Court of Appeals adopted the findings employee he had expressed views on all or any of the matter
and disposition of the Court of Agrarian Relations in this wise: in dispute or difference. 37 (Emphasis supplied.)
We have, therefore, carefully reviewed the evidence and Finally, we reiterate hereunder our pronouncement in the case
made a re-assessment of the same, and We are persuaded, of Northwest Orient Airlines, Inc. v. Court of Appeals 38 that:
nay compelled, to affirm the correctness of the trial court's
factual findings and the soundness of its conclusion. For A foreign judgment is presumed to be valid and binding in the
judicial convenience and expediency, therefore, We hereby country from which it comes, until the contrary is shown. It is
adopt by way of reference, the findings of facts and also proper to presume the regularity of the proceedings and
conclusions of the court a quo spread in its decision, as the giving of due notice therein.
integral part of this Our decision. 29 (Emphasis supplied) Under Section 50, Rule 39 of the Rules of Court, a judgment
Hence, even in this jurisdiction, incorporation by reference is in an action in personam of a tribunal of a foreign country
allowed if only to avoid the cumbersome reproduction of the having jurisdiction to pronounce the same is presumptive
decision of the lower courts, or portions thereof, in the evidence of a right as between the parties and their
decision of the higher court. 30This is particularly true when the successors-in-interest by a subsequent title. The judgment
decision sought to be incorporated is a lengthy and thorough may, however, be assailed by evidence of want of jurisdiction,
discussion of the facts and conclusions arrived at, as in this want of notice to the party, collusion, fraud, or clear mistake
case, where Award Paper No. 3/B-1 consists of eighteen (18) of law or fact. Also, under Section 3 of Rule 131, a court,
single spaced pages. whether of the Philippines or elsewhere, enjoys the
presumption that it was acting in the lawful exercise of
Furthermore, the recognition to be accorded a foreign judgment is not jurisdiction and has regularly performed its official duty. 39
necessarily affected by the fact that the procedure in the courts of the
country in which such judgment was rendered differs from that of the Consequently, the party attacking a foreign judgment, the
courts of the country in which the judgment is relied on. 31 This Court has private respondent herein, had the burden of overcoming the
held that matters of remedy and procedure are governed by the lex presumption of its validity which it failed to do in the instant
fori or the internal law of the forum. 32 Thus, if under the procedural rules case.
of the Civil Court of Dehra Dun, India, a valid judgment may be rendered The foreign judgment being valid, there is nothing else left to be done
by adopting the arbitrator's findings, then the same must be accorded than to order its enforcement, despite the fact that the petitioner merely
respect. In the same vein, if the procedure in the foreign court mandates prays for the remand of the case to the RTC for further proceedings. As
that an Order of the Court becomes final and executory upon failure to this Court has ruled on the validity and enforceability of the said foreign
pay the necessary docket fees, then the courts in this jurisdiction cannot judgment in this jurisdiction, further proceedings in the RTC for the
invalidate the order of the foreign court simply because our rules provide reception of evidence to prove otherwise are no longer necessary.
otherwise.
WHEREFORE, the instant petition is GRANTED, and the assailed
The private respondent claims that its right to due process had been decision of the Court of Appeals sustaining the trial court's dismissal of
blatantly violated, first by reason of the fact that the foreign court never the OIL AND NATURAL GAS COMMISSION's complaint in Civil Case
answered its queries as to the amount of docket fees to be paid then No. 4006 before Branch 30 of the RTC of Surigao City is REVERSED,
refused to admit its objections for failure to pay the same, and second, and another in its stead is hereby rendered ORDERING private
because of the presumed bias on the part of the arbitrator who was a respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the
former employee of the petitioner. amounts adjudged in the foreign judgment subject of said case.
Time and again this Court has held that the essence of due process is SO ORDERED.
to be found in the reasonable opportunity to be heard and submit any
evidence one may have in support of one's defense 33 or stated
otherwise, what is repugnant to due process is the denial of opportunity
to be heard. 34 Thus, there is no violation of due process even if no
hearing was conducted, where the party was given a chance to explain
his side of the controversy and he waived his right to do so. 35
In the instant case, the private respondent does not deny the fact that it
was notified by the foreign court to file its objections to the petition, and
subsequently, to pay legal fees in order for its objections to be given
consideration. Instead of paying the legal fees, however, the private
respondent sent a communication to the foreign court inquiring about
the correct amount of fees to be paid. On the pretext that it was yet
awaiting the foreign court's reply, almost a year passed without the
private respondent paying the legal fees. Thus, on February 2, 1990, the
foreign court rejected the objections of the private respondent and
proceeded to adjudicate upon the petitioner's claims. We cannot
subscribe to the private respondent's claim that the foreign court violated
its right to due process when it failed to reply to its queries nor when the
latter rejected its objections for a clearly meritorious ground. The private
respondent was afforded sufficient opportunity to be heard. It was not
incumbent upon the foreign court to reply to the private respondent's
written communication. On the contrary, a genuine concern for its cause
should have prompted the private respondent to ascertain with all due
diligence the correct amount of legal fees to be paid. The private
respondent did not act with prudence and diligence thus its plea that
they were not accorded the right to procedural due process cannot elicit
either approval or sympathy from this Court. 36
The private respondent bewails the presumed bias on the part of the
arbitrator who was a former employee of the petitioner. This point
deserves scant consideration in view of the following stipulation in the
contract:
. . . . It will be no objection any such appointment that the
arbitrator so appointed is a Commission employer (sic) that

35