Republic of the Philippines dated February 22, 1990.
The two petitions were consolidated on March 27, 1990
SUPREME COURT
Manila
EN BANC
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.
Arturo M. Tolentino for petitioner in 92013.
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
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 "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 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 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 situs rule 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 capable of 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 February 20, 1990 Temporary Restraining
Order is made PERMANENT.
SO ORDERED.
Melencio-Herrera, Paras, Bidin, Grio-Aquino and Regalado, JJ., concur.
FIRST DIVISION
[G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON.
LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting
Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the
Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC.,
respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private
respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are
paid more than their colleagues in other schools is, of course, beside the point. The point is
that employees should be given equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on fundamental notions of justice.
That is the principle we uphold today.
Private respondent International School, Inc. (the School, for short), pursuant to
Presidential Decree 732, is a domestic educational institution established primarily for
dependents of foreign diplomatic personnel and other temporary residents. 1[1] To enable
the School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it
either locally or abroad, from Philippine or other nationalities, such
personnel being exempt from otherwise applicable laws and regulations
attending their employment, except laws that have been or will be
enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty,
classifying the same into two: (1) foreign-hires and (2) local-hires. The School employs four
tests to determine whether a faculty member should be classified as a foreign-hire or a
local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School
and was the School responsible for bringing that individual to the
Philippines?2[2]
Should the answer to any of these queries point to the Philippines, the faculty member is
classified as a local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include
housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-
hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The
School justifies the difference on two "significant economic disadvantages" foreign-hires
1 3
2 4
have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School
explains:
A foreign-hire would necessarily have to uproot himself from his home
country, leave his family and friends, and take the risk of deviating from
a promising career path-all for the purpose of pursuing his profession
as an educator, but this time in a foreign land. The new foreign hire is
faced with economic realities: decent abode for oneself and/or for one's
family, effective means of transportation, allowance for the education of
one's children, adequate insurance against illness and death, and of
course the primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with
the same economic reality after his term: that he will eventually and
inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after a long period in a
foreign land.
The compensation scheme is simply the School's adaptive measure to
remain competitive on an international level in terms of attracting
competent professionals in the field of international education. 3[3]
When negotiations for a new collective bargaining agreement were held on June 1995,
petitioner International School Alliance of Educators, "a legitimate labor union and the
collective bargaining representative of all faculty members"4[4] of the School, contested the
difference in salary rates between foreign and local-hires. This issue, as well as the
question of whether foreign-hires should be included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National
Conciliation and Mediation Board to bring the parties to a compromise prompted the
Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On
June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order
resolving the parity and representation issues in favor of the School. Then DOLE Secretary
Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an
Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is
discriminatory to Filipinos and that the grant of higher salaries to foreign-hires constitutes
racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members,
numbering 38 in all, with nationalities other than Filipino, who have been hired locally and
classified as local hires.5[5]The Acting Secretary of Labor found that these non-Filipino
local-hires received the same benefits as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless To our mind, these provisions demonstrate the parties' recognition of
of race. Truth to tell, there are foreigners who have been hired locally and who are paid the difference in the status of two types of employees, hence, the
equally as Filipino local hires.6[6] difference in their salaries.

The Acting Secretary upheld the point-of-hire classification for the distinction in salary
rates:
The principle "equal pay for equal work" does not find application in the
present case. The international character of the School requires the
hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and
benefits accorded to foreign hired personnel which system is
universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their services
in the Philippines and in the process remain competitive in the
international market.
Furthermore, we took note of the fact that foreign hires have limited
contract of employment unlike the local hires who enjoy security of
tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment which
include the employment contract.
The Union cannot also invoke the equal protection clause to justify its
claim of parity. It is an established principle of constitutional law that the
guarantee of equal protection of the laws is not violated by legislation or
private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all
members of the same class. Verily, there is a substantial distinction
between foreign hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the Philippines and have to
be given a good compensation package in order to attract them to join
the teaching faculty of the School.7[7]
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our
Constitution and laws reflect the policy against these evils. The Constitution 8[8] in the
Article on Social Justice and Human Rights exhorts Congress to "give highest priority to
the enactment of measures that protect and enhance the right of all people to human
dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the
Civil Code requires every person, "in the exercise of his rights and in the performance of
his duties, [to] act with justice, give everyone his due, and observe honesty and good
faith."

A perusal of the parties' 1992-1995 CBA points us to the conditions and

provisions for salary and professional compensation wherein the parties International law, which springs from general principles of law,9[9] likewise proscribes
discrimination. General principles of law include principles of equity,10[10] i.e., the general
agree as follows:
principles of fairness and justice, based on the test of what is reasonable. 11[11] The
Universal Declaration of Human Rights,12[12] the International Covenant on Economic,
All members of the bargaining unit shall be Social, and Cultural Rights,13[13] the International Convention on the Elimination of All
compensated only in accordance with Appendix C
hereof provided that the Superintendent of the
School has the discretion to recruit and hire
expatriate teachers from abroad, under terms and 7
conditions that are consistent with accepted
international practice.
8
Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with 9

the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the
agreed value of system displacement and
contracted status of the OSRS as differentiated from 10
the tenured status of Locally Recruited Staff (LRS).

5 11

6 12
Forms of Racial Discrimination, 14[14] the Convention against Discrimination in Education,15
[15] the Convention (No. 111) Concerning Discrimination in Respect of Employment and
Occupation16[16] - all embody the general principle against discrimination, the very
antithesis of fairness and justice. The Philippines, through its Constitution, has
incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor
of capital, inequality and discrimination by the employer are all the more reprehensible.
The Constitution17[17] specifically provides that labor is entitled to "humane conditions of
work." These conditions are not restricted to the physical workplace - the factory, the office
or the field - but include as well the manner by which employers treat their employees.
The Constitution18[18] also directs the State to promote "equality of employment
opportunities for all." Similarly, the Labor Code19[19] provides that the State shall "ensure
equal work opportunities regardless of sex, race or creed." It would be an affront to both
the spirit and letter of these provisions if the State, in spite of its primordial obligation to
promote and ensure equal employment opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment.20[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article
135, for example, prohibits and penalizes21[21] the payment of lesser compensation to a
13
14
15
16
17
18
19
20
21
female employee as against a male employee for work of equal value. Article 248 declares
it an unfair labor practice for an employer to discriminate in regard to wages in order to
encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in
Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favourable conditions of work,
which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of
equal value without distinction of any kind, in
particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with
equal pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored
legal truism of "equal pay for equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar conditions, should be paid similar
salaries.22[22] This rule applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform
work equal to that of foreign-hires.23[23] The Court finds this argument a little cavalier. If an
employer accords employees the same position and rank, the presumption is that these
employees perform equal work. This presumption is borne by logic and human experience.
If the employer pays one employee less than the rest, it is not for that employee to explain
why he receives less or why the others receive more. That would be adding insult to injury.
The employer has discriminated against that employee; it is for the employer to explain
why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here
that foreign-hires perform 25% more efficiently or effectively than the local-hires. Both
groups have similar functions and responsibilities, which they perform under similar
working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to
rationalize the distinction in salary rates without violating the principle of equal work for
equal pay.
22
23
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for
services performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is
the "[c]onsideration paid at regular intervals for the rendering of services." In Songco v.
National Labor Relations Commission,24[24] we said that:
"salary" means a recompense or consideration made to a person for his
pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be
used as an enticement to the prejudice of local-hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same salaries as the latter. For the
same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot
serve as valid bases for the distinction in salary rates. The dislocation factor and limited
tenure affecting foreign-hires are adequately compensated by certain benefits accorded
them which are not enjoyed by local-hires, such as housing, transportation, shipping costs,
taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their
welfare,"25[25] "to afford labor full protection."26[26] The State, therefore, has the right and
duty to regulate the relations between labor and capital.27[27] These relations are not
merely contractual but are so impressed with public interest that labor contracts, collective
bargaining agreements included, must yield to the common good. 28[28] Should such
contracts contain stipulations that are contrary to public policy, courts will not hesitate to
strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to
justify the distinction in the salary rates of foreign-hires and local hires to be an invalid
classification. There is no reasonable distinction between the services rendered by foreign-
hires and local-hires. The practice of the School of according higher salaries to foreign-
hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.
24
25
26
27
28
We agree, however, that foreign-hires do not belong to the same bargaining unit as the
local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less
than all of the entire body of employees, consistent with equity to the employer indicate to
be the best suited to serve the reciprocal rights and duties of the parties under the
collective bargaining provisions of the law."29[29] The factors in determining the appropriate
collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and
unity of the employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3)
prior collective bargaining history; and (4) similarity of employment status. 30[30] The basic
test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their collective
bargaining rights.31[31]
It does not appear that foreign-hires have indicated their intention to be grouped together
with local-hires for purposes of collective bargaining. The collective bargaining history in
the School also shows that these groups were always treated separately. Foreign-hires
have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform
similar functions under the same working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These benefits, such as housing,
transportation, shipping costs, taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the exclusion of the former from the
latter. To include foreign-hires in a bargaining unit with local-hires would not assure either
group the exercise of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN
PART. The Orders of the Secretary of Labor and Employment dated June 10, 1996 and
March 19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the
practice of respondent School of according foreign-hires higher salaries than local-hires.
SO ORDERED.
Puno, and Pardo, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.
Ynares-Santiago, J., on leave.
29
30
31
G.R. No. L-11759 March 16, 1917

CAYETANO LIM and MARCIANO LIM, petitioners-appellants,

vs.
THE INSULAR COLLECTOR OF CUSTOMS, respondent-appellee.

Williams, Ferrier and SyCip for appellants.

Attorney-General Avancea for appellee.

CARSON, J.:

The real question raised on this appeal is whether the Insular Collector of Customs may lawfully
deny entry into the Philippine Islands to two children aged 8 and 14 years, respectively, under and
by authority of the Chinese Immigration, Laws, it appearing that the children arrived at the Port of
Manila accompanied by and in the custody of their mother, a Filipino woman; that they were born in
China, out of lawful wedlock; and that their father was a Chinese person.

It is contended, on behalf of the Insular Collector of Customs, that these children being Chinese
persons are denied the right of entrance into the Philippine Islands under the express terms of the
Chinese immigration laws. On the other hand, it is urged on behalf of the children that they are
entitled to enter, regardless of the provisions of the Chinese immigration laws, since the admitted
facts, as it is said, disclose that they are citizens of the Philippine Islands; and for the further reason,
that their mother, who is entitled to their custody and charged with their maintenance and education,
is clearly entitled to take up her residence in the Philippine Islands and should not be required, to
that end, to abandon her minor children.
Without discussing or deciding any of the contentions of the parties as to the rights of citizenship of
these children, actual or inchoate, we are of opinion that by analogous reasoning to that upon which
the Supreme Court of the United States held that the wives and minor children of Chinese
merchants domiciled in the United States may enter that country without certificates, these children
must be held to be entitled to enter the Philippine Islands with their mother, for the purpose of
taking up their residence here with her, it appearing that she is natural guardian, entitled to their
custody and charged with their maintenance and education. (U. S. vs. Gue Lim, 176 U. S. 459.)
In the case just cited the court said:
While the literal construction of the section would require a certificate, as therein stated,
from every Chinese person, other than a laborer, who should come into the country, yet
such a construction leads to what we think an absurd result, for it requires a certificate for
a wife of a merchant, among others, in regard to whom its would be impossible to give
the particulars which the statute requires shall be stated in such certificate.
"Nothing is better settled," says the present Chief Justice, in Lau Ow Bew vs. United
States (144 U. S., 59) "than that statutes should receive a sensible construction, such as
will effectuate the legislative intention, and, if possible, so as to avoid and unjust or an
absurd conclusion.
The purposes of the sixth section, requiring the certificate, was not to prevent the persons
named in the second article of the treaty from coming into the country, but to prevent
Chinese laborers from entering under the guise of being one of the classes permitted by
the treaty. It is the coming of Chinese laborers that the act is aimed against.
It was said in the opinion in the Lau Ow Bew case, in speaking of the provisions that the
sole evidence permissible should be the certificate: "This rule of evidence was evidently
prescribed by the amendment as a means of effectually preventing the violation or
evasion of the prohibition against the coming of Chinese laborers. It was designed as a
safeguard to prevent the unlawful entry of such laborers, under the pretense that they
belong to the merchant class or to some other of the admitted classes."
It was also held in that case that although the literal wording of the statute of 1884,
section six, would require a certificate in the case of a merchant already domiciled in the
United States and who had left the country for temporary purposes, animo revertendi, yet
its true and proper construction did not include his case, and the general terms used in the
act were limited to those persons to whom Congress manifestly intended to apply them,
which would be those who were about to come to the United States for the first time, and
not to those Chinese merchants already domiciled in the United States who had gone to
China for temporary purposes only, with the intention of returning. The case of Wan
Shing vs. United States (140 U. S., 24), was referred to, and attention called to the fact
that the appellant therein was not a merchant but a laborer, who had acquired no
commercial domicile in this county, and was clearly within the exception requiring him to
procure and produce the certificate specified in the act. The rule was approved, and the
differences in the two cases pointed out by the Chief Justice.
To hold that a certificate is required in this case is to decide that the woman cannot come
into this country at all, for it is not possible for her to comply with the act, because she
cannot in any event procure the certificate even by returning to China. She must come in
as the wife of her domiciled husband or not at all. The act was never meant to accomplish
the result of permanently excluding the wife under the circumstances of this case, and we
think that, properly and reasonably construed, it does not do so. If we hold that she is
entitled to come in as the wife, because the true construction of the treaty and the act
permits it, there is no provision which makes the certificate the only proof of the fact that
she is such wife.
In the case of the minor children, the same result must follow as in that of the wife. All
the reasons which favor the construction of the statute as exempting the wife from the
necessity of procuring a certificate apply with equal force to the case of minor children of
a member or members of the admitted classes. They come in by reason of their
relationship to the father, and whether they accompany or follow him, a certificate is not
necessary in either case. When the fact is established to the satisfaction of the authorities
that the person claiming to enter, either as wife or minor child, is in fact the wife or minor
child of one of the members of the class mentioned in the treaty as entitled to enter, them
that person in entitled to admission without the certificate.
We are not advised of any provision of Chinese law which differentiates the status of infant
children, born out of lawful wedlock, from that of similar children under the laws in force in the
Philippine Islands. We assume, therefore, that in China as well as in the Philippine Islands such
children have the right to look to their mother for their maintenance and education, and that she is
entitled to their custody and control in fulfilling the obligations towards them which are imposed
upon her, not only by the natural impulses of love and affection, but also by the express mandate of
the law. And it having been held on the highest authority that the general terms of the Act were
limited to those to whom Congress manifestly intended to apply them as set forth in the foregoing
opinion, and that "nothing is better settled than that statutes should receive a sensible construction,
such as will effectuate the legislative intention, and, if possible, so as to avoid an unjust or an absurd
conclusion," we are of opinion that the Chinese Immigration Laws should not be construed so as to
exclude infant children of a Filipino mother, born out of lawful wedlock, seeking entrance to the
Philippine Islands for the purpose of taking up their residence with her in her native land.
It has been suggested that such a ruling opens the door to fraud and evasion, but we are not much
impressed with the force of this suggestion, knowing as we do that the immigration authorities have
been furnished by the law with peculiarly effective machinery for its enforcement, well calculated to
defeat any attempt to make an unauthorized or improper use of so manifestly reasonable an
exception from the literal construction and application of its general provisions.
Some confusion seems to have arisen in the court below as to the precise nature and effect of the
somewhat inartificial pleadings upon which these proceedings were submitted. The case appears to
have been submitted upon an answer to an order to show cause why a writ of habeas corpus should
not issue upon the petition filed on behalf of the infant children. In the form in which the answer is
couched, there is much in the contention of the appellee that the trial court should have treated the
answer as in substance and effect a demurrer to the petition, admitting the truth of the facts alleged
therein, but praying judgment as to whether it sets forth facts sufficient to constitute a cause of
action and to justify the issuance of the writ. We are inclined to think, however, that the
understanding of the parties and of the court below was that the answer should be treated rather as
in the nature of a return to a writ of habeas corpus, accepting as true the allegations of the petition
but maintaining the legality of the detention upon the facts thus submitted. Without considering at
this time whether in habeas corpus proceedings the respondent may, without consent of court,
demur to, instead of answering an order to show cause why the writ should not issue, and without
considering or deciding the course which should be pursued where a respondent attempts to file a
demurrer to a petition for a writ of habeas corpus in lieu of the return prescribed by the statute to the
writ when actually issued; we treat the answer to the order to show cause in the case at bar as we
think the parties and the court below understood it should be treated, that is to say, as in substance
and effect the return which the Insular Collector desired to make to the writ of habeas corpus issued
or assumed to have been issued in response to the petition on behalf of the children held in custody
by him.

We conclude, therefore, that, it appearing that the respondent Collector of Customs is detaining the
petitioners under an erroneous construction of the immigration laws, and it appearing from the facts
disclosed by the administrative proceedings that these children are entitled to admission into the
Philippine Islands, the order entered in the court below should be reversed, and in lieu thereof an
order should be entered directing the discharge of these children from the custody of the Insular
Collector of Customs, with the costs in both instances, de officio. So ordered.

Torres, Moreland, Trent and Araullo, JJ., concur.

G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII,
LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.
Leovigildo Vallar for private respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D.
Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to
Dismiss the complaint, and the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio
Tiro, a contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90
on December 31, 1971 at the branch office of petitioner, a shipping company transporting
inter-island passengers and cargoes, at Cagayan de Oro City. Respondents were to board
petitioner's vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon
learning that the vessel was not proceeding to Bohol, since many passengers were bound
for Surigao, private respondents per advice, went to the branch office for proper relocation
to M/S "Sweet Town". Because the said vessel was already filled to capacity, they were
forced to agree "to hide at the cargo section to avoid inspection of the officers of the
Philippine Coastguard." Private respondents alleged that they were, during the trip,"
"exposed to the scorching heat of the sun and the dust coming from the ship's cargo of
corn grits," and that the tickets they bought at Cagayan de Oro City for Tagbilaran were not
honored and they were constrained to pay for other tickets. In view thereof, private
respondents sued petitioner for damages and for breach of contract of carriage in the
alleged sum of P10,000.00 before respondents Court of First Instance of Misamis Oriental.
2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion
was premised on the condition printed at the back of the tickets, i.e., Condition No. 14,
which reads:
14. It is hereby agreed and understood that any and all actions arising
out of the conditions and provisions of this ticket, irrespective of where
it is issued, shall be filed in the competent courts in the City of Cebu. 3
4
The motion was denied by the trial court. Petitioner moved to reconnsider the order of
denial, but no avail. 5 Hence, this instant petition for prohibition for preliminary injunction,
'alleging that the respondent judge has departed from the accepted and usual course of
judicial preoceeding" and "had acted without or in excess or in error of his jurisdicton or in
gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding
further with the case and required respondent to comment. 7 On January 18, 1974, We
gave due course to the petition and required respondent to answer. 8 Thereafter, the
parties submitted their respesctive memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is
one of first impression, to wit Is Condition No. 14 printed at the back of the petitioner's
passage tickets purchased by private respondents, which limits the venue of actions
arising from the contract of carriage to theCourt of First Instance of Cebu, valid and
enforceable? Otherwise stated, may a common carrier engaged in inter-island shipping
stipulate thru condition printed at the back of passage tickets to its vessels that any and all
actions arising out of the ocntract of carriage should be filed only in a particular province or
city, in this case the City of Cebu, to the exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private
respndents acceded to tit when they purchased passage tickets at its Cagayan de Oro
branch office and took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol
that the condition of the venue of actions in the City of Cebu is proper since venue may be
validly waived, citing cases; 10 that is an effective waiver of venue, valid and binding as
such, since it is printed in bold and capital letters and not in fine print and merely assigns
the place where the action sing from the contract is institution likewise citing cases; 11 and
that condition No. 14 is unequivocal and mandatory, the words and phrases "any and all",
"irrespective of where it is issued," and "shag" leave no doubt that the intention of
Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other places;
that the orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his jurisdiction
in is the orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the
same is not an essential element of the contract of carriage, being in itself a different
agreement which requires the mutual consent of the parties to it; that they had no say in its
preparation, the existence of which they could not refuse, hence, they had no choice but to
pay for the tickets and to avail of petitioner's shipping facilities out of necessity; that the
carrier "has been exacting too much from the public by inserting impositions in the
passage tickets too burdensome to bear," that the condition which was printed in fine
letters is an imposition on the riding public and does not bind respondents, citing cases; 13
that while venue 6f actions may be transferred from one province to another, such
arrangement requires the "written agreement of the parties", not to be imposed unilaterally;
and that assuming that the condition is valid, it is not exclusive and does not, therefore,
exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner
and private respondents and that the passage tickets, upon which the latter based their
complaint, are the best evidence thereof. All the essential elements of a valid contract, i.e.,
consent, cause or consideration and object, are present. As held in Peralta de Guerrero, et
al. v. Madrigal Shipping Co., Inc., 15
 It is a matter of common knowledge that whenever a passenger boards
a ship for transportation from one place to another he is issued a ticket
by the shipper which has all the elements of a written contract, Namely:
(1) the consent of the contracting parties manifested by the fact that the
passenger boards the ship and the shipper consents or accepts him in
the ship for transportation; (2) cause or consideration which is the fare
paid by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to the place
of destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions
one of which is "Condition No. 14" which is in issue in this case printed at the back of
the passage tickets, these are commonly known as "contracts of adhesion," the validity
and/or enforceability of which will have to be determined by the peculiar circumstances
obtaining in each case and the nature of the conditions or terms sought to be enforced.
For, "(W)hile generally, stipulations in a contract come about after deliberate drafting by the
parties thereto, ... there are certain contracts almost all the provisions of which have been
drafted only by one party, usually a corporation. Such contracts are called contracts of
adhesion, because the only participation of the party is the signing of his signature or his
'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on the
installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into
namely, that it is drafted only by one party, usually the corporation, and is sought to be
accepted or adhered to by the other party, in this instance the passengers, private
respondents, who cannot change the same and who are thus made to adhere thereto on
the "take it or leave it" basis certain guidelines in the determination of their validity
and/or enforceability have been formulated in order to that justice and fan play characterize
the relationship of the contracting parties. Thus, this Court speaking through Justice J.B.L.
Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through
Justice Fernando in Fieldman Insurance v. Vargas, 18 held
The courts cannot ignore that nowadays, monopolies, cartels and
concentration of capital endowed with overwhelm economic power,
manage to impose upon parties d with them y prepared 'agreements'
that the weaker party may not change one whit his participation in the
'agreement' being reduced to the alternative 'to take it or leave it,'
labelled since Raymond Saleilles 'contracts by adherence' (contracts d'
adhesion) in contrast to those entered into by parties bargaining on an
equal footing. Such contracts (of which policies of insurance and
international bill of lading are prime examples) obviously cap for greater
strictness and vigilance on the part of the courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent
their becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind,
the protection of the disadvantaged is expressly enjoined by the New Civil Code
In all contractual property or other relations, when one of the parties is
at a disadvantage on account of his moral dependence, ignorance
indigence, mental weakness, tender age and other handicap, the courts
must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances
Prevailing in the inter-island ship. ping industry in the country today, We find and hold that
Condition No. 14 printed at the back of the passage tickets should be held as void and
unenforceable for the following reasons first, under circumstances obligation in the inter-
island ship. ping industry, it is not just and fair to bind passengers to the terms of the
conditions printed at the back of the passage tickets, on which Condition No. 14 is Printed
in fine letters, and second, Condition No. 14 subverts the public policy on transfer of venue
of proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers in different s of the country who, under Condition No. 14, will
have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a
dearth of and acute shortage in inter- island vessels plying between the country's several
islands, and the facilities they offer leave much to be desired. Thus, even under ordinary
circumstances, the piers are congested with passengers and their cargo waiting to be
transported. The conditions are even worse at peak and/or the rainy seasons, when
Passengers literally scramble to whatever accommodations may be availed of, even
through circuitous routes, and/or at the risk of their safety their immediate concern, for
the moment, being to be able to board vessels with the hope of reaching their destinations.
The schedules are as often as not if not more so delayed or altered. This was
precisely the experience of private respondents when they were relocated to M/S "Sweet
Town" from M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits, " because even the latter was filed to capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to
examine their tickets received from crowded/congested counters, more often than not
during rush hours, for conditions that may be printed much charge them with having
consented to the conditions, so printed, especially if there are a number of such conditions
m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the
petitioner, respondents had no say in its preparation. Neither did the latter have the
opportunity to take the into account prior to the purpose chase of their tickets. For, unlike
the small print provisions of contracts the common example of contracts of adherence
which are entered into by the insured in his awareness of said conditions, since the
insured is afforded the op to and co the same, passengers of inter-island v do not have the
same chance, since their alleged adhesion is presumed only from the fact that they
purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of
public convenience and therefore, posses a virtual monopoly over the business of
transporting passengers between the ports covered by their franchise. This being so,
shipping companies, like petitioner, engaged in inter-island shipping, have a virtual
monopoly of the business of transporting passengers and may thus dictate their terms of
passage, leaving passengers with no choice but to buy their tickets and avail of their
vessels and facilities. Finally, judicial notice may be taken of the fact that the bulk of those
who board these inter-island vested come from the low-income groups and are less
literate, and who have little or no choice but to avail of petitioner's vessels.

2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For,

although venue may be changed or transferred from one province to another by
agreement of the parties in writing t to Rule 4, Section 3, of the Rules of Court, such an
agreement will not be held valid where it practically negates the action of the claimants,
such as the private respondents herein. The philosophy underlying the provisions on
transfer of venue of actions is the convenience of the plaintiffs as well as his witnesses and
to promote 21 the ends of justice. Considering the expense and trouble a passenger
residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he
would most probably decide not to file the action at all. The condition will thus defeat,
instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or
offices in the respective ports of call of its vessels and can afford to litigate in any of these
places. Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the
instant case, will not cause inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against the public
good ... 22 Under this principle" ... freedom of contract or private dealing is restricted by law
for the good of the public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the
public good or interest, since it will frustrate in meritorious cases, actions of passenger
cants outside of Cebu City, thus placing petitioner company at a decided advantage over
said persons, who may have perfectly legitimate claims against it. The said condition
should, therefore, be declared void and unenforceable, as contrary to public policy to
make the courts accessible to all who may have need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.

Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.

Antonio, J., reserves his vote.


G.R. No. 72494 August 11, 1989
HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,
vs.
JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE
COURT, respondents.
Quiason, Makalintal, Barot & Torres for petitioner.
Alejandro, Aranzaso & Associates for private respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate Appellate Court
(now Court of Appeals) dated August 2, 1985, which reversed the order of the Regional
Trial Court dated February 28,1985 denying the Motion to Dismiss filed by private
respondents Jack Robert Sherman and Deodato Reloj.
A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner
Hongkong and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK)
against private respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil
Case No. Q-42850 before the Regional Trial Court of Quezon City, Branch 84.
It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter
referred to as COMPANY), a company incorporated in Singapore applied with, and was
granted by, the Singapore branch of petitioner BANK an overdraft facility in the maximum
amount of Singapore dollars 200,000.00 (which amount was subsequently increased to
Singapore dollars 375,000.00) with interest at 3% over petitioner BANK prime rate,
payable monthly, on amounts due under said overdraft facility; as a security for the
repayment by the COMPANY of sums advanced by petitioner BANK to it through the
aforesaid overdraft facility, on October 7, 1982, both private respondents and a certain
Robin de Clive Lowe, all of whom were directors of the COMPANY at such time, executed
a Joint and Several Guarantee (p. 53, Rollo) in favor of petitioner BANK whereby private
respondents and Lowe agreed to pay, jointly and severally, on demand all sums owed by
the COMPANY to petitioner BANK under the aforestated overdraft facility.
The Joint and Several Guarantee provides, inter alia, that:
This guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be
enforced in accordance with the laws of the Republic of Singapore. We
hereby agree that the Courts of Singapore shall have jurisdiction over
all disputes arising under this guarantee. ... (p. 33-A, Rollo).
The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of
the obligation from private respondents, conformably with the provisions of the Joint and
Several Guarantee. Inasmuch as the private respondents still failed to pay, petitioner
BANK filed the above-mentioned complaint.
On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo)
which was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial
court issued an order dated February 28, 1985 (pp, 64-65, Rollo), which read as follows:
In a Motion to Dismiss filed on December 14, 1984, the defendants
seek the dismissal of the complaint on two grounds, namely:
1. That the court has no jurisdiction over the subject matter of the
complaint; and
2. That the court has no jurisdiction over the persons of the defendants.
In the light of the Opposition thereto filed by plaintiff, the Court finds no
merit in the motion. "On the first ground, defendants claim that by virtue
of the provision in the Guarantee (the actionable document) which
reads
This guarantee and all rights, obligations and
liabilities arising hereunder shall be construed and
determined under and may be enforced in
 accordance with the laws of the Republic of
Singapore. We hereby agree that the courts in
Singapore shall have jurisdiction over all disputes
arising under this guarantee,
the Court has no jurisdiction over the subject matter of the case. The
Court finds and concludes otherwise. There is nothing in the Guarantee
which says that the courts of Singapore shall have jurisdiction to the
exclusion of the courts of other countries or nations. Also, it has long
been established in law and jurisprudence that jurisdiction of courts is
fixed by law; it cannot be conferred by the will, submission or consent of
the parties.
On the second ground, it is asserted that defendant Robert' , Sherman
is not a citizen nor a resident of the Philippines. This argument holds no
water. Jurisdiction over the persons of defendants is acquired by
service of summons and copy of the complaint on them. There has
been a valid service of summons on both defendants and in fact the
same is admitted when said defendants filed a 'Motion for Extension of
Time to File Responsive Pleading on December 5, 1984.
WHEREFORE, the Motion to Dismiss is hereby DENIED.
SO ORDERED.
A motion for reconsideration of the said order was filed by private respondents which was,
however, denied (p. 66, Rollo).
Private respondents then filed before the respondent Intermediate Appellate Court (now
Court of Appeals) a petition for prohibition with preliminary injunction and/or prayer for a
restraining order (pp. 39-48, Rollo). On August 2, 1985, the respondent Court rendered a
decision (p. 37, Rollo), the dispositive portion of which reads:
WHEREFORE, the petition for prohibition with preliminary injuction is
hereby GRANTED. The respondent Court is enjoined from taking
further cognizance of the case and to dismiss the same for filing with
the proper court of Singapore which is the proper forum. No costs.
SO ORDERED.
The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition.
The main issue is whether or not Philippine courts have jurisdiction over the suit.
The controversy stems from the interpretation of a provision in the Joint and Several
Guarantee, to wit:
(14) This guarantee and all rights, obligations and liabilites arising
hereunder shall be construed and determined under and may be
enforced in accordance with the laws of the Republic of Singapore. We
hereby agree that the Courts in Singapore shall have jurisdiction over
all disputes arising under this guarantee. ... (p. 53-A, Rollo)
In rendering the decision in favor of private respondents, the Court of Appeals made, the
following observations (pp. 35-36, Rollo):
There are significant aspects of the case to which our attention is
invited. The loan was obtained by Eastern Book Service PTE, Ltd., a
company incorporated in Singapore. The loan was granted by the
Singapore Branch of Hongkong and Shanghai Banking Corporation.
The Joint and Several Guarantee was also concluded in Singapore.
The loan was in Singaporean dollars and the repayment thereof also in
the same currency. The transaction, to say the least, took place in
Singporean setting in which the law of that country is the measure by
which that relationship of the parties will be governed.
xxx xxx xxx
Contrary to the position taken by respondents, the guarantee
agreement compliance that any litigation will be before the courts of
Singapore and that the rights and obligations of the parties shall be
construed and determined in accordance with the laws of the Republic
of Singapore. A closer examination of paragraph 14 of the Guarantee
Agreement upon which the motion to dismiss is based, employs in clear
and unmistakeable (sic) terms the word 'shall' which under statutory
construction is mandatory.
Thus it was ruled that:
... the word 'shall' is imperative, operating to impose a duty which may
be enforced (Dizon vs. Encarnacion, 9 SCRA 714).lwph1.t
There is nothing more imperative and restrictive than what the
agreement categorically commands that 'all rights, obligations, and
liabilities arising hereunder shall be construed and determined under
and may be enforced in accordance with the laws of the Republic of
Singapore.'
While it is true that "the transaction took place in Singaporean setting" and that the Joint
and Several Guarantee contains a choice-of-forum clause, the very essence of due
process dictates that the stipulation that "[t]his guarantee and all rights, obligations and
liabilities arising hereunder shall be construed and determined under and may be enforced
in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts
in Singapore shall have jurisdiction over all disputes arising under this guarantee" be
liberally construed. One basic principle underlies all rules of jurisdiction in International
Law: a State does not have jurisdiction in the absence of some reasonable basis for
exercising it, whether the proceedings are in rem quasi in rem or in personam. To be
reasonable, the jurisdiction must be based on some minimum contacts that will not offend
traditional notions of fair play and substantial justice (J. Salonga, Private International Law,
1981, p. 46). Indeed, as pointed-out by petitioner BANK at the outset, the instant case
presents a very odd situation. In the ordinary habits of life, anyone would be disinclined to
litigate before a foreign tribunal, with more reason as a defendant. However, in this case,
private respondents are Philippine residents (a fact which was not disputed by them) who
would rather face a complaint against them before a foreign court and in the process incur
considerable expenses, not to mention inconvenience, than to have a Philippine court try
and resolve the case. Private respondents' stance is hardly comprehensible, unless their
ultimate intent is to evade, or at least delay, the payment of a just obligation.
The defense of private respondents that the complaint should have been filed in Singapore
is based merely on technicality. They did not even claim, much less prove, that the filing of
the action here will cause them any unnecessary trouble, damage, or expense. On the
other hand, there is no showing that petitioner BANK filed the action here just to harass
private respondents.
In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30
SCRA 187, it was ruled:
... An accurate reading, however, of the stipulation, 'The parties agree
to sue and be sued in the Courts of Manila,' does not preclude the filing
of suits in the residence of plaintiff or defendant. The plain meaning is
that the parties merely consented to be sued in Manila. Qualifying or
restrictive words which would indicate that Manila and Manila alone is
the venue are totally absent therefrom. We cannot read into that clause
that plaintiff and defendant bound themselves to file suits with respect
to the last two transactions in question only or exclusively in Manila.
For, that agreement did not change or transfer venue. It simply is
permissive. The parties solely agreed to add the courts of Manila as
tribunals to which they may resort. They did not waive their right to
pursue remedy in the courts specifically mentioned in Section 2(b) of
Rule 4. Renuntiatio non praesumitur.
This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et
al., G.R. No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case
of litigation, jurisdiction shall be vested in the Court of Davao City." We held:
Anent the claim that Davao City had been stipulated as the venue,
suffice it to say that a stipulation as to venue does not preclude the
filing of suits in the residence of plaintiff or defendant under Section 2
(b), Rule 4, Rules of Court, in the absence of qualifying or restrictive
words in the agreement which would indicate that the place named is
the only venue agreed upon by the parties.
Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the
courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause
in question operate to divest Philippine courts of jurisdiction. In International Law,
jurisdiction is often defined as the light of a State to exercise authority over persons and
things within its boundaries subject to certain exceptions. Thus, a State does not assume
jurisdiction over travelling sovereigns, ambassadors and diplomatic representatives of
other States, and foreign military units stationed in or marching through State territory with
the permission of the latter's authorities. This authority, which finds its source in the
concept of sovereignty, is exclusive within and throughout the domain of the State. A State
is competent to take hold of any judicial matter it sees fit by making its courts and agencies
assume jurisdiction over all kinds of cases brought before them (J. Salonga, Private
International Law, 1981, pp. 37-38).lwph1.t
As regards the issue on improper venue, petitioner BANK avers that the objection to
improper venue has been waived. However, We agree with the ruling of the respondent
Court that:
While in the main, the motion to dismiss fails to categorically use with
exactitude the words 'improper venue' it can be perceived from the
general thrust and context of the motion that what is meant is improper
venue, The use of the word 'jurisdiction' was merely an attempt to copy-
cat the same word employed in the guarantee agreement but conveys
the concept of venue. Brushing aside all technicalities, it would appear
that jurisdiction was used loosely as to be synonymous with venue. It is
in this spirit that this Court must view the motion to dismiss. ... (p. 35,
Rollo).
At any rate, this issue is now of no moment because We hold that venue here was properly
laid for the same reasons discussed above.
The respondent Court likewise ruled that (pp. 36-37, Rollo):
... In a conflict problem, a court will simply refuse to entertain the case if
it is not authorized by law to exercise jurisdiction. And even if it is so
authorized, it may still refuse to entertain the case by applying the
principle of forum non conveniens. ...
However, whether a suit should be entertained or dismissed on the basis of the principle of
forum non conveniens depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court (J. Salonga, Private International Law,
1981, p. 49).lwph1.t Thus, the respondent Court should not have relied on such
principle.
Philsec investment vs. CA
Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of
adhesion and that consequently, it cannot be permitted to take a stand contrary to the SECOND DIVISION
stipulations of the contract, substantial bases exist for petitioner Bank's choice of forum, as
discussed earlier.
[G.R. No. 103493. June 19, 1997]

Lastly, private respondents allege that neither the petitioner based at Hongkong nor its PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and
Philippine branch is involved in the transaction sued upon. This is a vain attempt on their ATHONA HOLDINGS, N.V., petitioners, vs. THE HONORABLE COURT OF APPEALS, 1488,
part to further thwart the proceedings below inasmuch as well-known is the rule that a INC., DRAGO DAIC, VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H.
defendant cannot plead any defense that has not been interposed in the court below. CRAIG, respondents.

ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the DECISION
decision of the Regional Trial Court is REINSTATED, with costs against private
respondents. This decision is immediately executory. MENDOZA, J.:

SO ORDERED. This case presents for determination the conclusiveness of a foreign judgment upon the rights of the
parties under the same cause of action asserted in a case in our local court. Petitioners brought this
case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of
Narvasa, Cruz, Gancayco and Gri;o-Aquino, JJ., concur. the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition to
forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review on
certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners
Ayala International Finance Limited (hereafter called AYALA) i[1] and Philsec Investment
Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock
owned by Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the
loans, private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed
Ducats obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a
Warranty Deed with Vendors Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter
called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while
PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial
payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a
promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered
by the note became due and demandable. Accordingly, on October 17, 1985, private respondent
1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of
the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to
1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was
later transferred to the United States District Court for the Southern District of Texas, where 1488,
Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed
an answer with counterclaim, impleading private respondents herein as counterdefendants, for
allegedly conspiring in selling the property at a price over its market value. Private respondent
Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA
sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the
alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a
motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was
denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSECs own former president, for the rescission of the sale on the ground that the
property had been overvalued. On March 13, 1990, the United States District Court for the Southern
District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was
frivolous and [was] brought against him simply to humiliate and embarrass him. For this reason, the
U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay
damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners
filed a complaint For Sum of Money with Damages and Writ of Preliminary Attachment against
private respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No.
16563. The complaint reiterated the allegation of petitioners in their respective counterclaims in
Civil Action No. H-86-440 of the United States District Court of Southern Texas that private
respondents committed fraud by selling the property at a price 400 percent more than its true value
of US$800,000.00. Petitioners claimed that, as a result of private respondents fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement
and to purchase the Houston property. Petitioners prayed that private respondents be ordered to
return to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20,
1987, the trial court issued a writ of preliminary attachment against the real and personal properties
of private respondents.ii[2]
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis
pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum
non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action.
Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA,
as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale and whose only
participation was to extend financial accommodation to ATHONA under a separate loan agreement.
On the other hand, private respondents 1488, Inc. and its president Daic filed a joint Special
Appearance and Qualified Motion to Dismiss, contending that the action being in personam,
extraterritorial service of summons by publication was ineffectual and did not vest the court with
jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a non-
resident alien.
On January 26, 1988, the trial court granted Ducats motion to dismiss, stating that the evidentiary
requirements of the controversy may be more suitably tried before the forum of the litis pendentia in
the U.S., under the principle in private international law of forum non conveniens, even as it noted
that Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daics motion to dismiss. On March 9,
1988, the trial courtiii[3] granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of
litis pendentia considering that
the main factual element of the cause of action in this case which is the validity of the sale of
real property in the United States between defendant 1488 and plaintiff ATHONA is the
subject matter of the pending case in the United States District Court which, under the
doctrine of forum non conveniens, is the better (if not exclusive) forum to litigate matters
needed to determine the assessment and/or fluctuations of the fair market value of real estate
situated in Houston, Texas, U.S.A. from the date of the transaction in 1983 up to the present
and verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were non-
residents and the action was not an action in rem or quasi in rem, so that extraterritorial service of
summons was ineffective. The trial court subsequently lifted the writ of attachment it had earlier
issued against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over
the defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and
Daic.
On January 6, 1992, the Court of Appealsiv[4] affirmed the dismissal of Civil Case No. 16563
against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are Philsec,
the Ayala International Finance Ltd. (BPI-IFLs former name) and the Athona Holdings, NV. The
case at bar involves the same parties. The transaction sued upon by the parties, in both cases is the
Warranty Deed executed by and between Athona Holdings and 1488 Inc. In the U.S. case, breach of
contract and the promissory note are sued upon by 1488 Inc., which likewise alleges fraud
employed by herein appellants, on the marketability of Ducats securities given in exchange for the
Texas property. The recovery of a sum of money and damages, for fraud purportedly committed by
appellees, in overpricing the Texas land, constitute the action before the Philippine court, which
likewise stems from the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the
recovery of a sum of money for alleged tortious acts, so that service of summons by publication did
not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case
No. 16563 on the ground of forum non conveniens was likewise affirmed by the Court of Appeals
on the ground that the case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main transaction, and involve foreign
elements, to wit: 1) the property subject matter of the sale is situated in Texas, U.S.A.; 2) the seller,
1488 Inc. is a non-resident foreign corporation; 3) although the buyer, Athona Holdings, a foreign
corporation which does not claim to be doing business in the Philippines, is wholly owned by
Philsec, a domestic corporation, Athona Holdings is also owned by BPI-IFL, also a foreign
corporation; 4) the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES
FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS
IN AFFIRMING THE TRIAL COURTS DISMISSAL OF THE CIVIL ACTION IS NOT
APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT
OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL
ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED
IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION,
NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL JURISDICTION
IN THE CIVIL ACTION FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE
PETITIONERS RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM
HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.
First. It is important to note in connection with the first point that while the present case was
pending in the Court of Appeals, the United States District Court for the Southern District of Texas
rendered judgmentv[5] in the case before it. The judgment, which was in favor of private
respondents, was affirmed on appeal by the Circuit Court of Appeals. vi[6] Thus, the principal issue
to be resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the U.S.
court.
Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment
admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign
judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it
on grounds stated in Rule 39, 50 of the Rules of Court, to wit: want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.
Petitioners contention is meritorious. While this Court has given the effect of res judicata to foreign
judgments in several cases,vii[7] it was after the parties opposed to the judgment had been given
ample opportunity to repel them on grounds allowed under the law.viii[8] It is not necessary for this
purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is
essential is that there is opportunity to challenge the foreign judgment, in order for the court to
properly determine its efficacy. This is because in this jurisdiction, with respect to actions in
personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima facie
evidence of the justness of the claim of a party and, as such, is subject to proof to the contrary.ix[9]
Rule 39, 50 provides:
SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a foreign country,
having jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the
thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as
between the parties and their successors in interest by a subsequent title; but the judgment may be
repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton,
Ltd.,x[10] which private respondents invoke for claiming conclusive effect for the foreign judgment
in their favor, the foreign judgment was considered res judicata because this Court found from the
evidence as well as from appellants own pleadingsxi[11] that the foreign court did not make a clear
mistake of law or fact or that its judgment was void for want of jurisdiction or because of fraud or
collusion by the defendants. Trial had been previously held in the lower court and only afterward
was a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to
have the effect of res judicata in the case before the lower court. In the same vein, in Philippine
International Shipping Corp. v. Court of Appeals,xii[12] this Court held that the foreign judgment
was valid and enforceable in the Philippines there being no showing that it was vitiated by want of
notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption
under the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the
judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary. Neither the trial court nor the
appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the
evidence presented thereat, to assure a proper determination of whether the issues then being
litigated in the U.S. court were exactly the issues raised in this case such that the judgment that
might be rendered would constitute res judicata. As the trial court stated in its disputed order dated
March 9, 1988:
On the plaintiffs claim in its Opposition that the causes of action of this case and the
pending case in the United States are not identical, precisely the Order of January 26,
1988 never found that the causes of action of this case and the case pending before the
USA Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners action is barred by
the principle of res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over
their persons, but their claim was brushed aside by both the trial court and the Court of Appeals. xiii
[13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the
enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil
Case No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of
the pendency of this case. To sustain the appellate courts ruling that the foreign judgment constitutes
res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from
repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign
judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to
resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is
sought to be enforced against him in a separate proceeding. This is plainly untenable. It has been
held therefore that:
[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where
affirmative relief is being sought. Hence, in the interest of justice, the complaint should be
considered as a petition for the recognition of the Hongkong judgment under Section 50 (b), Rule
39 of the Rules of Court in order that the defendant, private respondent herein, may present
evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if
applicable.xiv[14]
Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070
should be consolidated.xv[15] After all, the two have been filed in the Regional Trial Court of
Makati, albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe),
while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such
proceedings, petitioners should have the burden of impeaching the foreign judgment and only in the
event they succeed in doing so may they proceed with their action against private respondents.
Second. Nor is the trial courts refusal to take cognizance of the case justifiable under the principle of
forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, 1, which
does not include forum non conveniens.xvi[16] The propriety of dismissing a case based on this
principle requires a factual determination, hence, it is more properly considered a matter of defense.
Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on
this ground, it should do so only after vital facts are established, to determine whether special
circumstances require the courts desistance. xvii[17]
In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings
filed by private respondents in connection with the motion to dismiss. It failed to consider that one
of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is
a Filipino, and that it was the extinguishment of the latters debt which was the object of the
transaction under litigation. The trial court arbitrarily dismissed the case even after finding that
Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over
1488, Inc. and Daic could not be obtained because this is an action in personam and summons were
served by extraterritorial service. Rule 14, 17 on extraterritorial service provides that service of
summons on a non-resident defendant may be effected out of the Philippines by leave of Court
where, among others, the property of the defendant has been attached within the Philippines. xviii[18]
It is not disputed that the properties, real and personal, of the private respondents had been attached
prior to service of summons under the Order of the trial court dated April 20, 1987. xix[19]
Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the
proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11
sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to
be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The
separability of Guevarras claim is not only admitted by petitioners, xx[20] it appears from the
pleadings that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No.
16563.xxi[21] Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is
REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070
and for further proceedings in accordance with this decision. The temporary restraining order issued
on June 29, 1994 is hereby LIFTED.
SO ORDERED.
JORGE GONZALES and G.R. No. 161957
PANEL OF ARBITRATORS, vs CLIMAX MINING LTD.,
CLIMAX-ARIMCO MINING CORP.,
and AUSTRALASIAN PHILIPPINES Promulgated:
MINING INC.,
Respondents. January 22, 2007
Petitioner,
TINGA, J.:
This is a consolidation of two petitions rooted in the same disputed Addendum Contract
entered into by the parties. In G.R. No. 161957, the Court in its Decision of 28 February 2005 32[1]
denied the Rule 45 petition of petitioner Jorge Gonzales (Gonzales). It held that the DENR Panel of
Arbitrators had no jurisdiction over the complaint for the annulment of the Addendum Contract on
grounds of fraud and violation of the Constitution and that the action should have been brought
before the regular courts as it involved judicial issues. Both parties filed separate motions for
reconsideration. Gonzales avers in his Motion for Reconsideration 33[2] that the Court erred in
holding that the DENR Panel of Arbitrators was bereft of jurisdiction, reiterating its argument that
the case involves a mining dispute that properly falls within the ambit of the Panels authority.
Gonzales adds that the Court failed to rule on other issues he raised relating to the sufficiency of his
complaint before the DENR Panel of Arbitrators and the timeliness of its filing.
Respondents Climax Mining Ltd., et al., (respondents) filed their Motion for Partial Reconsideration
and/or Clarification34[3] seeking reconsideration of that part of the Decision holding that the case
should not be brought for arbitration under Republic Act (R.A.) No. 876, also known as the
32
33
Arbitration Law.35[4] Respondents, citing American jurisprudence 36[5] and the UNCITRAL Model
Law,37[6] argue that the arbitration clause in the Addendum Contract should be treated as an
agreement independent of the other terms of the contract, and that a claimed rescission of the main On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May 2005, or while the motions
contract does not avoid the duty to arbitrate. Respondents add that Gonzaless argument relating to for reconsideration in G.R. No. 16195741[10] were pending, wherein Gonzales challenged the orders
the alleged invalidity of the Addendum Contract still has to be proven and adjudicated on in a of the Regional Trial Court (RTC) requiring him to proceed with the arbitration proceedings as
proper proceeding; that is, an action separate from the motion to compel arbitration. Pending sought by Climax-Arimco Mining Corporation (Climax-Arimco).
judgment in such separate action, the Addendum Contract remains valid and binding and so does the
arbitration clause therein. Respondents add that the holding in the Decision that the case should not
be brought under the ambit of the Arbitration Law appears to be premised on Gonzaless having
impugn[ed] the existence or validity of the addendum contract. If so, it supposedly conveys the idea On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were consolidated upon the
that Gonzaless unilateral repudiation of the contract or mere allegation of its invalidity is all it takes recommendation of the Assistant Division Clerk of Court since the cases are rooted in the same
to avoid arbitration. Hence, respondents submit that the courts holding that the case should not be Addendum Contract.
brought under the ambit of the Arbitration Law be understood or clarified as operative only where
the challenge to the arbitration agreement has been sustained by final judgment.

We first tackle the more recent case which is G.R. No. 167994. It stemmed from the
petition to compel arbitration filed by respondent Climax-Arimco before the RTC of Makati City on
Both parties were required to file their respective comments to the other partys motion for 31 March 2000 while the complaint for the nullification of the Addendum Contract was pending
38 39
reconsideration/clarification. [7] Respondents filed their Comment on 17 August 2005, [8] while before the DENR Panel of Arbitrators. On 23 March 2000, Climax-Arimco had sent Gonzales a
Gonzales filed his only on 25 July 2006.40[9] Demand for Arbitration pursuant to Clause 19.1 42[11] of the Addendum Contract and also in
accordance with Sec. 5 of R.A. No. 876. The petition for arbitration was subsequently filed and
Climax-Arimco sought an order to compel the parties to arbitrate pursuant to the said arbitration
34
clause. The case, docketed as Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC of
Makati City, with Judge Herminio I. Benito as Presiding Judge. Respondent Climax-Arimco filed
35 on 5 April 2000 a motion to set the application to compel arbitration for hearing.

36

37

38

39 41

40 42
On 14 April 2000, Gonzales filed a motion to dismiss which he however failed to set for hearing.
On 15 May 2000, he filed an Answer with Counterclaim, 43[12] questioning the validity of the
Addendum Contract containing the arbitration clause. Gonzales alleged that the Addendum Contract
containing the arbitration clause is void in view of Climax-Arimcos acts of fraud, oppression and
violation of the Constitution. Thus, the arbitration clause, Clause 19.1, contained in the Addendum
Contract is also null and void ab initio and legally inexistent.
On 18 May 2000, the RTC issued an order declaring Gonzaless motion to dismiss moot and
44
academic in view of the filing of his Answer with Counterclaim. [13]
45
On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial. [14] This the RTC denied on
16 June 2000, holding that the petition for arbitration is a special proceeding that is summary in
nature.46[15] However, on 7 July 2000, the RTC granted Gonzaless motion for reconsideration of the
16 June 2000 Order and set the case for pre-trial on 10 August 2000, it being of the view that
47
Gonzales had raised in his answer the issue of the making of the arbitration agreement. [16]
Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC
denied the same in its 24 July 2000 order.
43
44
45
46
47
On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I. Benito for
not possessing the cold neutrality of an impartial judge. 48[17] On 5 August 2000, Judge Benito
issued an Order granting the Motion to Inhibit and ordered the re-raffling of the petition for
arbitration.49[18] The case was raffled to the sala of public respondent Judge Oscar B. Pimentel of
Branch 148.
On 23 August 2000, Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order. 50
[19] Climax-Arimco argued that R.A. No. 876 does not authorize a pre-trial or trial for a motion to
compel arbitration but directs the court to hear the motion summarily and resolve it within ten days
from hearing. Judge Pimentel granted the motion and directed the parties to arbitration. On 13
February 2001, Judge Pimentel issued the first assailed order requiring Gonzales to proceed with
arbitration proceedings and appointing retired CA Justice Jorge Coquia as sole arbitrator.51[20]
Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7
March 2005.52[21]
Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February 2001 and
7 March 2005 of Judge Pimentel. Gonzales contends that public respondent Judge Pimentel acted
with grave abuse of discretion in immediately ordering the parties to proceed with arbitration
despite the proper, valid, and timely raised argument in his Answer with Counterclaim that the
48
49
50
51
52
Addendum Contract, containing the arbitration clause, is null and void. Gonzales has also sought a unless it finds that the arbitration agreement is null and void, inoperative or
incapable of being performed.
temporary restraining order to prevent the enforcement of the assailed orders directing the parties to
arbitrate, and to direct Judge Pimentel to hold a pre-trial conference and the necessary hearings on
the determination of the nullity of the Addendum Contract.

According to Gonzales, the above-quoted provisions of law outline the procedure to be followed in
In support of his argument, Gonzales invokes Sec. 6 of R.A. No. 876:
petitions to compel arbitration, which the RTC did not follow. Thus, referral of the parties to
arbitration by Judge Pimentel despite the timely and properly raised issue of nullity of the
Addendum Contract was misplaced and without legal basis. Both R.A. No. 876 and R.A. No. 9285
mandate that any issue as to the nullity, inoperativeness, or incapability of performance of the
SEC. 6. Hearing by court.A party aggrieved by the failure, neglect
or refusal of another to perform under an agreement in writing providing for arbitration clause/agreement raised by one of the parties to the alleged arbitration agreement must
arbitration may petition the court for an order directing that such arbitration be determined by the court prior to referring them to arbitration. They require that the trial court
proceed in the manner provided for in such agreement. Five days notice in
first determine or resolve the issue of nullity, and there is no other venue for this determination other
writing of the hearing of such application shall be served either personally or
by registered mail upon the party in default. The court shall hear the parties, than a pre-trial and hearing on the issue by the trial court which has jurisdiction over the case.
and upon being satisfied that the making of the agreement or such failure to
Gonzales adds that the assailed 13 February 2001 Order also violated his right to procedural due
comply therewith is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the agreement. If the process when the trial court erroneously ruled on the existence of the arbitration agreement despite
making of the agreement or default be in issue the court shall proceed to
the absence of a hearing for the presentation of evidence on the nullity of the Addendum Contract.
summarily hear such issue. If the finding be that no agreement in writing
providing for arbitration was made, or that there is no default in the
proceeding thereunder, the proceeding shall be dismissed. If the finding be
that a written provision for arbitration was made and there is a default in
proceeding thereunder, an order shall be made summarily directing the
parties to proceed with the arbitration in accordance with the terms thereof. Respondent Climax-Arimco, on the other hand, assails the mode of review availed of by
The court shall decide all motions, petitions or applications filed Gonzales. Climax-Arimco cites Sec. 29 of R.A. No. 876:
under the provisions of this Act, within ten (10) days after such motions,
petitions, or applications have been heard by it.

SEC. 29. Appeals.An appeal may be taken from an order made in

a proceeding under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to questions
of law. The proceedings upon such an appeal, including the judgment
thereon shall be governed by the Rules of Court in so far as they are
Gonzales also cites Sec. 24 of R.A. No. 9285 or the Alternative Dispute Resolution Act of
applicable.
2004:

SEC. 24. Referral to Arbitration.A court before which an action is

brought in a matter which is the subject matter of an arbitration agreement Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales
shall, if at least one party so requests not later than the pre-trial conference,
or upon the request of both parties thereafter, refer the parties to arbitration is available only where there is no appeal or any plain, speedy, and adequate remedy in the ordinary
course of law against the challenged orders or acts. Climax-Arimco then points out that R.A. No. transaction to be arbitrated. The statute, in particular paragraph 1 of Sec. 2 thereof, considers the
876 provides for an appeal from such orders, which, under the Rules of Court, must be filed within arbitration stipulation an independent contract in its own right whose enforcement may be prevented
15 days from notice of the final order or resolution appealed from or of the denial of the motion for only on grounds which legally make the arbitration agreement itself revocable, thus:
reconsideration filed in due time. Gonzales has not denied that the relevant 15-day period for an
appeal had elapsed long before he filed this petition for certiorari. He cannot use the special civil
action of certiorari as a remedy for a lost appeal.
SEC. 2. Persons and matters subject to arbitration.Two or more
persons or parties may submit to the arbitration of one or more arbitrators
any controversy existing, between them at the time of the submission and
which may be the subject of an action, or the parties to any contract may in
such contract agree to settle by arbitration a controversy thereafter arising
Climax-Arimco adds that an application to compel arbitration under Sec. 6 of R.A. No.
between them. Such submission or contract shall be valid, enforceable and
876 confers on the trial court only a limited and special jurisdiction, i.e., a jurisdiction solely to irrevocable, save upon such grounds as exist at law for the revocation of any
contract.
determine (a) whether or not the parties have a written contract to arbitrate, and (b) if the defendant
has failed to comply with that contract. Respondent cites La Naval Drug Corporation v. Court of xxxx
53
Appeals, [22] which holds that in a proceeding to compel arbitration, [t]he arbitration law explicitly
confines the courts authority only to pass upon the issue of whether there is or there is no agreement
in writing providing for arbitration, and [i]n the affirmative, the statute ordains that the court shall
issue an order summarily directing the parties to proceed with the arbitration in accordance with the
terms thereof.54[23] Climax-Arimco argues that R.A. No. 876 gives no room for any other issue to
The grounds Gonzales invokes for the revocation of the Addendum Contractfraud and
be dealt with in such a proceeding, and that the court presented with an application to compel
oppression in the execution thereofare also not grounds for the revocation of the arbitration clause
arbitration may order arbitration or dismiss the same, depending solely on its finding as to those two
in the Contract, Climax-Arimco notes. Such grounds may only be raised by way of defense in the
limited issues. If either of these matters is disputed, the court is required to conduct a summary
arbitration itself and cannot be used to frustrate or delay the conduct of arbitration proceedings.
hearing on it. Gonzaless proposition contradicts both the trial courts limited jurisdiction and the
Instead, these should be raised in a separate action for rescission, it continues.
summary nature of the proceeding itself.

Climax-Arimco emphasizes that the summary proceeding to compel arbitration under

Climax-Arimco further notes that Gonzaless attack on or repudiation of the Addendum Contract
Sec. 6 of R.A. No. 876 should not be confused with the procedure in Sec. 24 of R.A. No. 9285. Sec.
also is not a ground to deny effect to the arbitration clause in the Contract. The arbitration
6 of R.A. No. 876 refers to an application to compel arbitration where the courts authority is limited
agreement is separate and severable from the contract evidencing the parties commercial or
to resolving the issue of whether there is or there is no agreement in writing providing for
economic transaction, it stresses. Hence, the alleged defect or failure of the main contract is not a
arbitration, while Sec. 24 of R.A. No. 9285 refers to an ordinary action which covers a matter that
ground to deny enforcement of the parties arbitration agreement. Even the party who has repudiated
appears to be arbitrable or subject to arbitration under the arbitration agreement. In the latter case,
the main contract is not prevented from enforcing its arbitration provision. R.A. No. 876 itself treats
the statute is clear that the court, instead of trying the case, may, on request of either or both parties,
the arbitration clause or agreement as a contract separate from the commercial, economic or other
refer the parties to arbitration, unless it finds that the arbitration agreement is null and void,
53 inoperative or incapable of being performed. Arbitration may even be ordered in the same suit
brought upon a matter covered by an arbitration agreement even without waiting for the outcome of

54
the issue of the validity of the arbitration agreement. Art. 8 of the UNCITRAL Model Law 55[24]
states that where a court before which an action is brought in a matter which is subject of an
arbitration agreement refers the parties to arbitration, the arbitral proceedings may proceed even
while the action is pending.
Thus, the main issue raised in the Petition for Certiorari is whether it was proper for the RTC, in the
proceeding to compel arbitration under R.A. No. 876, to order the parties to arbitrate even though
the defendant therein has raised the twin issues of validity and nullity of the Addendum Contract
and, consequently, of the arbitration clause therein as well. The resolution of both Climax-Arimcos
Motion for Partial Reconsideration and/or Clarification in G.R. No. 161957 and Gonzaless Petition
for Certiorari in G.R. No. 167994 essentially turns on whether the question of validity of the
Addendum Contract bears upon the applicability or enforceability of the arbitration clause contained
therein. The two pending matters shall thus be jointly resolved.
We address the Rule 65 petition in G.R. No. 167994 first from the remedial law
perspective. It deserves to be dismissed on procedural grounds, as it was filed in lieu of appeal
which is the prescribed remedy and at that far beyond the reglementary period. It is elementary in
remedial law that the use of an erroneous mode of appeal is cause for dismissal of the petition for
certiorari and it has been repeatedly stressed that a petition for certiorari is not a substitute for a lost
appeal. As its nature, a petition for certiorari lies only where there is no appeal, and no plain, speedy
56
and adequate remedy in the ordinary course of law. [25] The Arbitration Law specifically provides
for an appeal by certiorari, i.e., a petition for review under certiorari under Rule 45 of the Rules of
57
Court that raises pure questions of law. [26] There is no merit to Gonzaless argument that the use of
the permissive term may in Sec. 29, R.A. No. 876 in the filing of appeals does not prohibit nor
discount the filing of a petition for certiorari under Rule 65. 58[27] Proper interpretation of the
aforesaid provision of law shows that the term may refers only to the filing of an appeal, not to the
55
56
57
mode of review to be employed. Indeed, the use of may merely reiterates the principle that the right
to appeal is not part of due process of law but is a mere statutory privilege to be exercised only in
the manner and in accordance with law.
Neither can BF Corporation v. Court of Appeals 59[28] cited by Gonzales support his
theory. Gonzales argues that said case recognized and allowed a petition for certiorari under Rule 65
appealing the order of the Regional Trial Court disregarding the arbitration agreement as an
acceptable remedy.60[29] The BF Corporation case had its origins in a complaint for collection of
sum of money filed by therein petitioner BF Corporation against Shangri-la Properties, Inc. (SPI).
SPI moved to suspend the proceedings alleging that the construction agreement or the Articles of
Agreement between the parties contained a clause requiring prior resort to arbitration before judicial
intervention. The trial court found that an arbitration clause was incorporated in the Conditions of
Contract appended to and deemed an integral part of the Articles of Agreement. Still, the trial court
denied the motion to suspend proceedings upon a finding that the Conditions of Contract were not
duly executed and signed by the parties. The trial court also found that SPI had failed to file any
written notice of demand for arbitration within the period specified in the arbitration clause. The
trial court denied SPI's motion for reconsideration and ordered it to file its responsive pleading.
Instead of filing an answer, SPI filed a petition for certiorari under Rule 65, which the Court of
Appeals, favorably acted upon. In a petition for review before this Court, BF Corporation alleged,
among others, that the Court of Appeals should have dismissed the petition for certiorari since the
order of the trial court denying the motion to suspend proceedings is a resolution of an incident on
the merits and upon the continuation of the proceedings, the trial court would eventually render a
decision on the merits, which decision could then be elevated to a higher court in an ordinary
appeal.61[30]
58
59
60
61
 The Court did not uphold BF Corporations argument. The issue raised before the Court
was whether SPI had taken the proper mode of appeal before the Court of Appeals. The question
before the Court of Appeals was whether the trial court had prematurely assumed jurisdiction over
the controversy. The question of jurisdiction in turn depended on the question of existence of the
arbitration clause which is one of fact. While on its face the question of existence of the arbitration
clause is a question of fact that is not proper in a petition for certiorari, yet since the determination
of the question obliged the Court of Appeals as it did to interpret the contract documents in
accordance with R.A. No. 876 and existing jurisprudence, the question is likewise a question of law
which may be properly taken cognizance of in a petition for certiorari under Rule 65, so the Court
held.62[31]
The situation in B.F. Corporation is not availing in the present petition. The disquisition
in B.F. Corporation led to the conclusion that in order that the question of jurisdiction may be
resolved, the appellate court had to deal first with a question of law which could be addressed in a
certiorari proceeding. In the present case, Gonzaless petition raises a question of law, but not a
question of jurisdiction. Judge Pimentel acted in accordance with the procedure prescribed in R.A.
No. 876 when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after
making the determination that there was indeed an arbitration agreement. It has been held that as
long as a court acts within its jurisdiction and does not gravely abuse its discretion in the exercise
thereof, any supposed error committed by it will amount to nothing more than an error of judgment
reviewable by a timely appeal and not assailable by a special civil action of certiorari. 63[32] Even if
we overlook the employment of the wrong remedy in the broader interests of justice, the petition
would nevertheless be dismissed for failure of Gonzalez to show grave abuse of discretion.
Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction. The Civil Code is explicit on the matter. 64[33] R.A. No. 876 also expressly
62
63
64
authorizes arbitration of domestic disputes. Foreign arbitration, as a system of settling commercial
disputes of an international character, was likewise recognized when the Philippines adhered to the
United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of
1958," under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal
recognition and allowing enforcement of international arbitration agreements between parties of
different nationalities within a contracting state. 65[34] The enactment of R.A. No. 9285 on 2 April
2004 further institutionalized the use of alternative dispute resolution systems, including arbitration,
in the settlement of disputes.
Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrators
decision. Necessarily, a contract is required for arbitration to take place and to be binding. R.A. No.
876 recognizes the contractual nature of the arbitration agreement, thus:
SEC. 2. Persons and matters subject to arbitration.Two or more
persons or parties may submit to the arbitration of one or more
arbitrators any controversy existing, between them at the time of the
submission and which may be the subject of an action, or the parties to any
contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be
valid, enforceable and irrevocable, save upon such grounds as exist at
law for the revocation of any contract.
Such submission or contract may include question arising out of
valuations, appraisals or other controversies which may be collateral,
incidental, precedent or subsequent to any issue between the parties.
A controversy cannot be arbitrated where one of the parties to the
controversy is an infant, or a person judicially declared to be incompetent,
unless the appropriate court having jurisdiction approve a petition for
permission to submit such controversy to arbitration made by the general
guardian or guardian ad litem of the infant or of the incompetent. [Emphasis
added.]
65
 Thus, we held in Manila Electric Co. v. Pasay Transportation Co. 66[35] that a submission The court shall decide all motions, petitions or applications filed
under the provisions of this Act, within ten days after such motions,
to arbitration is a contract. A clause in a contract providing that all matters in dispute between the
petitions, or applications have been heard by it. [Emphasis added.]
parties shall be referred to arbitration is a contract, 67[36] and in Del Monte Corporation-USA v.
Court of Appeals68[37] that [t]he provision to submit to arbitration any dispute arising therefrom and
the relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are
respected as the law between the contracting parties and produce effect as between them, their
assigns and heirs.69[38]
This special proceeding is the procedural mechanism for the enforcement of the contract to
arbitrate. The jurisdiction of the courts in relation to Sec. 6 of R.A. No. 876 as well as the nature of
the proceedings therein was expounded upon in La Naval Drug Corporation v. Court of Appeals.70
[39] There it was held that R.A. No. 876 explicitly confines the court's authority only to the
The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of
determination of whether or not there is an agreement in writing providing for arbitration. In the
arbitration clauses or agreements. It provides:
affirmative, the statute ordains that the court shall issue an order "summarily directing the parties to
proceed with the arbitration in accordance with the terms thereof." If the court, upon the other hand,
finds that no such agreement exists, "the proceeding shall be dismissed." 71[40] The cited case also

SEC. 6. Hearing by court.A party aggrieved by the failure, neglect stressed that the proceedings are summary in nature. 72[41] The same thrust was made in the earlier
or refusal of another to perform under an agreement in writing providing case of Mindanao Portland Cement Corp. v. McDonough Construction Co. of Florida 73[42] which
for arbitration may petition the court for an order directing that such
arbitration proceed in the manner provided for in such agreement. Five days held, thus:
notice in writing of the hearing of such application shall be served either
personally or by registered mail upon the party in default. The court shall
hear the parties, and upon being satisfied that the making of the agreement
or such failure to comply therewith is not in issue, shall make an order
Since there obtains herein a written provision for arbitration as
directing the parties to proceed to arbitration in accordance with the terms of
well as failure on respondent's part to comply therewith, the court a quo
the agreement. If the making of the agreement or default be in issue the court
rightly ordered the parties to proceed to arbitration in accordance with the
shall proceed to summarily hear such issue. If the finding be that no
terms of their agreement (Sec. 6, Republic Act 876). Respondent's arguments
agreement in writing providing for arbitration was made, or that there is
touching upon the merits of the dispute are improperly raised herein. They
no default in the proceeding thereunder, the proceeding shall be dismissed. If
should be addressed to the arbitrators. This proceeding is merely a summary
the finding be that a written provision for arbitration was made and there
remedy to enforce the agreement to arbitrate. The duty of the court in this
is a default in proceeding thereunder, an order shall be made summarily
case is not to resolve the merits of the parties' claims but only to determine if
directing the parties to proceed with the arbitration in accordance with the
they should proceed to arbitration or not. x x x x 74[43]
terms thereof.

66 70

67 71

68 72

69 73
 The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL
Model Law and Art. 21(2) of the UNCITRAL Arbitration Rules. 79[48]
Implicit in the summary nature of the judicial proceedings is the separable or independent
character of the arbitration clause or agreement. This was highlighted in the cases of Manila
Electric Co. v. Pasay Trans. Co.75[44] and Del Monte Corporation-USA v. Court of Appeals.76[45]

The separability doctrine was dwelt upon at length in the U.S. case of Prima Paint Corp.
v. Flood & Conklin Manufacturing Co.80[49] In that case, Prima Paint and Flood and Conklin (F &
C) entered into a consulting agreement whereby F & C undertook to act as consultant to Prima Paint
The doctrine of separability, or severability as other writers call it, enunciates that an
for six years, sold to Prima Paint a list of its customers and promised not to sell paint to these
arbitration agreement is independent of the main contract. The arbitration agreement is to be treated
customers during the same period. The consulting agreement contained an arbitration clause. Prima
as a separate agreement and the arbitration agreement does not automatically terminate when the
Paint did not make payments as provided in the consulting agreement, contending that F & C had
contract of which it is part comes to an end.77[46]
fraudulently misrepresented that it was solvent and able for perform its contract when in fact it was
not and had even intended to file for bankruptcy after executing the consultancy agreement. Thus, F
& C served Prima Paint with a notice of intention to arbitrate. Prima Paint sued in court for
rescission of the consulting agreement on the ground of fraudulent misrepresentation and asked for
the issuance of an order enjoining F & C from proceeding with arbitration. F & C moved to stay the
suit pending arbitration. The trial court granted F & Cs motion, and the U.S. Supreme Court
The separability of the arbitration agreement is especially significant to the determination
affirmed.
of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the
doctrine denotes that the invalidity of the main contract, also referred to as the container contract,
does not affect the validity of the arbitration agreement. Irrespective of the fact that the main
contract is invalid, the arbitration clause/agreement still remains valid and enforceable. 78[47]
The U.S. Supreme Court did not address Prima Paints argument that it had been
fraudulently induced by F & C to sign the consulting agreement and held that no court should
address this argument. Relying on Sec. 4 of the Federal Arbitration Actwhich provides that if a party
[claims to be] aggrieved by the alleged failure x x x of another to arbitrate x x x, [t]he court shall
hear the parties, and upon being satisfied that the making of the agreement for arbitration or the

74 failure to comply therewith is not in issue, the court shall make an order directing the parties to
proceed to arbitration x x x. If the making of the arbitration agreement or the failure, neglect, or
refusal to perform the same be in issue, the court shall proceed summarily to the trial thereofthe
75
U.S. High Court held that the court should not order the parties to arbitrate if the making of the
arbitration agreement is in issue. The parties should be ordered to arbitration if, and only if, they
76 have contracted to submit to arbitration. Prima Paint was not entitled to trial on the question of
whether an arbitration agreement was made because its allegations of fraudulent inducement were

77 79

78 80
not directed to the arbitration clause itself, but only to the consulting agreement which contained the
arbitration agreement.81[50] Prima Paint held that arbitration clauses are separable from the
contracts in which they are embedded, and that where no claim is made that fraud was directed to
the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the
82
claim that the contract itself was induced by fraud. [51]
There is reason, therefore, to rule against Gonzales when he alleges that Judge Pimentel
acted with grave abuse of discretion in ordering the parties to proceed with arbitration. Gonzaless
argument that the Addendum Contract is null and void and, therefore the arbitration clause therein is
void as well, is not tenable. First, the proceeding in a petition for arbitration under R.A. No. 876 is
limited only to the resolution of the question of whether the arbitration agreement exists. Second,
the separability of the arbitration clause from the Addendum Contract means that validity or
invalidity of the Addendum Contract will not affect the enforceability of the agreement to arbitrate.
Thus, Gonzaless petition for certiorari should be dismissed.
This brings us back to G.R. No. 161957. The adjudication of the petition in G.R. No.
167994 effectively modifies part of the Decision dated 28 February 2005 in G.R. No. 161957.
Hence, we now hold that the validity of the contract containing the agreement to submit to
arbitration does not affect the applicability of the arbitration clause itself. A contrary ruling would
suggest that a partys mere repudiation of the main contract is sufficient to avoid arbitration. That is
exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks to
avoid. We add that when it was declared in G.R. No. 161957 that the case should not be brought for
arbitration, it should be clarified that the case referred to is the case actually filed by Gonzales
before the DENR Panel of Arbitrators, which was for the nullification of the main contract on the
ground of fraud, as it had already been determined that the case should have been brought before the
regular courts involving as it did judicial issues.
81
82
The Motion for Reconsideration of Gonzales in G.R. No. 161957 should also be denied.
In the motion, Gonzales raises the same question of jurisdiction, more particularly that the
complaint for nullification of the Addendum Contract pertained to the DENR Panel of Arbitrators,
not the regular courts. He insists that the subject of his complaint is a mining dispute since it
involves a dispute concerning rights to mining areas, the Financial and Technical Assistance
Agreement (FTAA) between the parties, and it also involves claimowners. He adds that the Court
failed to rule on other issues he raised, such as whether he had ceded his claims over the mineral
deposits located within the Addendum Area of Influence; whether the complaint filed before the
DENR Panel of Arbitrators alleged ultimate facts of fraud; and whether the action to declare the
nullity of the Addendum Contract on the ground of fraud has prescribed.
These are the same issues that Gonzales raised in his Rule 45 petition in G.R. No. 161957
which were resolved against him in the Decision of 28 February 2005. Gonzales does not raise any
new argument that would sway the Court even a bit to alter its holding that the complaint filed
before the DENR Panel of Arbitrators involves judicial issues which should properly be resolved by
the regular courts. He alleged fraud or misrepresentation in the execution of the Addendum Contract
which is a ground for the annulment of a voidable contract. Clearly, such allegations entail legal
questions which are within the jurisdiction of the courts.
The question of whether Gonzales had ceded his claims over the mineral deposits in the
Addendum Area of Influence is a factual question which is not proper for determination before this
Court. At all events, moreover, the question is irrelevant to the issue of jurisdiction of the DENR
Panel of Arbitrators. It should be pointed out that the DENR Panel of Arbitrators made a factual
finding in its Order dated 18 October 2001, which it reiterated in its Order dated 25 June 2002, that
Gonzales had, through the various agreements, assigned his interest over the mineral claims all in
favor of [Climax-Arimco] as well as that without the complainant [Gonzales] assigning his interest
over the mineral claims in favor of [Climax-Arimco], there would be no FTAA to speak of. 83[52] time of the discovery of the alleged fraud is not clear from the allegations of Gonzaless complaint.
This finding was affirmed by the Court of Appeals in its Decision dated 30 July 2003 resolving the That being the situation coupled with the fact that this Court is not a trier of facts, any ruling on the
petition for certiorari filed by Climax-Arimco in regard to the 18 October 2001 Order of the DENR issue of prescription would be uncalled for or even unnecessary.
Panel.84[53]

The Court of Appeals likewise found that Gonzaless complaint alleged fraud but did not
provide any particulars to substantiate it. The complaint repeatedly mentioned fraud, oppression,
violation of the Constitution and similar conclusions but nowhere did it give any ultimate facts or
particulars relative to the allegations.85[54]
WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED. Such
dismissal effectively renders superfluous formal action on the Motion for Partial Reconsideration
and/or Clarification filed by Climax Mining Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No. 161957 is DENIED
WITH FINALITY.
Sec. 5, Rule 8 of the Rules of Court specifically provides that in all averments of fraud,
the circumstances constituting fraud must be stated with particularity. This is to enable the opposing
party to controvert the particular facts allegedly constituting the same. Perusal of the complaint
indeed shows that it failed to state with particularity the ultimate facts and circumstances SO ORDERED.
constituting the alleged fraud. It does not state what particulars about Climax-Arimcos financial or
technical capability were misrepresented, or how the misrepresentation was done. Incorporated in
the body of the complaint are verbatim reproductions of the contracts, correspondence and
government issuances that reportedly explain the allegations of fraud and misrepresentation, but
these are, at best, evidentiary matters that should not be included in the pleading.

As to the issue of prescription, Gonzaless claims of fraud and misrepresentation attending

the execution of the Addendum Contract are grounds for the annulment of a voidable contract under
the Civil Code.86[55] Under Art. 1391 of the Code, an action for annulment shall be brought within
four years, in the case of fraud, beginning from the time of the discovery of the same. However, the

83

84

85 86
G.R. No. L-5887 December 16, 1910

THE UNITED STATES, plaintiff-appellee,

vs.
LOOK CHAW (alias LUK CHIU), defendant-appellant.

Thos. D. Aitken for appellant.

Attorney-General Villamor for appellee.

ARELLANO, C. J.:

The first complaint filed against the defendant, in the Court of First Instance of Cebu, stated that he
"carried, kept, possessed and had in his possession and control, 96 kilogrammes of opium," and that
"he had been surprised in the act of selling 1,000 pesos worth prepared opium."

The defense presented a demurrer based on two grounds, the second of which was the more than
one crime was charged in the complaint. The demurrer was sustained, as the court found that the
complaint contained two charges, one, for the unlawful possession of opium, and the other, for the
unlawful sale of opium, and, consequence of that ruling, it ordered that the fiscal should separated
one charge from the other and file a complaint for each violation; this, the fiscal did, and this cause
concerns only the unlawful possession of opium. It is registered as No. 375, in the Court of First
Instance of Cebu, and as No. 5887 on the general docket of this court.

The facts of the case are contained in the following finding of the trial court:
 The evidence, it says, shows that between 11 and 12 o'clock a. m. on the present month
(stated as August 19, 1909), several persons, among them Messrs. Jacks and Milliron,
chief of the department of the port of Cebu and internal-revenue agent of Cebu,
respectively, went abroad the steamship Erroll to inspect and search its cargo, and found,
first in a cabin near the saloon, one sack (Exhibit A) and afterwards in the hold, another
sack (Exhibit B). The sack referred to as Exhibit A contained 49 cans of opium, and the
other, Exhibit B, the larger sack, also contained several cans of the same substance. The
hold, in which the sack mentioned in Exhibit B was found, was under the defendant's
control, who moreover, freely and of his own will and accord admitted that this sack, as
well as the other referred to in Exhibit B and found in the cabin, belonged to him. The
said defendant also stated, freely and voluntarily, that he had bought these sacks of
opium, in Hongkong with the intention of selling them as contraband in Mexico or Vera
Cruz, and that, as his hold had already been searched several times for opium, he ordered
two other Chinamen to keep the sack. Exhibit A.
It is to be taken into account that the two sacks of opium, designated as Exhibits A and B, properly
constitute the corpus delicti. Moreover, another lot of four cans of opium, marked, as Exhibit C, was
the subject matter of investigation at the trial, and with respect to which the chief of the department
of the port of Cebu testified that they were found in the part of the ship where the firemen habitually
sleep, and that they were delivered to the first officer of the ship to be returned to the said firemen
after the vessel should have left the Philippines, because the firemen and crew of foreign vessels,
pursuant to the instructions he had from the Manila custom-house, were permitted to retain certain
amounts of opium, always provided it should not be taken shore.
And, finally, another can of opium, marked "Exhibit D," is also corpus delicti and important as
evidence in this cause. With regard to this the internal-revenue agent testified as follows:itc-alf
FISCAL. What is it?
WITNESS. It is a can opium which was bought from the defendant by a secret-service
agent and taken to the office of the governor to prove that the accused had opium in his
possession to sell.
On motion by the defense, the court ruled that this answer might be stricken out "because it refers to
a sale." But, with respect to this answer, the chief of the department of customs had already given
this testimony, to wit:
FISCAL. Who asked you to search the vessel?
WITNESS. The internal-revenue agent came to my office and said that a party brought
him a sample of opium and that the same party knew that there was more opium on board
the steamer, and the agent asked that the vessel be searched.
The defense moved that this testimony be rejected, on the ground of its being hearsay evidence, and
the court only ordered that the part thereof "that there was more opium, on board the vessel" be
stricken out.
The defense, to abbreviate proceedings, admitted that the receptacles mentioned as Exhibits A, B,
and C, contained opium and were found on board the steamship Erroll, a vessel of English
nationality, and that it was true that the defendant stated that these sacks of opium were his and that
he had them in his possession.
According to the testimony of the internal-revenue agent, the defendant stated to him, in the
presence of the provincial fiscal, of a Chinese interpreter (who afterwards was not needed, because
the defendant spoke English), the warden of the jail, and four guards, that the opium seized in the
vessel had been bought by him in Hongkong, at three pesos for each round can and five pesos for
each one of the others, for the purpose of selling it, as contraband, in Mexico and Puerto de Vera
Cruz; that on the 15th the vessel arrived at Cebu, and on the same day he sold opium; that he had
tried to sell opium for P16 a can; that he had a contract to sell an amount of the value of about P500;
that the opium found in the room of the other two Chinamen prosecuted in another cause, was his,
and that he had left it in their stateroom to avoid its being found in his room, which had already
been searched many times; and that, according to the defendant, the contents of the large sack was
80 cans of opium, and of the small one, 49, and the total number, 129.
It was established that the steamship Erroll was of English nationality, that it came from Hongkong,
and that it was bound for Mexico, via the call ports of Manila and Cebu.
The defense moved for a dismissal of the case, on the grounds that the court had no jurisdiction to
try the same and the facts concerned therein did not constitute a crime. The fiscal, at the conclusion
of his argument, asked that the maximum penalty of the law be imposed upon the defendant, in view
of the considerable amount of opium seized. The court ruled that it did not lack jurisdiction,
inasmuch as the crime had been committed within its district, on the wharf of Cebu.
The court sentenced the defendant to five years' imprisonment, to pay a fine of P10,000, with
additional subsidiary imprisonment in case of insolvency, though not to exceed one third of the
principal penalty, and to the payment of the costs. It further ordered the confiscation, in favor of the
Insular Government, of the exhibits presented in the case, and that, in the event of an appeal being
taken or a bond given, or when the sentenced should have been served, the defendant be not
released from custody, but turned over to the customs authorities for the purpose of the fulfillment
of the existing laws on immigration.
From this judgment, the defendant appealed to this court.lawphi1.net
The appeal having been heard, together with the allegations made therein by the parties, it is found:
That, although the mere possession of a thing of prohibited use in these Islands, aboard a foreign
vessel in transit, in any of their ports, does not, as a general rule, constitute a crime triable by the
courts of this country, on account of such vessel being considered as an extension of its own
nationality, the same rule does not apply when the article, whose use is prohibited within the
Philippine Islands, in the present case a can of opium, is landed from the vessel upon Philippine
soil, thus committing an open violation of the laws of the land, with respect to which, as it is a
violation of the penal law in force at the place of the commission of the crime, only the court
established in that said place itself had competent jurisdiction, in the absence of an agreement under
an international treaty.
It is also found: That, even admitting that the quantity of the drug seized, the subject matter of the
present case, was considerable, it does not appear that, on such account, the two penalties fixed by
the law on the subject, should be imposed in the maximum degree.

Therefore, reducing the imprisonment and the fine imposed to six months and P1,000, respectively,
we affirm in all other respects the judgment appealed from, with the costs of this instance against
the appellant. So ordered.

Torres, Mapa, Johnson, Carson, Moreland and Trent, JJ., concur.

G.R. No. L-11390 March 26, 1918

EL BANCO ESPAOL-FILIPINO, plaintiff-appellant,

vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca Tanquinyeng,
defendant-appellant.

Aitken and DeSelms for appellant.

Hartigan and Welch for appellee.

STREET, J.:
This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a
mortgage upon various parcels of real property situated in the city of Manila. The mortgage in
question is dated June 16, 1906, and was executed by the original defendant herein, Engracio
Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon March
31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8 per centum per
annum, payable at the end of each quarter. It appears that the parties to this mortgage at that time
estimated the value of the property in question at P292,558, which was about P75,000 in excess of
the indebtedness. After the execution of this instrument by the mortgagor, he returned to China
which appears to have been his native country; and he there died, upon January 29, 1810, without
again returning to the Philippine Islands.
As the defendant was a nonresident at the time of the institution of the present action, it was
necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by
publication pursuant to section 399 of the Code of Civil Procedure. An order for publication was
accordingly obtained from the court, and publication was made in due form in a newspaper of the
city of Manila. At the same time that the order of the court should deposit in the post office in a
stamped envelope a copy of the summons and complaint directed to the defendant at his last place
of residence, to wit, the city of Amoy, in the Empire of China. This order was made pursuant to the
following provision contained in section 399 of the Code of Civil Procedure:
In case of publication, where the residence of a nonresident or absent defendant is known,
the judge must direct a copy of the summons and complaint to be forthwith deposited by
the clerk in the post-office, postage prepaid, directed to the person to be served, at his
place of residence
Whether the clerk complied with this order does not affirmatively appear. There is, however, among
the papers pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo Chan y
Garcia, an employee of the attorneys of the bank, showing that upon that date he had deposited in
the Manila post-office a registered letter, addressed to Engracio Palanca Tanquinyeng, at Manila,
containing copies of the complaint, the plaintiff's affidavit, the summons, and the order of the court
directing publication as aforesaid. It appears from the postmaster's receipt that Bernardo probably
used an envelope obtained from the clerk's office, as the receipt purports to show that the letter
emanated from the office.
The cause proceeded in usual course in the Court of First Instance; and the defendant not having
appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3, 1908, a
decision was rendered in favor of the plaintiff. In this decision it was recited that publication had
been properly made in a periodical, but nothing was said about this notice having been given mail.
The court, upon this occasion, found that the indebtedness of the defendant amounted to P249,355.
32, with interest from March 31, 1908. Accordingly it was ordered that the defendant should, on or
before July 6, 1908, deliver said amount to the clerk of the court to be applied to the satisfaction of
the judgment, and it was declared that in case of the failure of the defendant to satisfy the judgment
within such period, the mortgage property located in the city of Manila should be exposed to public
sale. The payment contemplated in said order was never made; and upon July 8, 1908, the court
ordered the sale of the property. The sale took place upon July 30, 1908, and the property was
bought in by the bank for the sum of P110,200. Upon August 7, 1908, this sale was confirmed by
the court.
About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a motion
was made in this cause by Vicente Palanca, as administrator of the estate of the original defendant,
Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant requested the court to set aside
the order of default of July 2, 1908, and the judgment rendered upon July 3, 1908, and to vacate all
the proceedings subsequent thereto. The basis of this application, as set forth in the motion itself,
was that the order of default and the judgment rendered thereon were void because the court had
never acquired jurisdiction over the defendant or over the subject of the action.
At the hearing in the court below the application to vacate the judgment was denied, and from this
action of the court Vicente Planca, as administrator of the estate of the original defendant, has
appealed. No other feature of the case is here under consideration than such as related to the action
of the court upon said motion.
The case presents several questions of importance, which will be discussed in what appears to be
the sequence of most convenient development. In the first part of this opinion we shall, for the
purpose of argument, assume that the clerk of the Court of First Instance did not obey the order of
the court in the matter of mailing the papers which he was directed to send to the defendant in
Amoy; and in this connection we shall consider, first, whether the court acquired the necessary
jurisdiction to enable it to proceed with the foreclosure of the mortgage and, secondly, whether
those proceedings were conducted in such manner as to constitute due process of law.
The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several
different, though related, senses since it may have reference (1) to the authority of the court to
entertain a particular kind of action or to administer a particular kind of relief, or it may refer to the
power of the court over the parties, or (2) over the property which is the subject to the litigation.
The sovereign authority which organizes a court determines the nature and extent of its powers in
general and thus fixes its competency or jurisdiction with reference to the actions which it may
entertain and the relief it may grant.
Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his
submission to its authority, or it is acquired by the coercive power of legal process exerted over the
person.
Jurisdiction over the property which is the subject of the litigation may result either from a seizure
of the property under legal process, whereby it is brought into the actual custody of the law, or it
may result from the institution of legal proceedings wherein, under special provisions of law, the
power of the court over the property is recognized and made effective. In the latter case the
property, though at all times within the potential power of the court, may never be taken into actual
custody at all. An illustration of the jurisdiction acquired by actual seizure is found in attachment
proceedings, where the property is seized at the beginning of the action, or some subsequent stage
of its progress, and held to abide the final event of the litigation. An illustration of what we term
potential jurisdiction over the res, is found in the proceeding to register the title of land under our
system for the registration of land. Here the court, without taking actual physical control over the
property assumes, at the instance of some person claiming to be owner, to exercise a jurisdiction in
rem over the property and to adjudicate the title in favor of the petitioner against all the world.
In the terminology of American law the action to foreclose a mortgage is said to be a proceeding
quasi in rem, by which is expressed the idea that while it is not strictly speaking an action in rem yet
it partakes of that nature and is substantially such. The expression "action in rem" is, in its narrow
application, used only with reference to certain proceedings in courts of admiralty wherein the
property alone is treated as responsible for the claim or obligation upon which the proceedings are
based. The action quasi rem differs from the true action in rem in the circumstance that in the
former an individual is named as defendant, and the purpose of the proceeding is to subject his
interest therein to the obligation or lien burdening the property. All proceedings having for their sole
object the sale or other disposition of the property of the defendant, whether by attachment,
foreclosure, or other form of remedy, are in a general way thus designated. The judgment entered in
these proceedings is conclusive only between the parties.
In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has said:
Though nominally against person, such suits are to vindicate liens; they proceed upon
seizure; they treat property as primarily indebted; and, with the qualification above-
mentioned, they are substantially property actions. In the civil law, they are styled
hypothecary actions, and their sole object is the enforcement of the lien against the res; in
the common law, they would be different in chancery did not treat the conditional
conveyance as a mere hypothecation, and the creditor's right ass an equitable lien; so, in
both, the suit is real action so far as it is against property, and seeks the judicial
recognition of a property debt, and an order for the sale of the res. (Waples, Proceedings
In Rem. sec. 607.)
It is true that in proceedings of this character, if the defendant for whom publication is made
appears, the action becomes as to him a personal action and is conducted as such. This, however,
does not affect the proposition that where the defendant fails to appear the action is quasi in rem;
and it should therefore be considered with reference to the principles governing actions in rem.
There is an instructive analogy between the foreclosure proceeding and an action of attachment,
concerning which the Supreme Court of the United States has used the following language:
If the defendant appears, the cause becomes mainly a suit in personam, with the added
incident, that the property attached remains liable, under the control of the court, to
answer to any demand which may be established against the defendant by the final
judgment of the court. But, if there is no appearance of the defendant, and no service of
process on him, the case becomes, in its essential nature, a proceeding in rem, the only
effect of which is to subject the property attached to the payment of the defendant which
the court may find to be due to the plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.)
In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary
seizure is to, be considered necessary in order to confer jurisdiction upon the court. In this case the
lien on the property is acquired by the seizure; and the purpose of the proceedings is to subject the
property to that lien. If a lien already exists, whether created by mortgage, contract, or statute, the
preliminary seizure is not necessary; and the court proceeds to enforce such lien in the manner
provided by law precisely as though the property had been seized upon attachment. (Roller vs.
Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere circumstance that in an
attachment the property may be seized at the inception of the proceedings, while in the foreclosure
suit it is not taken into legal custody until the time comes for the sale, does not materially affect the
fundamental principle involved in both cases, which is that the court is here exercising a jurisdiction
over the property in a proceeding directed essentially in rem.
Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage
foreclosure, it is evident that the court derives its authority to entertain the action primarily from the
statutes organizing the court. The jurisdiction of the court, in this most general sense, over the cause
of action is obvious and requires no comment. Jurisdiction over the person of the defendant, if
acquired at all in such an action, is obtained by the voluntary submission of the defendant or by the
personal service of process upon him within the territory where the process is valid. If, however, the
defendant is a nonresident and, remaining beyond the range of the personal process of the court,
refuses to come in voluntarily, the court never acquires jurisdiction over the person at all. Here the
property itself is in fact the sole thing which is impleaded and is the responsible object which is the
subject of the exercise of judicial power. It follows that the jurisdiction of the court in such case is
based exclusively on the power which, under the law, it possesses over the property; and any
discussion relative to the jurisdiction of the court over the person of the defendant is entirely apart
from the case. The jurisdiction of the court over the property, considered as the exclusive object of
such action, is evidently based upon the following conditions and considerations, namely: (1) that
the property is located within the district; (2) that the purpose of the litigation is to subject the
property by sale to an obligation fixed upon it by the mortgage; and (3) that the court at a proper
stage of the proceedings takes the property into custody, if necessary, and expose it to sale for the
purpose of satisfying the mortgage debt. An obvious corollary is that no other relief can be granted
in this proceeding than such as can be enforced against the property.
We may then, from what has been stated, formulated the following proposition relative to the
foreclosure proceeding against the property of a nonresident mortgagor who fails to come in and
submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the court is
derived from the power which it possesses over the property; (II) that jurisdiction over the person is
not acquired and is nonessential; (III) that the relief granted by the court must be limited to such as
can be enforced against the property itself.
It is important that the bearing of these propositions be clearly apprehended, for there are many
expressions in the American reports from which it might be inferred that the court acquires personal
jurisdiction over the person of the defendant by publication and notice; but such is not the case. In
truth the proposition that jurisdiction over the person of a nonresident cannot be acquired by
publication and notice was never clearly understood even in the American courts until after the
decision had been rendered by the Supreme Court of the United States in the leading case of
Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and of other decisions
which have subsequently been rendered in that and other courts, the proposition that jurisdiction
over the person cannot be thus acquired by publication and notice is no longer open to question; and
it is now fully established that a personal judgment upon constructive or substituted service against
a nonresident who does not appear is wholly invalid. This doctrine applies to all kinds of
constructive or substituted process, including service by publication and personal service outside of
the jurisdiction in which the judgment is rendered; and the only exception seems to be found in the
case where the nonresident defendant has expressly or impliedly consented to the mode of service.
(Note to Raher vs. Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.],
312
The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process from the
tribunals of one State cannot run into other States or countries and that due process of law requires
that the defendant shall be brought under the power of the court by service of process within the
State, or by his voluntary appearance, in order to authorize the court to pass upon the question of his
personal liability. The doctrine established by the Supreme Court of the United States on this point,
being based upon the constitutional conception of due process of law, is binding upon the courts of
the Philippine Islands. Involved in this decision is the principle that in proceedings in rem or quasi
in rem against a nonresident who is not served personally within the state, and who does not appear,
the relief must be confined to the res, and the court cannot lawfully render a personal judgment
against him. (Dewey vs. Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil
Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore in an action to foreclose a mortgage against a
nonresident, upon whom service has been effected exclusively by publication, no personal judgment
for the deficiency can be entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal.,
416.)
It is suggested in the brief of the appellant that the judgment entered in the court below offends
against the principle just stated and that this judgment is void because the court in fact entered a
personal judgment against the absent debtor for the full amount of the indebtedness secured by the
mortgage. We do not so interpret the judgment.
In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all cases
of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of Civil
Procedure, and to make an order requiring the defendant to pay the money into court. This step is a
necessary precursor of the order of sale. In the present case the judgment which was entered
contains the following words:
Because it is declared that the said defendant Engracio Palanca Tanquinyeng y
Limquingco, is indebted in the amount of P249,355.32, plus the interest, to the 'Banco
Espanol-Filipino' . . . therefore said appellant is ordered to deliver the above amount etc.,
etc.
This is not the language of a personal judgment. Instead it is clearly intended merely as a
compliance with the requirement that the amount due shall be ascertained and that the evidence of
this it may be observed that according to the Code of Civil Procedure a personal judgment against
the debtor for the deficiency is not to be rendered until after the property has been sold and the
proceeds applied to the mortgage debt. (sec. 260).
The conclusion upon this phase of the case is that whatever may be the effect in other respects of the
failure of the clerk of the Court of First Instance to mail the proper papers to the defendant in Amoy,
China, such irregularity could in no wise impair or defeat the jurisdiction of the court, for in our
opinion that jurisdiction rest upon a basis much more secure than would be supplied by any form of
notice that could be given to a resident of a foreign country.
Before leaving this branch of the case, we wish to observe that we are fully aware that many
reported cases can be cited in which it is assumed that the question of the sufficiency of publication
or notice in a case of this kind is a question affecting the jurisdiction of the court, and the court is
sometimes said to acquire jurisdiction by virtue of the publication. This phraseology was
undoubtedly originally adopted by the court because of the analogy between service by the
publication and personal service of process upon the defendant; and, as has already been suggested,
prior to the decision of Pennoyer vs. Neff (supra) the difference between the legal effects of the two
forms of service was obscure. It is accordingly not surprising that the modes of expression which
had already been molded into legal tradition before that case was decided have been brought down
to the present day. But it is clear that the legal principle here involved is not effected by the peculiar
language in which the courts have expounded their ideas.
We now proceed to a discussion of the question whether the supposed irregularity in the
proceedings was of such gravity as to amount to a denial of that "due process of law" which was
secured by the Act of Congress in force in these Islands at the time this mortgage was foreclosed.
(Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of the constitutional
provisions relating to due process of law the Supreme Court of the United States has refrained from
attempting to define with precision the meaning of that expression, the reason being that the idea
expressed therein is applicable under so many diverse conditions as to make any attempt ay precise
definition hazardous and unprofitable. As applied to a judicial proceeding, however, it may be laid
down with certainty that the requirement of due process is satisfied if the following conditions are
present, namely; (1) There must be a court or tribunal clothed with judicial power to hear and
determine the matter before it; (2) jurisdiction must be lawfully acquired over the person of the
defendant or over the property which is the subject of the proceeding; (3) the defendant must be
given an opportunity to be heard; and (4) judgment must be rendered upon lawful hearing.
Passing at once to the requisite that the defendant shall have an opportunity to be heard, we observe
that in a foreclosure case some notification of the proceedings to the nonresident owner, prescribing
the time within which appearance must be made, is everywhere recognized as essential. To answer
this necessity the statutes generally provide for publication, and usually in addition thereto, for the
mailing of notice to the defendant, if his residence is known. Though commonly called constructive,
or substituted service of process in any true sense. It is merely a means provided by law whereby
the owner may be admonished that his property is the subject of judicial proceedings and that it is
incumbent upon him to take such steps as he sees fit to protect it. In speaking of notice of this
character a distinguish master of constitutional law has used the following language:
. . . if the owners are named in the proceedings, and personal notice is provided for, it is
rather from tenderness to their interests, and in order to make sure that the opportunity for
a hearing shall not be lost to them, than from any necessity that the case shall assume that
form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.)
It will be observed that this mode of notification does not involve any absolute assurance that the
absent owner shall thereby receive actual notice. The periodical containing the publication may
never in fact come to his hands, and the chances that he should discover the notice may often be
very slight. Even where notice is sent by mail the probability of his receiving it, though much
increased, is dependent upon the correctness of the address to which it is forwarded as well as upon
the regularity and security of the mail service. It will be noted, furthermore, that the provision of our
law relative to the mailing of notice does not absolutely require the mailing of notice
unconditionally and in every event, but only in the case where the defendant's residence is known.
In the light of all these facts, it is evident that actual notice to the defendant in cases of this kind is
not, under the law, to be considered absolutely necessary.
The idea upon which the law proceeds in recognizing the efficacy of a means of notification which
may fall short of actual notice is apparently this: Property is always assumed to be in the possession
of its owner, in person or by agent; and he may be safely held, under certain conditions, to be
affected with knowledge that proceedings have been instituted for its condemnation and sale.
It is the duty of the owner of real estate, who is a nonresident, to take measures that in
some way he shall be represented when his property is called into requisition, and if he
fails to do this, and fails to get notice by the ordinary publications which have usually
been required in such cases, it is his misfortune, and he must abide the consequences. (6
R. C. L., sec. 445 [p. 450]).
It has been well said by an American court:
If property of a nonresident cannot be reached by legal process upon the constructive
notice, then our statutes were passed in vain, and are mere empty legislative declarations,
without either force, or meaning; for if the person is not within the jurisdiction of the
court, no personal judgment can be rendered, and if the judgment cannot operate upon the
property, then no effective judgment at all can be rendered, so that the result would be
that the courts would be powerless to assist a citizen against a nonresident. Such a result
would be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am. Rep., 662, 667.)
It is, of course universally recognized that the statutory provisions relative to publication or other
form of notice against a nonresident owner should be complied with; and in respect to the
publication of notice in the newspaper it may be stated that strict compliance with the requirements
of the law has been held to be essential. In Guaranty Trust etc. Co. vs. Green Cove etc., Railroad
Co. (139 U. S., 137, 138), it was held that where newspaper publication was made for 19 weeks,
when the statute required 20, the publication was insufficient.
With respect to the provisions of our own statute, relative to the sending of notice by mail, the
requirement is that the judge shall direct that the notice be deposited in the mail by the clerk of the
court, and it is not in terms declared that the notice must be deposited in the mail. We consider this
to be of some significance; and it seems to us that, having due regard to the principles upon which
the giving of such notice is required, the absent owner of the mortgaged property must, so far as the
due process of law is concerned, take the risk incident to the possible failure of the clerk to perform
his duty, somewhat as he takes the risk that the mail clerk or the mail carrier might possibly lose or
destroy the parcel or envelope containing the notice before it should reach its destination and be
delivered to him. This idea seems to be strengthened by the consideration that placing upon the
clerk the duty of sending notice by mail, the performance of that act is put effectually beyond the
control of the plaintiff in the litigation. At any rate it is obvious that so much of section 399 of the
Code of Civil Procedure as relates to the sending of notice by mail was complied with when the
court made the order. The question as to what may be the consequences of the failure of the record
to show the proof of compliance with that requirement will be discussed by us further on.
The observations which have just been made lead to the conclusion that the failure of the clerk to
mail the notice, if in fact he did so fail in his duty, is not such an irregularity, as amounts to a denial
of due process of law; and hence in our opinion that irregularity, if proved, would not avoid the
judgment in this case. Notice was given by publication in a newspaper and this is the only form of
notice which the law unconditionally requires. This in our opinion is all that was absolutely
necessary to sustain the proceedings.
It will be observed that in considering the effect of this irregularity, it makes a difference whether it
be viewed as a question involving jurisdiction or as a question involving due process of law. In the
matter of jurisdiction there can be no distinction between the much and the little. The court either
has jurisdiction or it has not; and if the requirement as to the mailing of notice should be considered
as a step antecedent to the acquiring of jurisdiction, there could be no escape from the conclusion
that the failure to take that step was fatal to the validity of the judgment. In the application of the
idea of due process of law, on the other hand, it is clearly unnecessary to be so rigorous. The
jurisdiction being once established, all that due process of law thereafter requires is an opportunity
for the defendant to be heard; and as publication was duly made in the newspaper, it would seem
highly unreasonable to hold that failure to mail the notice was fatal. We think that in applying the
requirement of due process of law, it is permissible to reflect upon the purposes of the provision
which is supposed to have been violated and the principle underlying the exercise of judicial power
in these proceedings. Judge in the light of these conceptions, we think that the provision of Act of
Congress declaring that no person shall be deprived of his property without due process of law has
not been infringed.
In the progress of this discussion we have stated the two conclusions; (1) that the failure of the clerk
to send the notice to the defendant by mail did not destroy the jurisdiction of the court and (2) that
such irregularity did not infringe the requirement of due process of law. As a consequence of these
conclusions the irregularity in question is in some measure shorn of its potency. It is still necessary,
however, to consider its effect considered as a simple irregularity of procedure; and it would be idle
to pretend that even in this aspect the irregularity is not grave enough. From this point of view,
however, it is obvious that any motion to vacate the judgment on the ground of the irregularity in
question must fail unless it shows that the defendant was prejudiced by that irregularity. The least,
therefore, that can be required of the proponent of such a motion is to show that he had a good
defense against the action to foreclose the mortgage. Nothing of the kind is, however, shown either
in the motion or in the affidavit which accompanies the motion.
An application to open or vacate a judgment because of an irregularity or defect in the proceedings
is usually required to be supported by an affidavit showing the grounds on which the relief is
sought, and in addition to this showing also a meritorious defense to the action. It is held that a
general statement that a party has a good defense to the action is insufficient. The necessary facts
must be averred. Of course if a judgment is void upon its face a showing of the existence of a
meritorious defense is not necessary. (10 R. C. L., 718.)
The lapse of time is also a circumstance deeply affecting this aspect of the case. In this connection
we quote the following passage from the encyclopedic treatise now in course of publication:
 Where, however, the judgment is not void on its face, and may therefore be enforced if
permitted to stand on the record, courts in many instances refuse to exercise their quasi
equitable powers to vacate a judgement after the lapse of the term ay which it was
entered, except in clear cases, to promote the ends of justice, and where it appears that the
party making the application is himself without fault and has acted in good faith and with
ordinary diligence. Laches on the part of the applicant, if unexplained, is deemed
sufficient ground for refusing the relief to which he might otherwise be entitled.
Something is due to the finality of judgments, and acquiescence or unnecessary delay is
fatal to motions of this character, since courts are always reluctant to interfere with
judgments, and especially where they have been executed or satisfied. The moving party
has the burden of showing diligence, and unless it is shown affirmatively the court will
not ordinarily exercise its discretion in his favor. (15 R. C. L., 694, 695.)
It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died
January 29, 1910. The mortgage under which the property was sold was executed far back in 1906;
and the proceedings in the foreclosure were closed by the order of court confirming the sale dated
August 7, 1908. It passes the rational bounds of human credulity to suppose that a man who had
placed a mortgage upon property worth nearly P300,000 and had then gone away from the scene of
his life activities to end his days in the city of Amoy, China, should have long remained in ignorance
of the fact that the mortgage had been foreclosed and the property sold, even supposing that he had
no knowledge of those proceedings while they were being conducted. It is more in keeping with the
ordinary course of things that he should have acquired information as to what was transpiring in his
affairs at Manila; and upon the basis of this rational assumption we are authorized, in the absence of
proof to the contrary, to presume that he did have, or soon acquired, information as to the sale of his
property.
The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things have
happened according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive of a
situation more appropriate than this for applying the presumption thus defined by the lawgiver. In
support of this presumption, as applied to the present case, it is permissible to consider the
probability that the defendant may have received actual notice of these proceedings from the
unofficial notice addressed to him in Manila which was mailed by an employee of the bank's
attorneys. Adopting almost the exact words used by the Supreme Court of the United States in
Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-known
skill of postal officials and employees in making proper delivery of letters defectively addressed, we
think the presumption is clear and strong that this notice reached the defendant, there being no proof
that it was ever returned by the postal officials as undelivered. And if it was delivered in Manila,
instead of being forwarded to Amoy, China, there is a probability that the recipient was a person
sufficiently interested in his affairs to send it or communicate its contents to him.
Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon the
mailing of the notice by the clerk, the reflections in which we are now indulging would be idle and
frivolous; but the considerations mentioned are introduced in order to show the propriety of
applying to this situation the legal presumption to which allusion has been made. Upon that
presumption, supported by the circumstances of this case, ,we do not hesitate to found the
conclusion that the defendant voluntarily abandoned all thought of saving his property from the
obligation which he had placed upon it; that knowledge of the proceedings should be imputed to
him; and that he acquiesced in the consequences of those proceedings after they had been
accomplished. Under these circumstances it is clear that the merit of this motion is, as we have
already stated, adversely affected in a high degree by the delay in asking for relief. Nor is it an
adequate reply to say that the proponent of this motion is an administrator who only qualified a few
months before this motion was made. No disability on the part of the defendant himself existed
from the time when the foreclosure was effected until his death; and we believe that the delay in the
appointment of the administrator and institution of this action is a circumstance which is imputable
to the parties in interest whoever they may have been. Of course if the minor heirs had instituted an
action in their own right to recover the property, it would have been different.
It is, however, argued that the defendant has suffered prejudice by reason of the fact that the bank
became the purchaser of the property at the foreclosure sale for a price greatly below that which had
been agreed upon in the mortgage as the upset price of the property. In this connection, it appears
that in article nine of the mortgage which was the subject of this foreclosure, as amended by the
notarial document of July 19, 1906, the parties to this mortgage made a stipulation to the effect that
the value therein placed upon the mortgaged properties should serve as a basis of sale in case the
debt should remain unpaid and the bank should proceed to a foreclosure. The upset price stated in
that stipulation for all the parcels involved in this foreclosure was P286,000. It is said in behalf of
the appellant that when the bank bought in the property for the sum of P110,200 it violated that
stipulation.
It has been held by this court that a clause in a mortgage providing for a tipo, or upset price, does
not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure proceedings.
(Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Espaol Filipino vs. Donaldson,
Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the property was purchased at the
foreclosure sale, not by the creditor or mortgagee, but by a third party. Whether the same rule
should be applied in a case where the mortgagee himself becomes the purchaser has apparently not
been decided by this court in any reported decision, and this question need not here be considered,
since it is evident that if any liability was incurred by the bank by purchasing for a price below that
fixed in the stipulation, its liability was a personal liability derived from the contract of mortgage;
and as we have already demonstrated such a liability could not be the subject of adjudication in an
action where the court had no jurisdiction over the person of the defendant. If the plaintiff bank
became liable to account for the difference between the upset price and the price at which in bought
in the property, that liability remains unaffected by the disposition which the court made of this
case; and the fact that the bank may have violated such an obligation can in no wise affect the
validity of the judgment entered in the Court of First Instance.
In connection with the entire failure of the motion to show either a meritorious defense to the action
or that the defendant had suffered any prejudice of which the law can take notice, we may be
permitted to add that in our opinion a motion of this kind, which proposes to unsettle judicial
proceedings long ago closed, can not be considered with favor, unless based upon grounds which
appeal to the conscience of the court. Public policy requires that judicial proceedings be upheld. The
maximum here applicable is non quieta movere. As was once said by Judge Brewer, afterwards a
member of the Supreme Court of the United States:
Public policy requires that judicial proceedings be upheld, and that titles obtained in those
proceedings be safe from the ruthless hand of collateral attack. If technical defects are
 adjudged potent to destroy such titles, a judicial sale will never realize that value of the
property, for no prudent man will risk his money in bidding for and buying that title
which he has reason to fear may years thereafter be swept away through some occult and
not readily discoverable defect. (Martin vs. Pond, 30 Fed., 15.)
In the case where that language was used an attempt was made to annul certain foreclosure
proceedings on the ground that the affidavit upon which the order of publication was based
erroneously stated that the State of Kansas, when he was in fact residing in another State. It was
held that this mistake did not affect the validity of the proceedings.
In the preceding discussion we have assumed that the clerk failed to send the notice by post as
required by the order of the court. We now proceed to consider whether this is a proper assumption;
and the proposition which we propose to establish is that there is a legal presumption that the clerk
performed his duty as the ministerial officer of the court, which presumption is not overcome by any
other facts appearing in the cause.
In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a
presumption "that official duty has been regularly performed;" and in subsection 18 it is declared
that there is a presumption "that the ordinary course of business has been followed." These
presumptions are of course in no sense novelties, as they express ideas which have always been
recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium. There is
therefore clearly a legal presumption that the clerk performed his duty about mailing this notice; and
we think that strong considerations of policy require that this presumption should be allowed to
operate with full force under the circumstances of this case. A party to an action has no control over
the clerk of the court; and has no right to meddle unduly with the business of the clerk in the
performance of his duties. Having no control over this officer, the litigant must depend upon the
court to see that the duties imposed on the clerk are performed.
Other considerations no less potent contribute to strengthen the conclusion just stated. There is no
principle of law better settled than that after jurisdiction has once been required, every act of a court
of general jurisdiction shall be presumed to have been rightly done. This rule is applied to every
judgment or decree rendered in the various stages of the proceedings from their initiation to their
completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the record is silent
with respect to any fact which must have been established before the court could have rightly acted,
it will be presumed that such fact was properly brought to its knowledge. (The Lessee of Grignon
vs. Astor, 2 How., 319; 11 L. ed., 283.)
In making the order of sale [of the real state of a decedent] the court are presumed to have
adjudged every question necessary to justify such order or decree, viz: The death of the
owners; that the petitioners were his administrators; that the personal estate was
insufficient to pay the debts of the deceased; that the private acts of Assembly, as to the
manner of sale, were within the constitutional power of the Legislature, and that all the
provisions of the law as to notices which are directory to the administrators have been
complied with. . . . The court is not bound to enter upon the record the evidence on which
any fact was decided. (Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially
does all this apply after long lapse of time.
Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive
discussion in a case analogous to that which is now before us. It there appeared that in order to
foreclose a mortgage in the State of Kentucky against a nonresident debtor it was necessary that
publication should be made in a newspaper for a specified period of time, also be posted at the front
door of the court house and be published on some Sunday, immediately after divine service, in such
church as the court should direct. In a certain action judgment had been entered against a
nonresident, after publication in pursuance of these provisions. Many years later the validity of the
proceedings was called in question in another action. It was proved from the files of an ancient
periodical that publication had been made in its columns as required by law; but no proof was
offered to show the publication of the order at the church, or the posting of it at the front door of the
court-house. It was insisted by one of the parties that the judgment of the court was void for lack of
jurisdiction. But the Supreme Court of the United States said:
The court which made the decree . . . was a court of general jurisdiction. Therefore every
presumption not inconsistent with the record is to be indulged in favor of its jurisdiction. .
. . It is to be presumed that the court before making its decree took care of to see that its
order for constructive service, on which its right to make the decree depended, had been
obeyed.
It is true that in this case the former judgment was the subject of collateral , or indirect attack, while
in the case at bar the motion to vacate the judgment is direct proceeding for relief against it. The
same general presumption, however, is indulged in favor of the judgment of a court of general
jurisdiction, whether it is the subject of direct or indirect attack the only difference being that in case
of indirect attack the judgment is conclusively presumed to be valid unless the record affirmatively
shows it to be void, while in case of direct attack the presumption in favor of its validity may in
certain cases be overcome by proof extrinsic to the record.
The presumption that the clerk performed his duty and that the court made its decree with the
knowledge that the requirements of law had been complied with appear to be amply sufficient to
support the conclusion that the notice was sent by the clerk as required by the order. It is true that
there ought to be found among the papers on file in this cause an affidavit, as required by section
400 of the Code of Civil Procedure, showing that the order was in fact so sent by the clerk; and no
such affidavit appears. The record is therefore silent where it ought to speak. But the very purpose
of the law in recognizing these presumptions is to enable the court to sustain a prior judgment in the
face of such an omission. If we were to hold that the judgment in this case is void because the
proper affidavit is not present in the file of papers which we call the record, the result would be that
in the future every title in the Islands resting upon a judgment like that now before us would
depend, for its continued security, upon the presence of such affidavit among the papers and would
be liable at any moment to be destroyed by the disappearance of that piece of paper. We think that
no court, with a proper regard for the security of judicial proceedings and for the interests which
have by law been confided to the courts, would incline to favor such a conclusion. In our opinion
the proper course in a case of this kind is to hold that the legal presumption that the clerk performed
his duty still maintains notwithstanding the absence from the record of the proper proof of that fact.
In this connection it is important to bear in mind that under the practice prevailing in the Philippine
Islands the word "record" is used in a loose and broad sense, as indicating the collective mass of
papers which contain the history of all the successive steps taken in a case and which are finally
deposited in the archives of the clerk's office as a memorial of the litigation. It is a matter of general
information that no judgment roll, or book of final record, is commonly kept in our courts for the
purpose of recording the pleadings and principal proceedings in actions which have been
terminated; and in particular, no such record is kept in the Court of First Instance of the city of
Manila. There is, indeed, a section of the Code of Civil Procedure which directs that such a book of
final record shall be kept; but this provision has, as a matter of common knowledge, been generally
ignored. The result is that in the present case we do not have the assistance of the recitals of such a
record to enable us to pass upon the validity of this judgment and as already stated the question
must be determined by examining the papers contained in the entire file.
But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing
that upon April 4, 1908, he sent a notification through the mail addressed to the defendant at Manila,
Philippine Islands, should be accepted as affirmative proof that the clerk of the court failed in his
duty and that, instead of himself sending the requisite notice through the mail, he relied upon
Bernardo to send it for him. We do not think that this is by any means a necessary inference. Of
course if it had affirmatively appeared that the clerk himself had attempted to comply with this
order and had directed the notification to Manila when he should have directed it to Amoy, this
would be conclusive that he had failed to comply with the exact terms of the order; but such is not
this case. That the clerk of the attorneys for the plaintiff erroneously sent a notification to the
defendant at a mistaken address affords in our opinion very slight basis for supposing that the clerk
may not have sent notice to the right address.
There is undoubtedly good authority to support the position that when the record states the evidence
or makes an averment with reference to a jurisdictional fact, it will not be presumed that there was
other or different evidence respecting the fact, or that the fact was otherwise than stated. If, to give
an illustration, it appears from the return of the officer that the summons was served at a particular
place or in a particular manner, it will not be presumed that service was also made at another place
or in a different manner; or if it appears that service was made upon a person other than the
defendant, it will not be presumed, in the silence of the record, that it was made upon the defendant
also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97 U. S., 444, 449). While we
believe that these propositions are entirely correct as applied to the case where the person making
the return is the officer who is by law required to make the return, we do not think that it is properly
applicable where, as in the present case, the affidavit was made by a person who, so far as the
provisions of law are concerned, was a mere intermeddler.
The last question of importance which we propose to consider is whether a motion in the cause is
admissible as a proceeding to obtain relief in such a case as this. If the motion prevails the judgment
of July 2, 1908, and all subsequent proceedings will be set aside, and the litigation will be renewed,
proceeding again from the date mentioned as if the progress of the action had not been interrupted.
The proponent of the motion does not ask the favor of being permitted to interpose a defense. His
purpose is merely to annul the effective judgment of the court, to the end that the litigation may
again resume its regular course.
There is only one section of the Code of Civil Procedure which expressly recognizes the authority
of a Court of First Instance to set aside a final judgment and permit a renewal of the litigation in the
same cause. This is as follows:
SEC. 113. Upon such terms as may be just the court may relieve a party or legal
representative from the judgment, order, or other proceeding taken against him through
his mistake, inadvertence, surprise, or excusable neglect; Provided, That application
thereof be made within a reasonable time, but in no case exceeding six months after such
judgment, order, or proceeding was taken.
An additional remedy by petition to the Supreme Court is supplied by section 513 of the same Code.
The first paragraph of this section, in so far as pertinent to this discussion, provides as follows:
When a judgment is rendered by a Court of First Instance upon default, and a party
thereto is unjustly deprived of a hearing by fraud, accident, mistake or excusable
negligence, and the Court of First Instance which rendered the judgment has finally
adjourned so that no adequate remedy exists in that court, the party so deprived of a
hearing may present his petition to the Supreme Court within sixty days after he first
learns of the rendition of such judgment, and not thereafter, setting forth the facts and
praying to have judgment set aside. . . .
It is evident that the proceeding contemplated in this section is intended to supplement the remedy
provided by section 113; and we believe the conclusion irresistible that there is no other means
recognized by law whereby a defeated party can, by a proceeding in the same cause, procure a
judgment to be set aside, with a view to the renewal of the litigation.
The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it
contains provisions describing with much fullness the various steps to be taken in the conduct of
such proceedings. To this end it defines with precision the method of beginning, conducting, and
concluding the civil action of whatever species; and by section 795 of the same Code it is declared
that the procedure in all civil action shall be in accordance with the provisions of this Code. We are
therefore of the opinion that the remedies prescribed in sections 113 and 513 are exclusive of all
others, so far as relates to the opening and continuation of a litigation which has been once
concluded.
The motion in the present case does not conform to the requirements of either of these provisions;
and the consequence is that in our opinion the action of the Court of First Instance in dismissing the
motion was proper.
If the question were admittedly one relating merely to an irregularity of procedure, we cannot
suppose that this proceeding would have taken the form of a motion in the cause, since it is clear
that, if based on such an error, the came to late for relief in the Court of First Instance. But as we
have already seen, the motion attacks the judgment of the court as void for want of jurisdiction over
the defendant. The idea underlying the motion therefore is that inasmuch as the judgment is a nullity
it can be attacked in any way and at any time. If the judgment were in fact void upon its face, that is,
if it were shown to be a nullity by virtue of its own recitals, there might possibly be something in
this. Where a judgment or judicial order is void in this sense it may be said to be a lawless thing,
which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits
its head.
But the judgment in question is not void in any such sense. It is entirely regular in form, and the
alleged defect is one which is not apparent upon its face. It follows that even if the judgment could
be shown to be void for want of jurisdiction, or for lack of due process of law, the party aggrieved
thereby is bound to resort to some appropriate proceeding to obtain relief. Under accepted principles
of law and practice, long recognized in American courts, a proper remedy in such case, after the
time for appeal or review has passed, is for the aggrieved party to bring an action to enjoin the
judgment, if not already carried into effect; or if the property has already been disposed of he may
institute suit to recover it. In every situation of this character an appropriate remedy is at hand; and
if property has been taken without due process, the law concedes due process to recover it. We
accordingly old that, assuming the judgment to have been void as alleged by the proponent of this
motion, the proper remedy was by an original proceeding and not by motion in the cause. As we
have already seen our Code of Civil Procedure defines the conditions under which relief against a
judgment may be productive of conclusion for this court to recognize such a proceeding as proper
under conditions different from those defined by law. Upon the point of procedure here involved,
we refer to the case of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not
lie to vacate a judgment after the lapse of the time limited by statute if the judgment is not void on
its face; and in all cases, after the lapse of the time limited by statute if the judgment is not void on G.R. No. L-18176 October 26, 1966
its face; and all cases, after the lapse of such time, when an attempt is made to vacate the judgment
by a proceeding in court for that purpose an action regularly brought is preferable, and should be LAZARO B. RAYRAY, plaintiff-appellant,
required. It will be noted taken verbatim from the California Code (sec. 473). vs.
CHAE KYUNG LEE, defendant-appellee.
The conclusions stated in this opinion indicate that the judgment appealed from is without error, and
the same is accordingly affirmed, with costs. So ordered. Jaime R. Nuevas for plaintiff and appellee.
Rafael Jose for defendant and appellant.
Arellano, C.J., Torres, Carson, and Avancea, JJ., concur.
CONCEPCION, C.J.:

Appeal from a decision of the Court of Juvenile and Domestic Relations.

Plaintiff Lazaro Rayray seeks the annulment of his marriage to defendant Chae Kyung Lee.
Inasmuch as, the latter's whereabouts is unknown, and she was formerly a resident of Pusan, Korea,
summons was served by publication, as provided in the Rules of Court. Thereafter, plaintiff moved
that defendant be declared in default, she not having filed an answer, and that a date be set for the
reception of his evidence. Before acting on this motion, the lower court referred the case to the City
Fiscal of Manila pursuant to Articles 88 and 101 of the Civil Code of the Philippines, for the
purpose of determining whether or not a collusion between the parties exists. Said officer having
found no such collusion, the case was heard on the merits. In due course, thereafter, decision was
rendered dismissing plaintiff's complaint, without costs, upon the ground: (1) that the court could
not nullify a marriage contracted abroad; and (2) that the facts proven do not warrant the relief
prayed for. A reconsideration of this decision having been denied, plaintiff appealed to the Court of
Appeals, which certified the case to the Supreme Court, the jurisdiction of the lower court being in
issue in the appeal.

In relation thereto, the court a quo found that it had no jurisdiction to pass upon the validity of
plaintiff's marriage to the defendant, it having been solemnized in Seoul, Korea. Said conclusion is
erroneous. In order that a given case could be validly decided by a court of justice, it must have
jurisdiction over (1) the subject-matter of the litigation; (2) the person of the parties therein; and (3)
in actions in rem or quasi-in-rem, the res.1
The subject-matter of the present case is the annulment of plaintiff's marriage to the defendant,
which is within the jurisdiction of our courts of first instance, 2 and, in Manila, of its Court of
Juvenile and Domestic Relations.3
The same acquired jurisdiction over plaintiff herein by his submission thereto in consequence of the
filing of the complaint herein.4 Defendant was placed under the jurisdiction of said court, upon the
service of summons by publication.5
The lower court considered plaintiffs evidence insufficient to establish that defendant was married
to another person prior to March 15, 1953, and we agree with this conclusion. To begin with,
Exhibit A is not signed. It merely purports to bear the seal of the Chief of Pusan National Police.
Secondly, the record does not show who prepared it, much less that he had personal knowledge of
the truth of the entry therein concerning defendant's status on February 15, 1953. It should be noted,
that defendant was a native, not of Pusan but of Seoul, Korea. Hence, Exhibit A could, at best, be no
more than hearsay evidence. Again, when plaintiff allegedly confronted the defendant with the
contents of Exhibit B, defendant did not say that she had been married before. Plaintiff declared that
she admitted having previously lived with several other men, adding, however, that she had no
impediment, thus, in effect, negating the alleged previous marriage.

Thirdly, if Exhibit A was obtained on February 16, 1953, in order to establish defendant's
This is an action in rem, for it concerns the status of the parties herein, and status affects or binds the
qualification to contract marriage, why is it that the wedding took place, despite the entry in said
whole word. The res in the present case is the relation between said parties, or their marriage tie. 6
document to the effect that defendant was married already? There is no competent evidence to the
Jurisdiction over the same depends upon the nationality or domicile of the parties, not the place of
effect that Korean laws permit bigamy or polygamy. Moreover, the presumption is that the foreign
celebration of marriage, or the locus celebrationis.7 Plaintiff here is a citizen of the Philippines,
law is identical to the lex fori, or, in the case at bar, the Philippine Law.9 In fact, the statement,
domiciled therein. His status is, therefore, subject to our jurisdiction, on both counts. True that
imputed by plaintiff to the defendant, to the effect that, although she had cohabited before with
defendant was and under plaintiff's theory still is a non-resident alien. But, this fact does not
other men, there was no impediment to her marrying him, clearly suggests that a previous marriage
deprive the lower court of its jurisdiction to pass upon the validity of her marriage to plaintiff
on her part would have been, in her opinion, a legal obstacle to her marriage with the plaintiffs.
herein.
Then too, the marriage certificate Exhibit D contains spaces for the entry of data on whether any of
the contracting parties had been previously married; whether the prior marriage had been dissolved
Indeed, marriage is one of the cases of double status, in that the status therein involves and affects by a decree of divorce; and, if there had been such decree, the date thereof. Surely, these data would
two persons. One is married, never in abstract or a vacuum, but, always to somebody else. Hence, a be absolutely irrelevant if polygamy were sanctioned in Korea. And, again, why is it that Exhibit D
judicial decree on the marriage status of a person necessarily reflects upon the status of another and states that defendant had had no previous marriage?
the relation between them. The prevailing rule is, accordingly, that a court has jurisdiction over the
res, in an action for annulment of marriage, provided, at least, one of the parties is domiciled in, or a
Last, but not least, plaintiff cannot possibly secure the relief prayed for unless full faith and
national of, the forum.8 Since plaintiff is a Filipino, domiciled in the Philippines, it follows that the
credence are given to his testimony, but we cannot believe him for the records show that he would
lower court had jurisdiction over the res, in addition to its jurisdiction over the subject-matter and
not hesitate to lie when it suits his purpose. Thus, for instance, when plaintiff contracted marriage
the parties. In other words, it could validly inquire into the legality of the marriage between the
with the defendant, he said that he was single, although, he admitted, this was a lie, because,
parties herein.
sometime in 1940, he married in Baguio, one Adelaida Melecio or Valdez. 10 But, then he would,
also, have us believe that his marriage with the latter was illegal or fictitious, because Adelaida and
As regards the substantial validity of said marriage, plaintiff testified that he met the defendant in he did no more than sign, on a small window in the City Hall of Baguio, certain documents the
Pusan Korea, sometime in 1952, where she was operating a nightclub; that they lived together from contents of which he did not read.
November 1952 to April 1955; that they were married in Pusan Korea, on March 15, 1953, as
attested to by their marriage certificate Exhibit D; that before the wedding she obtained the "police
WHEREFORE, the decision appealed from should be, as it is hereby, affirmed, with the costs of this
clearance" Exhibit A, written in Korean language, and dated February 16, 1953, which was
instance against plaintiff-appellant. It is so ordered.
necessary in order that she could contract marriage; that on June 30, 1953, he proceeded to India
and left the defendant, then in advanced stage of pregnancy, in Korea; that in October, 1953, she
joined him in India, bringing with her said Exhibit A, and its translation into English, Exhibit B; that Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.
he then noticed that, on February 16, 1958, defendant was already married, according to said Barrera, J, is on leave.
Exhibit B; that as he confronted the defendant with the contents of this document, her reply was that
it is not unusual for a Korean girl to marry twice in Korea; that when he inquired about her status on
March 15, 1953, defendant confided to him that she had lived with about two (2) Americans and a
Korean, adding, however, that there was no impediment to her contracting marriage with him; and
that, later on, they were separated and her whereabouts are now unknown to him.
G.R. No. L-13525 November 30, 1962

FAR EAST INTERNATIONAL IMPORT and EXPORT CORPORATION, plaintiff-appellee,

vs.
NANKAI KOGYO CO. LTD., ET AL., defendants,
NANKAI KOGYO CO., LTD., defendant-appellant.

Protasio Canalita, Jesus Ocampo and Gonzalo D. David for plaintiff-appellee.

Marcial Ranola and Fernandez and Benedicto for defendant-appellant.

PAREDES, J.:
On December 26, 1956, the Far East International Import & Export Corporation, Far East for short,
organized under Philippine Laws, entered into a Contract of Sale of Steel Scrap with the Nankai
Kogyo Co., Ltd., Nankai for short, a foreign corporation organized under Japanese Laws with
address at Osaka, Japan. The buyer sign in Japan and the seller in Manila, Philippines. The pertinent
provisions of the agreement are represented below
1. Quantity: Approximately 5,000 (five thousand) metric tons 10% more or less.
xxx xxx xxx
10. Payments: BUYER shall establish an irrevocable without recourse Letter of Credit in
the amount of U.S. $312,500.00 with China Banking Corp. in Manila, not later than 30
days upon receipt of SELLERS' confirmation about the availability of export permit, and
shall be subject to the following terms and conditions:
a. This Letter of Credit shall be drawable 90% of quantity been shipped
uponpresentation of:
xxx xxx xxx
b. the remaining balance of 10% of the shipment shall be adjusted between
BUYER and SELLER immediately after the discharge is completed at the port
of destination, and shall be drawable by the SELLER upon presentation of:
xxx xxx xxx
13. Force Majeure: the execution of this agrrement is subject to any and allGovernment
restrictions prohibiting or penalizing in whole or in part theexport of Iron & Steel Scrap
from the Philippines, and the Seller shall not be responsible for delay in or failure of
shipment or delivery or delays in transportation due to force majeure, strikes, dfferences
with workmen, accidents, fires, flood, mobilizations, wars, foreign wars, riots,
revolutions, regulations and restrictions or to any conditions beyond thecontrol of the
SELLER whether the nature herein stated or not.
14. Dispute: In case of disputes, Board of Arbitration may be formed in Japan. Decision
by the board of Arbitration shall be final and binding on both BUYER AND SELLER.
Upon perfection of the contract and after having been informed of the readiness to ship and that the
Export License was to expire on March 18, 1957,Nankai opened a letter for credit (No. 38/80049)
with the China BankingCorporation, issued by the Nippon Kangyo, Ltd., Tokyo, Japan, in the
amountof $312,500.00 on January 30, 1957. On March 15, 1957, only four (4) daysbefore the
expiration of the Far East licence, three (3) boats sent by Nankai arrived in the Philippines, one to
load in Manila, the other two at Poro Point, San Fernando, La Union, and Tacloban, Leyte,
respectively. On March 19, 1957, the expiration of the export license, only 1,058.6 metric tonsof
scrap steel was loaded on the SS Mina (loading in Manila). The loading wasaccordingly stopped.
The boat at Poro Point was also unloaded of the 200 metric tons, for the same reason. An agreement
was reached wherby the Far East would seek an extension of the license. However, the untimely
death of President Magsaysay and the taking over by President Garcia changed the picture, for the
latter and/or his agents refused to extend the license. The two boats sailed to Japan without any
cargo, the third (SS Mina) only 1,058.6 metric tons.
On April 27, 1957, Nankai confirmed and acknowleged delivery of the 1,058.6 metric tons of steel
scrap, but asked for damages amounting to $148,135.00 consisting of dead freight charges,
damages, bank charges, phone and cable expenses (Exh. F).
On May 4, 1957, Far East wrote the Everett Steamship Corporation, requesting the issuance of a
complete set of the Bill of Lading for the shipment, in order that payment thereof be effected against
the Letter of Credit. Under date of May 7, 1957, the Everett informed Far East that they were not in
a position to comply because the Bill of Lading was issued and signed in Tokyo by the Master of the
boat, upon request of the Charterer, defendant herein.
As repeated requests, both against the shipping agent and the buyers (Nankai), for the issuance of
the of Bill Lading were ignored, Far East filed on May 16, 1957, the present complaint for Specific
Performance, damages, a writ of preliminiry mandatory injunction directed against Nankai and the
shipping company, to issue and deliver to the plaintiff, a complete set of negotiable of Lading for
the 1,058.6 metric tons of scrap and a writ of preliminary injunction against the China Banking
Corporation and the Nankai to maintain the Letter Credit. The lower court issued on May 17, 1957
an ex parte writ of preliminary injunction, after Far East had posted a bond in the amount of
P50,000.00.
By Special Apperance, defendant Nankai filed a Motion to Dismiss the complaint and dissolve the
preliminary mandatory injunction on the followinggrounds: lack of jurisdiction over the person of
the defendant and the subject matter: and failure to state a cause of action against the said defendant.
On June 8, 1957 plaintiff Far East opposed the Special Appearance and Motion to Dismiss.
Before the Special Appearance, Motions to Dismiss and Dissolve Preliminary Mandatory Injunction
could be ruled upon by the court a quo, plaintiff filed a Motion to file amended complaint, it
appearing that Nankai had already taken the Bill of Lading for the shipment from the Master of the
SS Mina and used the same to secure the delivery of the 1,058.6 metric tons of scrap. The most
important amendments introduced are the allegation that defendant is doing business in the
Philippines with office address at R-517 Luneta Hotel, Manila, represented by Mr. Issei Ishida and
Mr. Tominaga, and the additional prayer to order the defendant Nankai to pay plaintiff the price of
the scrapamounting to $68,809.00 or its equivalent in Philippine currency.
The motions to dismiss the complaint and to dissolve the Writ of Preliminary Mandatory Injunction
were denied, the Court holding that the grounds therefor "do not appear to be indubitable".
On June 26, 1957, the defendant Nankai presented an opposition to the motion to admit amended
complaint, stating that the same is belated and an unfair and unjust attempt to establish by
allegation, a semblance of jurisdiction of the Court over the person of the defendant Nankai and the
subject matter.
Under date of June 29, 1957, the motion to file an amended complaint was denied. A motion for
reconsideration of the order was presented on July 31, 1957, plaintiff alleging that the amended
complaint contained facts which are necessary and indispensable for the complete resolution of the
issues between the parties and that the amendment is a matter of right, since defendants have not yet
filed a responsive pleading (Sec. 1, Rule 17, Rules of Court). An opposition was registered by
defendant. Before resolution on the reconsideration could be issued, defendant filed its Answer to
the original complaint containing the customary admissions and denials. As Special Defenses, it
reiterated the grounds contained in the Motion to Dismiss Complaint and Dissolve the Writ of
Preliminary Mandatory Injunction and the arguments invoked in the oppositions, replies, etc. On
August 20, 1957, the Amended Complaint was ordered admitted and on September 30, 1957,
Nankai presented its Answer, which is identical to the Answer to the original complaint.
At the trial, plaintiff Far East, thru the testimony of its Secretary Pablo Ocampo, showed that the
transaction in question was intended to be the beginning of business to be undertaken by Nankai, as
in fact, the representatives of the company had made inquiries as to the operation of mines and
mining rights in this jurisdiction; (Nankai) thru its representatives, Messrs. Ishida and Tominaga,
established a temporary office at Room 517 Luneta Hotel and manifested their intention to put up
one at the Madrigal building, which did not materialize, to the belated confirmation of the head
office; that in spite of the repeated demands and actual receipt of the delivery of the 1,056.8 metric
tons of scrap steel, Nankai and the steamship company failed and consistently refused to issue the
Bill of Lading, which acts prevented plaintiff from collecting the price of the scrap from theChina
Banking Corporation against the Letter of Credit. Defendant Everett Steamship Company and the
China Banking Corporation also presented evidence, both oral and documentary.
Defendant Nankai presented Francisco Santos, accountant of the Luneta Hotel, to prove that it has
not established an office at Room 517 of said Hotel; Nabuo Yoshida, chief of the Import Section of
defendant Nankai show that it has not established a branch office in the Philippines and that the
buying of the scrap was the only transiction of the defendant had in the Philippines; Tan Tiong Tick,
the financier of the exportation in behalf of appellee, and Tan Tia Cuan, the contact man, to prove
that the real party in interest is not the plaintiff Far East but the Delta Enterprises, and that the
plaintiffwas merely the holder of the Export License but had no scrap.
The lower court rendered judgment absolving, defendants Everett Steamship Company and China
Banking Corporation from liability and denied the claim for damages, both actual and moral, of the
parties; found that the question of jurisdiction over the person of defendant and the subject matter
has become moot and
. . . hereby renders judgment in favor of the plaintiff and against defendant Nankai Kogyo
Co., Ltd., sentencing said defendant to pay plaintiff the amount of U.S. $67,710.50, or its
equivalent in pesos, with interest thereon at the legal rate from the date of filing of
plaintiff's complaint until fully paid, plus the sum of P1,000.00 as attorney's fees, and to
pay the costs.
Defendant assigned six (6) errors allegedly committed by the lower court, which may be
consolidated into two propositions: to wit
(1) Whether or not the trial court acquired jurisdiction over the subject matter and over
the person of the defendant-appellant; and
(2) the propriety of the award.
Defendant contends that Philippine Courts have no jurisdiction to take cognizance of the case
because the Nankai is not doing business in the islands; and that while it has entered into the
transaction in question, same, however, does not constitute "doing business", so as to make it
amenable to summons and subject it to the Court's jurisdiction. It bolstered this claim by a provision
in the contract which provides that "In case of disputes, Board of Arbitration may be formed in
Japan. Decision of the Board of Arbitration shall be final and binding on both BUYER and
SELLER".
The rule pertinent to the questions in issue provides
SEC. 14. Service upon private foreign corporations. If the defendant is a foreign
corporation, or a non-resident joint stock company or association, doing business in the
Philippines, service may be made on its resident agent designated in accordance with law
for that purpose, or, if there be no such agent, on the government official designated by
law to that effect, or on any officer or agent within the Philipines. (Rule 7).
The above rule indicates three modes of effecting service of summons upon a private, foreign
corporation, viz: (1) by serving upon the agent designated in accordance with law to accept service
of summons; (2) if there is no resident agent, by service on the government cial designated by law
to that effect; and (3) by serving on any officer or agent of said corporation with Philippines. The
plaintiff complied with the third stated above, for it has been shown that Mr. Ishida, who personally
signed the contract for the purchase of the scrap in question in behalf of the Nankai Kogyo, the
Trade Manager of said Company, Mr. Tominaga the Chief of the Petroleum Section of the same
company and Mr. Yoshida was the man-in-charge of the Import Section of the company's Tokyo
Branch. All these three, including the first two who were served with Summons, were officers of the
defendant company.
It is true that the defendant entered a Special Appearance, wherein it contested the jurisdiction of the
Philippines Courts to take cognizance of the case on grounds contained in the various pleadings
presented by it. The motion to dismiss on the ground of lack of jurisdiction had been overruled
because it did not appear indubitable. Subsequently, however, the defendant filed its Answer and
invoked defenses and grounds for dismissal of complaint other than lack of jurisdiction (See pars.
12 & 13 of Answer to Amended Complaint), which circumstance vested upon the Court jurisdiction
to take cognizance of the case.
Even though the defendant objects to the jurisdiction of the court, if at thesame time he
alleges any non-jurisdictional ground for dismissing the action, the Court acquires
jurisdiction over him. Even though he does not intend to confer jurisdiction upon the
court, his appearance for some other purpose than to object to the jurisdiction subjects
him to jurisdiction of the court.Even though he does not wish to submit to the jurisdiction
 of the court, he cannot ask the court to act upon any question except the question of
jurisdiction, without conferring jurisdiction upon the court.
Thus though a Special appearance to object to the jurisdiction is not a submission, if it is
followed by a motion to dismiss or to quash the motion invokes the jurisdiction of Court
to decide the issue raised by the motion; and a decision of that issue binds the defendant.
Therefore if the decision of the motion is based upon a finding of facts necessary to
jurisdiction, this finding binds the defendant and the court acquires jurisdiction to
determine the merits of the case.
. . . . Undoubtedly if after his objection to the jurisdiction is wrongly overruled, a
defendant files a cross complaint demanding affirmative relief, he cannot thereafter claim
that the court had no jurisdiction over him. (p. 352.) (I Conflict of Laws, Beale and
authorities cited therein.)
Not only did appellant allege non-jurisdictional grounds in its pleadings to have the complaint
dismissed, but it also went into trial on the merits and presented evidence destined to resist
appellee's claim. Verily, there could not be a better situation of acquired jurisdiction based on
consent. Consequently, the provision of the contract wherein it was agreed that disputes should be
submitted to a Board of Arbitration which may be formed in Japan (in the supposition that it can
apply to the matter in dispute - payment of the scrap), seems to have been waived with appellant's
voluntary submission. Apart from the fact that the clause employs the word "may".
The appellant alleges that the lower court did not acquire jurisdiction, because it was not doing
business in the Philippines and the requirement of summons had not been fulfilled. It is difficult to
lay down any rule of universal application to determine when a foreign corporation is doing
business. Each case must turn upon its own peculiar facts and upon the language of the statute
applicable. But from the proven facts obtaining in this particular case, the appellant's defense of lack
of jurisdiction appears unavailing. The case of Pacific Micronesian Line, Inc. v. Baens del Rosario,
et al., G.R. No. L-7154, October 23, 1954, relied upon in the Motion to Dismiss and other pleadings
presented by defendant-appellant, stand on a different footing. Therein, We made the following
pronouncements:
to the Philippines by his company to look into the operation of mines, thereby revealing the
defendant's desire to continue engaging in business here, after receiving the shipment of the iron
under consideration, making the Philippines a base thereof.
The rule stated in the preceding section that the doing of a single act doesnot constitute
business within the meaning of statutes prescribing the conditions to be complied with
the foreign corporations must be qualified to this extent, that a single act may bring the
corporation. In such a case, the single act of transaction is not merly incidental or
casual, but is of such character as distinctly to indicate a purpose on the part of the
foreign corporation to do other business in the state, and to make the state a basis of
operations for the conduct of a part of corporation's ordinary business. (17 Fletchers
Cyc. of Corporations, sec. 8470, pp. 572-573, and authorities cited therein.) (Emphasis
ours.)
It is finally noted that when defendant's motion to dismiss in the Micronesian case was denied, it
immediately brought the matter to this Court on Prohibition seeking to restrain the Workmen's
Compensation mission from exercising jurisdiction over the controversy. In the present case, the
defendant, while entering a Special Appearance to contest the jurisdiction of the Court, pursued its
defense further by filing its Answer and going into trial.
There is no appeal on the lower court's findings that the failure of the appellee herein to make full
shipment of the scrap was due, not to the fault of said appellee, but to the action and intervention of
the Philippine Government, which was beyond the control of the plaintiff. This aspect of the case is
particularly covered by paragraph 13 of the contract, heretofore reproduced..
WHEREFORE, the judgment appealed from is hereby affirmed, with costs against defendant-
appellant Nankai Kogyo.
Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala and
Makalintal, JJ. concur.

. . . . And the only act it did here was to secure the services of Luceno Pelingon to act as
cook and chief steward in one of its vessels authorizing to that effect the Luzon
Stevedoring Co., Inc., a domestic corporation, and the contract of employment was
entered into on July 18, 1951. It further appears that petitioner has never sent its ships to
the Philippines nor has it transported nor even solicited the transportation passengers and
cargoes to and from the Philippines. In words, petitioner engaged the services of Pelingon
not as part of the operation of its business but merely to employ him as member of the
crew in one of its ships. That act apparently is an isolated one, incidental, or casual, and
"not of a character to indicate a purpose to engage in business" within the meaning of
the rule. (Emphasis ours.)

In the instant case, the testimony of Atty. Pablo Ocampo that appellant was doing business in the
Philippines corroborated by no less than Nabuo Yoshida, one of appellant's officers, that he was sent
 No. Q-2796, aside from being false and derogatory to the reputation, good name and credit of
Gemperle, "with the only purpose of attacking" his" honesty, integrity and reputation" and of
bringing him "into public hatred, discredit, disrepute and contempt as a man and a businessman",
Gemperle commenced the present action against the Schenkers for the recovery of P300,000 as
damages, P30,000 as attorney's fees, and costs, in addition to praying for a judgment ordering Mrs.
Schenker "to retract in writing the said defamatory expressions". In due course, thereafter, the lower
court, rendered the decision above referred to. A reconsiderating thereof having been denied,
Gemperle interposed the present appeal.

The first question for determination therein is whether or not the lower court had acquired
jurisdiction over the person of Schenker. Admittedly, he, a Swiss citizen, residing in Zurich,
Switzerland, has not been actually served with summons in the Philippines, although the summons
address to him and Mrs. Schenker had been served personally upon her in the Philippines. It is
urged by plaintiff that jurisdiction over the person of Schenker has been secured through voluntary
appearance on his part, he not having made a special appearance to assail the jurisdiction over his
person, and an answer having been filed in this case, stating that "the defendants, by counsel,
answering the plaintiff's complaint, respectfully aver", which is allegedly a general appearance
amounting to a submission to the jurisdiction of the court, confirmed, according to plaintiff, by a
P225,000 counterclaim for damages set up in said answer; but this counterclaim was set up by Mrs.
Schenker alone, not including her husband. Moreover, said answer contained several affirmative
G.R. No. L-18164 January 23, 1967 defenses, one of which was lack of jurisdiction over the person of Schenker, thus negating the
alleged waiver of this defense. Nevertheless, We hold that the lower court had acquired jurisdiction
WILLIAM F. GEMPERLE, plaintiff-appellant, over said defendant, through service of the summons addressed to him upon Mrs. Schenker, it
vs. appearing from said answer that she is the representative and attorney-in-fact of her husband
HELEN SCHENKER and PAUL SCHENKER as her husband, defendants-appellees. aforementioned civil case No. Q-2796, which apparently was filed at her behest, in her
aforementioned representative capacity. In other words, Mrs. Schenker had authority to sue, and had
actually sued on behalf of her husband, so that she was, also, empowered to represent him in suits
Gamboa & Gamboa for plaintiff-appellant.
filed against him, particularly in a case, like the of the one at bar, which is consequence of the action
A. R. Narvasa for defendants-appellees.
brought by her on his behalf.

CONCEPCION, C. J.:
Inasmuch as the alleged absence of a cause of action against Mrs. Schenker is premised upon the
alleged lack of jurisdiction over the person of Schenker, which cannot be sustained, it follows that
Appeal, taken by plaintiff, William F. Gemperle, from a decision of the Court of First Instance of the conclusion drawn therefore from is, likewise, untenable.
Rizal dismissing this case for lack of jurisdiction over the person of defendant Paul Schenker and
for want of cause of action against his wife and co-defendant, Helen Schenker said Paul Schenker
Wherefore, the decision appealed from should be, is hereby, reversed, and the case remanded to the
"being in no position to be joined with her as party defendant, because he is beyond the reach of the
lower court for proceedings, with the costs of this instance defendants-appellees. It is so ordered.
magistracy of the Philippine courts."

Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.
The record shows that sometime in 1952, Paul Schenker-hereinafter referred to as Schenker
acting through his wife and attorney-in-fact, Helen Schenker herein-after referred to as Mrs.
Schenker filed with the Court of First Instance of Rizal, a complaint which was docketed as
Civil Case No. Q-2796 thereof against herein plaintiff William F. Gemperle, for the enforcement
of Schenker's allegedly initial subscription to the shares of stock of the Philippines-Swiss Trading
Co., Inc. and the exercise of his alleged pre-emptive rights to the then unissued original capital
stock of said corporation and the increase thereof, as well as for an accounting and damages.
Alleging that, in connection with said complaint, Mrs. Schenker had caused to be published some
allegations thereof and other matters, which were impertinent, irrelevant and immaterial to said case

G.R. No. 73531. April 6, 1993.
DOLORES DELOS SANTOS, NICOLAS DELOS SANTOS and RICARDO DELOS SANTOS,
petitioners,
vs.
HON. JUDGE CAMILO MONTESA, JR. and JUANA DELOS SANTOS, respondents.
Jose C. Patalinjug for petitioners.
Leonardo O. Mancao for private respondent.
SYLLABUS
1. REMEDIAL LAW CIVIL PROCEDURE; SUMMONS; DEFENDANT'S VOLUNTARY
APPEARANCE IN THE ACTION EQUIVALENT TO SERVICE OF SUMMONS; CASE AT
BAR. At first blush, it would appear that the recourse pursued by petitioners could elicit a
favorable response from us in as much as the proof of service of the summons upon petitioners does
not indicate impossibility of personal service, a condition precedent for resorting to substituted
service. Even then, and assuming in gratia argumenti that the statutory norms on service of
summons have not been strictly complied with, still, any defect in form and in the manner of
effecting service thereof were nonetheless erased when petitioners' counsel moved to re-examine the
impugned decision and posed a subsequent bid on appeal to impede immediate execution (Boticano
vs. Chu. Jr., 145 SCRA 541 [1987]); 1 Regalado, Remedial Law Compendium, 1988 Fifth Rev. Ed.,
p. 136). Indeed, such demeanor is tantamount to voluntary submission to the competencia of the
court within the purview of Section 23, Rule 14 of the Revised Rules of Court since any mode of
appearance in court by a defendant or his lawyer is equivalent to service of summons, absent any
indication that the appearance of counsel for petitioner was precisely to protest the jurisdiction of
the court over the person of defendant (Carballo vs. Encarnacion, 49 O.G. 1383; 1 Regalado, supra,
p. 144; Flores vs. Zurbito, 37 Phil. 746 [1918]; 1 Martin, Rules of Court in the Philippines, 1989
Rev. Ed., p. 473 Sison, et al. vs. Gonzales, 50 O.G. 4756; 1 Moran, Comments on the Rules of
Court, 1970 Ed., p. 467). Neither can We treat the motion for reconsideration directed against the
unfavorable disposition as a special appearance founded on the sole challenge on invalid service of
summons since the application therefor raised another ground on failure to state a cause of action
when conciliation proceedings at the barangay level were allegedly bypassed, nay, disregarded
(Republic vs. Ker and Co., Ltd., 64 O.G. 3761; Regalado, supra, p. 152).
2. ID APPEAL; ONLY QUESTIONS OF LAW MAY BE RAISED IN PETITION FOR REVIEW
ON CERTIORARI UNDER RULE 45; CASE AT BAR The fact that petitioners are supposedly
occupying a parcel of land other than the realty claimed by private respondent deserves scant
consideration since a clarification on a factual query of this nature is proscribed by the second
paragraph, Section 2 of Rule 45 of the Revised Rules of Court. Verily, counsel for petitioners'
assertion in the notice of appeal filed with respondent judge that the grievance to be elevated to this
Court will focus "fully on a question of law" (p. 32 Rollo) is a self-defeating posture and operates as
a legal bar for us to dwell into the truth or falsehood of such factual premise (Article 1431, New
Civil Code; Section 4, Rule 129; Section 2(a), Rule 131, Revised Rules on Evidence).
3. ID; JUDGMENT; EXECUTION PENDING APPEAL; PREVAILING PARTY MOVING FOR
EXECUTION PENDING APPEAL OBLIGED TO SERVE COPY OF MOTION ON ADVERSE
PARTY'S COUNSEL. Petitioners argue next that execution pending appeal was ordered without
any prior notice to them (p. 3, Petition; p. 7, Rollo). This notion is also devoid of substance since it
erroneously suggests that the court is duty-bound to notify petitioners of the immediate enforcement
of the appealed decision. A contrario, it is the prevailing party moving for execution pending appeal
under Section 2, Rule 39 of the Revised Rules of Court who is obliged to serve a copy of such
motion on the adverse party's counsel, which, on the face of the subject motion, was effected by
personal delivery (p. 23, Rollo; Lao vs. Mencias, 21 SCRA 1021 [1967]; 2 Martin, Rules of Court in
the Philippines, 1973 Ed., p. 288).
DECISION
MELO, J p:
In the suit for desahucio initiated below by herein private respondent against petitioners, the court of
origin ordered petitioners to vacate the lot in question to pay P5,000.00 per year as reasonable rental
from 1985 until possession is surrendered, and to pay P1,000.00 as attorney's fees and the costs of
the suit (pp. 37-38, Rollo). Upon appeal, Branch XIX of the Regional Trial Court of the Third
Judicial Region stationed in Malolos and presided over by herein respondent judge, granted private
respondents motion for execution pending appeal on account of petitioners' failure to post a
supersedeas bond (p. 21, Rollo). To set aside the proceedings below, the petition at hand was
instituted anchored on the supposition that petitioners were deprived of their day in court.
Petitioners' mental distress started when private respondent, who supposedly owns Lot 39 of the
Cadastral survey of Bustos with an area of 5,358 square meters covered by Original Certificate of
Title No. U-7924 a portion of which petitioners entered and occupied, lodged the complaint geared
towards petitioners' eviction. Summons was served through the mother of petitioners when the under Section 2, Rule 39 of the Revised Rules of Court who is obliged to serve a copy of such
process server was unable to locate Dolores, Nicolas, and Ricardo delos Santos in Talampas, motion on the adverse party's counsel, which, on the face of the subject motion, was effected by
Bustos, Bulacan. For failure of petitioners to submit the corresponding answer, judgment was personal delivery (p. 23, Rollo; Lao vs. Mencias, 21 SCRA 1021 [1967]; 2 Martin, Rules of Court in
rendered pursuant to the rules on summary procedure (pp. 2-3, Decision; pp. 37-38, Rollo). the Philippines, 1973 Ed., p. 288).

Upon learning of said decision, petitioners sought to reconsider on the principal thesis that they
were never served notice of the conciliation meeting at the barangay level, as well as the summons.
They insist that private respondent was referring to a different piece of realty because petitioners
actually occupied Lot No. 3568 owned by Nicolas delos Santos under Original Certificate of Title
No. F-10418. Moreover, petitioners advanced the proposition that Dolores' husband should have
been impleaded. All of these arguments were to no avail. As indicated earlier, execution pending
appeal was ordered due to petitioners' failure to post a supersedeas bond.
In fine, petitioners may not press the idea that they were deprived of their day in court amidst the
implicit forms of waiver performed by their lawyer in submitting every conceivable defense for
petitioners via the two motions for reconsideration below.
WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order issued
on April 28, 1986 LIFTED.

SO ORDERED.
To stave off the impending eviction of petitioners, this Court issued a restraining order on April 28,
1986 directed against the reviewing authority and private respondent until further orders (p. 52,
Rollo). Feliciano, Bidin, Davide, Jr. and Romero, JJ ., concur.

At first blush, it would appear that the recourse pursued by petitioners could elicit a favorable
response from us in as much as the proof of service of the summons upon petitioners does not
indicate impossibility of personal service, a condition precedent for resorting to substituted service.
Even then, and assuming in gratia argumenti that the statutory norms on service of summons have
not been strictly complied with, still, any defect in form and in the manner of effecting service
thereof were nonetheless erased when petitioners' counsel moved to re-examine the impugned
decision and posed a subsequent bid on appeal to impede immediate execution (Boticano vs. Chu.
Jr., 145 SCRA 541 [1987]); 1 Regalado, Remedial Law Compendium, 1988 Fifth Rev. Ed., p. 136).
Indeed, such demeanor is tantamount to voluntary submission to the competencia of the court
within the purview of Section 23, Rule 14 of the Revised Rules of Court since any mode of
appearance in court by a defendant or his lawyer is equivalent to service of summons, absent any
indication that the appearance of counsel for petitioner was precisely to protest the jurisdiction of
the court over the person of defendant (Carballo vs. Encarnacion, 49 O.G. 1383; 1 Regalado, supra,
p. 144; Flores vs. Zurbito, 37 Phil. 746 [1918]; 1 Martin, Rules of Court in the Philippines, 1989
Rev. Ed., p. 473 Sison, et al. vs. Gonzales, 50 O.G. 4756; 1 Moran, Comments on the Rules of
Court, 1970 Ed., p. 467).

Neither can We treat the motion for reconsideration directed against the unfavorable disposition as a
special appearance founded on the sole challenge on invalid service of summons since the
application therefor raised another ground on failure to state a cause of action when conciliation
proceedings at the barangay level were allegedly bypassed, nay, disregarded (Republic vs. Ker and
Co., Ltd., 64 O.G. 3761; Regalado, supra, p. 152).

The fact that petitioners are supposedly occupying a parcel of land other than the realty claimed by
private respondent deserves scant consideration since a clarification on a factual query of this nature
is proscribed by the second paragraph, Section 2 of Rule 45 of the Revised Rules of Court. Verily,
counsel for petitioners' assertion in the notice of appeal filed with respondent judge that the
grievance to be elevated to this Court will focus "fully on a question of law" (p. 32 Rollo) is a self-
defeating posture and operates as a legal bar for us to dwell into the truth or falsehood of such
factual premise (Article 1431, New Civil Code; Section 4, Rule 129; Section 2(a), Rule 131,
Revised Rules on Evidence).

Petitioners argue next that execution pending appeal was ordered without any prior notice to them
(p. 3, Petition; p. 7, Rollo). This notion is also devoid of substance since it erroneously suggests that
the court is duty-bound to notify petitioners of the immediate enforcement of the appealed .appeal
 resolution dated April 1, 1947, which declares the petitioners guilty of contempt of court for not
complying or performing the order of the court of January 7, 1947, in case No. 5486 of the Court of
First Instance of Bulacan, requiring the petitioners to execute a deed of sale in favor of plaintiff over
one-half of the land pro indiviso in question, within ten days from the receipt of copy of said
resolution, and which orders that the petitioners be imprisoned until they perform the said act.

The first ground on which the petition is based is that the judgment of the court which the
petitioners are ordered to perform has not yet become final. This ground is unfounded. From the
pleadings and annexes it appears that the judgment of the lower against the petitioners was appealed
to the Court of Appeals and was affirmed by the latter in its decision promulgated on May 30, 1944;
that the petition to appeal to the Supreme Court by certiorari filed by the petitioners was denied on
July 24, 1944; that a motion for reconsideration filed by the petitioners was also denied on August
21, 1944; that the record of the case, having been destroyed during the liberation, was reconstituted;
that on September 24, 1945, the Deputy Clerk of this Court wrote a letter to and notified the
petitioners of the resolution of the Court declaring said record reconstituted, together with the
copies of the decision of the Court of Appeals and resolutions of the Supreme Court during Japanese
occupation of June 24 and August 21, 1944; and that on October 23, 1946, the clerk of Court of
First Instance of Bulacan notified the attorneys for both parties of the said decision of the Court of
Appeals and resolutions of the Supreme Court. There can be no question, therefore, that the
judgment of the Court of First Instance above-mentioned, as affirmed by the Court of Appeals, has
become final and executory.

The other two grounds alleged by the petitioners in support of the present petition for certiorari are:
that plaintiff's action abated or was extinguished upon the death of the plaintiff Fortunato Alejo,
because his right of legal redemption was a personal one, and therefore not transferable to his
successors in interest; and that, even assuming that it is a personal one and therefore transferable,
his successors in interest have failed to secure the substitution of said deceased by his legal
representative under section 17, Rule 3. These reasons or grounds do not deserve any serious
consideration, not only because they are without merits, but because the Court of First Instance of
Bulacan, having jurisdiction to render that judgment, the latter cannot be disobeyed however
erroneous it may be (Compaia General de Tabacos vs. Alhambra Cigar & Cigarette Mfg. Co., 33
G.R. No. L-1403 October 29, 1948 Phil., 503; Golding vs. Balatbat, 36 Phil., 941). And this Court cannot in this proceeding correct any
error which may have been committed by the lower court.
VICENTE CALUAG and JULIANA GARCIA, petitioners,
vs. However, although not alleged, we may properly take judicial notice of the fact that the respondent
POTENCIANO PECSON and ANGEL H. MOJICA, Judges of the Court of First Instance of Judges have acted without jurisdiction in proceeding against and declaring the petitioners guilty of
Bulacan, and LEON ALEJO, respondents. contempt of court.

Marcial G. Mendiola for petitioners. The contempt supposed to have been committed by the petitioners is not a direct contempt under
Antonio Gonzalez for respondent L. Alejo. section 1, Rule 64, for it is not a misbehavior in the presence of or so near a court or judge as to
The respondent Judge Pecson in his own behalf. interrupt the administration of justice. It is an indirect contempt or disobedience of a lawful order of
the court, under section 3, Rule 64, of the Rules of Court. According to sections 4 and 5 of said rule,
FERIA, J.: where a contempt under section 3 has been committed against a superior court or judge the charge
may be filed with such superior court, and the accused put under custody; but if the hearing is
ordered to be had forthwith, the accused may be released from custody upon filing a bond in an
This is a petition for certiorari and prohibition filed by the petitioners on the ground that the
amount to be fixed by the court for his appearance to answer the charge. From the record it appears
respondent judge acted without or in excess of the jurisdiction of the court in rendering the
that no charge for contempt was filed against the petitioners nor was a trial held. The only
proceeding had in this case which led to the conviction of the defendants are: the order of January 7,
1947, issued by the lower court requiring the defendants to execute the deed of conveyance as direct
in the judgment within ten days from the receipt of the copy of said order, with the admonition that
upon failure to do so said petitioners will be dealt with for contempt of court; the motion of March
21, 1947, filed by the attorney for the respondent Leon Alejo, administrator of the estate of
Fortunato Alejo, that the petitioners be punished for contempt; and the resolution of the court of
April 1, 1947, denying the second motion for reconsideration of March 17, 1947, of the order of
January 7, 1947, filed by the petitioners, and ordering the petitioners to be imprisoned in the
provincial jail until they have complied with the order of the court above mentioned.
It is well settled that jurisdiction of the subject matter of a particular case is something more than
the general power conferred by law upon a court to take cognizance of cases of the general class to
which the particular case belongs. It is not enough that a court has power in abstract to try and
decide the class of litigations to which a case belongs; it is necessary that said power be properly
invoked, or called into activity, by the filing of a petition, complaint or other appropriate pleading. A
Court of First Instance has an abstract jurisdiction or power to try and decide criminal cases for
homicide committed within its territorial jurisdiction; but it has no power to try and decide a
criminal case against a person for homicide committed within its territory, unless a complaint or
information against him be filed with the said court. And it has also power to try civil cases
involving title to real estate situated within its district; but it has no jurisdiction to take cognizance
of a dispute or controversy between two persons over title of real property located in his province,
unless a proper complaint be filed with its court. So, although the Court of First Instance of Bulacan
has power conferred by law to punish as guilty of indirect contempt a party who disobeys its order
or judgment, it did not have or acquire jurisdiction of the particular case under consideration to
declare the petitioners guilty of indirect contempt, and order their confinement until they have
executed the deed of conveyance in question, because neither a charge has been filed against them
nor a hearing thereof held as required by law.
The respondent Judge Angel Mojica acted not only without jurisdiction in proceeding against and
declaring the petitioners guilty of contempt, but also in excess of jurisdiction in ordering the
confinement of the petitioners, because it had no power to impose such punishment upon the latter.
The respondent judge has no power under the law to order the confinement of the petitioners until
they have compiled with the order of the court. Section 9, Rule 39, in connection with section 7 of
Rule 64, provides that if a person is required by a judgment or order of the court to perform any
other act than the payment of money or sale or delivery of real or personal property, and said person
disobeys such judgment or order while it is yet in his power to perform it, he may be punished for
contempt and imprisoned until he performs said order. This provision is applicable only to specific
acts other than those provided for or covered by section 10 of the same Rule, that is, it refers to a
specific act which the party or person must personally do, because his personal qualification and
circumstances have been taken into consideration in accordance with the provision of article 1161 of
the Civil Code. But if a judgment directs a party to execute a conveyance of land or to deliver deeds
or other documents or to perform any specific act which may be performed by some other person, or
in some other way provided by law with the same effect, as in the present case, section 10, and not
said section 9 of Rule 39 applies; and under the provision of said section 10, the court may direct
the act to be done at the cost of the disobedient party, by some other person appointed or designated
by the court, and the act when so done shall have like effect as if done by the party himself.
It is also well settled by the authorities that a judgment may be void for want of power to render the
particular judgment, though the court may have had jurisdiction over the subject matter and the
parties. A wrong decision made within the limits of the court's authority is erroneous and may be
corrected on appeal or other direct review, but a wrong, or for that matter a correct, decision is void,
and may be set aside either directly or collaterally, where the court exceeds its jurisdiction and
power in rendering it. Hence though the court has acquired jurisdiction over the subject matter and
the particular case has been submitted properly to it for hearing and decision, it will overstep its
jurisdiction if it renders a judgment which it has no power under the law to render. A sentence which
imposes upon the defendant in a criminal prosecution a penalty different from or in excess of the
maximum which the court is authorized by law to impose for the offense of which the defendant
was convicted, is void for want or excess of jurisdiction, as to the excess in the latter case. And a
judgment of imprisonment which the court has no constitutional or statutory power to impose, as in
the present case, may also be collaterally attacked for want or rather in excess of jurisdiction.
In Cruz vs. Director of Prisons (17 Phil., 269, 272, 273), this Court said the following applicable to
punishment imposed for contempt of court:
. . . The courts uniformly hold that where a sentence imposes a punishment in excess of
the power of the court to impose, such sentence is void as to the excess, and some of the
courts hold that the sentence is void in toto; but the weight of authority sustains the
proposition that such a sentence is void only as to the excess imposed in case the parts are
separable, the rule being that the petitioner is not entitled to his discharge on a writ of
habeas corpus unless he has served out so much of the sentence as was valid. (Ex parte
Erdmann, 88 Cal., 579; Lowrey vs. Hogue, 85 Cal., 600; Armstrong vs. People, 37 Ill.,
459; State vs. Brannon, 34 La Ann., 942; People vs. Liscomb, 19 Am. Rep., 211; In re
Taylor, 7 S. D., 382, 45 L. R. A., 136; Ex parte Mooney, 26 W. Va., 36, 53 Am. Rep., 59;
U. S. vs. Pridgeon, 153 U. S., 48; In re Graham, 138 U. S., 461.)
In the present case, in view of the failure of the petitioners to execute the deed of conveyance
directed in the judgment of the court, the respondent may, under section 10, Rule 39, either order its
execution by some other person appointed or designated by the court at the expense of the
petitioners, or enter a judgment divesting the title of the petitioner over the property in question and
vesting it in Leon Alejo, administrator of estate of the deceased Fortunato Alejo, and such judgment
has the force and effect of a conveyance executed in due form of law.
In view of the foregoing, the order of the court of April 7, 1947, ordering the confinement of the
petitioners in the provincial jail until they have complied with the order of the court, is set aside
without costs. So ordered.
Moran, C.J., Pablo, Bengzon, Briones and Tuason, JJ., conc
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xxiRepublic of Philippines v. Pimentel

553 U.S. 851 (2008)

REPUBLIC OF PHILIPPINES et al. v. PIMENTEL, temporary administrator of ESTATE OF

PIMENTEL, DECEASED, et al.

certiorari to the united states court of appeals for the ninth circuit

No. 061204.Argued March 17, 2008Decided June 12, 2008

A class action by and for human rights victims (Pimentel class) of Ferdinand Marcos, while
he was President of the Republic of the Philippines (Republic), led to a nearly $2 billion
judgment in a United States District Court. The Pimentel class then sought to attach the
assets of Arelma, S. A. (Arelma), a company incorporated by Marcos, held by a New York
broker (Merrill Lynch). The Republic and a Philippine commission (Commission)
established to recover property wrongfully taken by Marcos are also attempting to
recover this and other Marcos property. The Philippine National Banc (PNB) holds some of
the disputed assets in escrow, awaiting the outcome of pending litigation in the
Sandiganbayan, a Philippine court determining whether Marcos property should be
forfeited to the Republic. Facing claims from various Marcos creditors, including the
Pimentel class, Merrill Lynch filed this interpleader action under 28 U. S. C. 1335,
naming, among the defendants, the Republic, the Commission, Arelma, PNB (all
petitioners here), and the Pimentel class (respondents here). The Republic and the
Commission asserted sovereign immunity under the Foreign Sovereign Immunities Act of
1976, and moved to dismiss pursuant to Federal Rule of Civil Procedure 19(b), arguing
that the action could not proceed without them. Arelma and PNB also sought a Rule 19(b)
dismissal. The District Court refused, but the Ninth Circuit reversed, holding that the
Republic and the Commission are entitled to sovereign immunity and are required parties
under Rule 19(a), and it entered a stay pending the Sandiganbayan litigations outcome.
Finding that that litigation could not determine entitlement to Arelmas assets, the District
Court vacated the stay and ultimately awarded the assets to the Pimentel class. The
Ninth Circuit affirmed, holding that dismissal was not warranted under Rule 19(b)
because, though the Republic and the Commission were required parties, their claim had
so little likelihood of success on the merits that the action could proceed without them.
The court found it unnecessary to consider whether prejudice to those entities might be
lessened by a judgment or interim decree in the interpleader action, found the entities
failure to obtain a judgment in the Sandiganbayan an equitable consideration counseling
against dismissing the interpleader suit, and found that allowing the interpleader case to
proceed would serve the Pimentel class interests.

Held:

1. Because Arelma and PNB also seek review of the Ninth Circuits decision, this Court
need not rule on the question whether the Republic and the Commission, having been
dismissed from the suit, had the right to seek review of the decision that the suit could
proceed in their absence. As a general matter any party may move to dismiss an action
under Rule 19(b). Arelma and PNB have not lost standing to have the judgment vacated
in its entirety on procedural grounds simply because they did not appeal, or petition for
certiorari on, the underlying merits ruling denying them the interpleaded assets. Pp. 79.

2. Rule 19 requires dismissal of the interpleader action. Pp. 920.

(a) Under Rule 19(a), nonjoinder even of a required person does not always result in
dismissal. When joinder is not feasible, the question whether an action should proceed
turns on nonexclusive considerations in Rule 19(b), which asks whether in equity and
good conscience, the action should proceed among the existing parties or should be
dismissed. The joinder issue can be complex, and the case-specific determinations
involve multiple factors, some substantive, some procedural, some compelling by
themselves, and some subject to balancing against opposing interests, Provident
Tradesmens Bank & Trust Co. v. Patterson, 390 U. S. 102, 119. Pp. 910.

(b) Here, Rule 19(a)s application is not contested: The Republic and the Commission
are required entities. And this Court need not decide the proper standard of review for
Rule 19(b) decisions, because the Ninth Circuits errors of law require reversal. Pp. 1019.

(1) The first factor directs the court to consider, in determining whether the action
may proceed, the prejudice to absent entities and present parties in the event judgment
is rendered without joinder. Rule 19(b)(1). The Ninth Circuit gave insufficient weight to the
sovereign status of the Republic and the Commission in considering whether they would
be prejudiced if the case proceeded. Giving full effect to sovereign immunity promotes
the comity and dignity interests that contributed to the development of the immunity
doctrine. See, e.g., Verlinden B. V. v. Central Bank of Nigeria, 461 U. S. 480, 486. These
interests are concrete here. The entities claims arise from historically and politically
significant events for the Republic and its people, and the entities have a unique interest
in resolving matters related to Arelmas assets. A foreign state has a comity interest in
using its courts for a dispute if it has a right to do so. Its dignity is not enhanced if other
nations bypass its courts without right or good cause. A more specific affront could result
if property the Republic and the Commission claim is seized by a foreign court decree.
This Court has not considered the precise question presented, but authorities involving
the intersection of joinder and the United States governmental immunity, see, e.g., Mine
Safety Appliances Co. v. Forrestal, 326 U. S. 371, 373375, instruct that where sovereign
immunity is asserted, and the sovereigns claims are not frivolous, dismissal must be
ordered where there is a potential for injury to the absent sovereigns interests. The
claims of the Republic and the Commission were not frivolous, and the Ninth Circuit thus
erred in ruling on their merits. The privilege of sovereign immunity from suit is much
diminished if an important and consequential ruling affecting the sovereigns substantial
interest is determined, or at least assumed, by a federal court in its absence and over its
objection. The Pimentel class interest in recovering its damages is not discounted, but
important comity concerns are implicated by assertion of foreign sovereign immunity. The
error is not that the courts below gave too much weight to the Pimentel class interests,
but that they did not accord proper weight to the compelling sovereign immunity claim.
Pp. 1116.

(2) The second factor is the extent to which any prejudice could be lessened or
avoided by relief or measures alternative to dismissal, Rule 19(b)(2), but no alternative
remedies or forms of relief have been proposed or appear to be available. As to the third
factorwhether a judgment rendered without the absent party would be adequate, Rule
19(b)(3)adequacy refers not to satisfaction of the Pimentel class claims, but to the
public stake in settling disputes by wholes, whenever possible, Provident Bank, supra,
at 111. Going forward with the action in the absence of the Republic and the Commission
would not further this public interest because they could not be bound by a judgment to
which they were not parties. As to the fourth factorwhether the plaintiff would have an
adequate remedy if the action were dismissed for nonjoinder, Rule 19(b)(4)the Ninth
Circuit made much of the tort victims lack of an alternative forum. But Merrill Lynch, not
the Pimentel class, is the plaintiff as the stakeholder in the interpleader action. See 28 U.
S. C. 1335(a). The Pimentel class interests are not irrelevant to Rule 19(b)s equitable
balance, but the Rules other provisions are the relevant ones to consult. A dismissal on
the ground of nonjoinder will not provide Merrill Lynch with a judgment determining
entitlement to the assets so it could be done with the matter, but it likely would give
Merrill Lynch an effective defense against piecemeal litigation by various claimants and
inconsistent, conflicting judgments. Any prejudice to Merrill Lynch is outweighed by
prejudice to the absent entities invoking sovereign immunity. In the usual course, the
Ninth Circuits failure to give sufficient weight to the likely prejudice to the Republic and
the Commission would warrant reversal and remand for further determinations, but here,
that error plus this Courts analysis under Rule 19(b)s additional provisions require the
actions dismissal. Pp. 1720.
464 F. 3d 885, reversed and remanded.