G.R. No.

149177
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD.,
Petitioners,- versus -MINORU KITAMURA,Respondent

NACHURA, J.:

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

On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy
firm providing technical and management support in the infrastructure projects of foreign
governments,[3] entered into an Independent Contractor Agreement (ICA) with respondent Minoru Kitamura, a
Japanese national permanently residing in the Philippines.[4] The agreement provides that respondent was to
extend professional services to Nippon for a year starting on April 1, 1999.[5]Nippon then assigned respondent
to work as the project manager of the Southern Tagalog Access Road (STAR) Project in the Philippines,
following the company's consultancy contract with the Philippine Government.[6]

When the STAR Project was near completion, the Department of Public Works and Highways (DPWH)
engaged the consultancy services of Nippon, on January 28, 2000, this time for the detailed engineering and
construction supervision of the Bongabon-Baler Road Improvement (BBRI) Project.[7] Respondent was named
as the project manager in the contract's Appendix 3.1.[8]

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International Division,
informed respondent that the company had no more intention of automatically renewing his ICA. His services
would be engaged by the company only up to the substantial completion of the STAR Project on March 31,
2000, just in time for the ICA's expiry.[9]

Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation
conference and demanded that he be assigned to the BBRI project. Nippon insisted that respondents contract
was for a fixed term that had already expired, and refused to negotiate for the renewal of the ICA.[10]

As he was not able to generate a positive response from the petitioners, respondent consequently initiated
on June 1, 2000 Civil Case No. 00-0264 for specific performance and damages with
the Regional Trial Court of Lipa City.[11]

For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and between
Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for
improper pre-termination of respondent's ICA could only be heard and ventilated in the proper courts
of Japan following the principles of lex loci celebrationis and lex contractus.[12]

In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of Kitamura by
a certain Y. Kotake as project manager of the BBRI Project.[13]

On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14] that matters connected with
the performance of contracts are regulated by the law prevailing at the place of performance,[15] denied the
motion to dismiss.[16] The trial court subsequently denied petitioners' motion for reconsideration, [17] prompting
them to file with the appellate court, on August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205].[18] On August 23, 2000, the CA resolved to dismiss the petition on
procedural groundsfor lack of statement of material dates and for insufficient verification and certification
against forum shopping.[19] An Entry of Judgment was later issued by the appellate court on September 20,
2000.[20]

Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the
reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the material dates
and attaching thereto the proper verification and certification. This second petition, which substantially raised
the same issues as those in the first, was docketed as CA-G.R. SP No. 60827.[21]

Ruling on the merits of the second petition, the appellate court rendered the assailed April 18,
2001 Decision[22] finding no grave abuse of discretion in the trial court's denial of the motion to dismiss. The CA
ruled, among others, that the principle of lex loci celebrationis was not applicable to the case, because
nowhere in the pleadings was the validity of the written agreement put in issue. The CA thus declared that the
trial court was correct in applying instead the principle of lex loci solutionis.[23]

Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25,
2001 Resolution.[24]

Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant Petition for
Review on Certiorari[25] imputing the following errors to the appellate court:

A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE

TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE
PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN
TOKYO, JAPAN.

B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE

NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN
THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.[26]

The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of
Philippine courts in civil cases for specific performance and damages involving contracts executed outside the
country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, the state
of the most significant relationship rule, or forum non conveniens.

However, before ruling on this issue, we must first dispose of the procedural matters raised by the respondent.

Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has already
barred the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the same
issues as those in the first one) and the instant petition for review thereof.

We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective
certification of non-forum shopping, it was a dismissal without prejudice.[27] The same holds true in the CA's
dismissal of the said case due to defects in the formal requirement of verification[28] and in the other
requirement in Rule 46 of the Rules of Court on the statement of the material dates.[29] The dismissal being
without prejudice, petitioners can re-file the petition, or file a second petition attaching thereto the appropriate
verification and certificationas they, in fact didand stating therein the material dates, within the prescribed
period[30] in Section 4, Rule 65 of the said Rules.[31]

The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves the
parties free to litigate the matter in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the merits does not bar another action involving
the same parties, on the same subject matter and theory.[32]
Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even if
petitioners still indicated in the verification and certification of the second certiorari petition that the first had
already been dismissed on procedural grounds,[33] petitioners are no longer required by the Rules to indicate in
their certification of non-forum shopping in the instant petition for review of the second certiorari petition, the
status of the aforesaid first petition before the CA. In any case, an omission in the certificate of non-forum
shopping about any event that will not constitute res judicata and litis pendentia, as in the present case, is not
a fatal defect. It will not warrant the dismissal and nullification of the entire proceedings, considering that the
evils sought to be prevented by the said certificate are no longer present.[34]

The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to verify
and certify, on behalf of Nippon, the certiorari petition filed with the CA and not the instant petition. True, the
Authorization[35] dated September 4, 2000, which is attached to the second certiorari petition and which is also
attached to the instant petition for review, is limited in scopeits wordings indicate that Hasegawa is given the
authority to sign for and act on behalf of the company only in the petition filed with the appellate court, and that
authority cannot extend to the instant petition for review. [36] In a plethora of cases, however, this Court has
liberally applied the Rules or even suspended its application whenever a satisfactory explanation and a
subsequent fulfillment of the requirements have been made.[37] Given that petitioners herein sufficiently
explained their misgivings on this point and appended to their Reply[38] an updated Authorization[39] for
Hasegawa to act on behalf of the company in the instant petition, the Court finds the same as sufficient
compliance with the Rules.

However, the Court cannot extend the same liberal treatment to the defect in the verification and certification.
As respondent pointed out, and to which we agree, Hasegawa is truly not authorized to act on behalf
of Nippon in this case. The aforesaid September 4, 2000 Authorization and even the subsequent August 17,
2001 Authorization were issued only by Nippon's president and chief executive officer, not by the company's
board of directors. In not a few cases, we have ruled that corporate powers are exercised by the board of
directors; thus, no person, not even its officers, can bind the corporation, in the absence of authority from the
board.[40] Considering that Hasegawa verified and certified the petition only on his behalf and not on behalf of
the other petitioner, the petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.[41] Substantial compliance will not suffice in a matter that demands strict observance of the
Rules.[42] While technical rules of procedure are designed not to frustrate the ends of justice, nonetheless, they
are intended to effect the proper and orderly disposition of cases and effectively prevent the clogging of court
dockets.[43]

Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the trial court's
denial of their motion to dismiss. It is a well-established rule that an order denying a motion to dismiss is
interlocutory, and cannot be the subject of the extraordinary petition for certiorari or mandamus. The
appropriate recourse is to file an answer and to interpose as defenses the objections raised in the motion, to
proceed to trial, and, in case of an adverse decision, to elevate the entire case by appeal in due
course.[44] While there are recognized exceptions to this rule,[45] petitioners' case does not fall among them.

This brings us to the discussion of the substantive issue of the case.

Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to hear and
resolve the civil case for specific performance and damages filed by the respondent. The ICA subject of the
litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the
Japanese language. Thus, petitioners posit that local courts have no substantial relationship to the
parties[46] following the [state of the] most significant relationship rule in Private International Law.[47]

The Court notes that petitioners adopted an additional but different theory when they elevated the case to the
appellate court. In the Motion to Dismiss[48] filed with the trial court, petitioners never contended that the RTC is
an inconvenient forum. They merely argued that the applicable law which will determine the validity or invalidity
of respondent's claim is that of Japan, following the principles of lex loci celebrationis and lex
contractus.[49] While not abandoning this stance in their petition before the appellate court, petitioners
on certiorari significantly invoked the defense of forum non conveniens.[50] On petition for review before this
Court, petitioners dropped their other arguments, maintained the forum non conveniens defense, and
introduced their new argument that the applicable principle is the [state of the] most significant relationship
rule.[51]

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

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

Analytically, jurisdiction and choice of law are two distinct concepts.[54] Jurisdiction considers whether it is fair to
cause a defendant to travel to this state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both parties. The power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and
the choice of the lex fori will often coincide, the minimum contacts for one do not always provide the necessary
significant contacts for the other.[55] The question of whether the law of a state can be applied to a transaction
is different from the question of whether the courts of that state have jurisdiction to enter a judgment. [56]

In this case, only the first phase is at issuejurisdiction. Jurisdiction, however, has various aspects. For a court
to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff or the
petitioner, over the defendant or the respondent, over the subject matter, over the issues of the case and, in
cases involving property, over the res or the thing which is the subject of the litigation.[57] In assailing the trial
court's jurisdiction herein, petitioners are actually referring to subject matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which
establishes and organizes the court. It is given only by law and in the manner prescribed by law. [58] It is further
determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of
the claims asserted therein.[59] To succeed in its motion for the dismissal of an action for lack of jurisdiction over
the subject matter of the claim,[60] the movant must show that the court or tribunal cannot act on the matter
submitted to it because no law grants it the power to adjudicate the claims.[61]

In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested
by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific
performance and damages is one not capable of pecuniary estimation and is properly cognizable by the RTC
of Lipa City.[62]What they rather raise as grounds to question subject matter jurisdiction are the principles of lex
loci celebrationis and lex contractus, and the state of the most significant relationship rule.

The Court finds the invocation of these grounds unsound.

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

Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules
proper for the second phase, the choice of law.[70] They determine which state's law is to be applied in
resolving the substantive issues of a conflicts problem.[71] Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.

Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet
pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, first
there should exist a conflict of laws situation requiring the application of the conflict of laws rules. [72] Also, when
the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of
such law must be pleaded and proved.[73]

It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or
administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the case,
either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction
over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into
account or apply the law of some other State or States. [74] The courts power to hear cases and controversies is
derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court
is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding
rights provided by foreign sovereigns.[75]

Neither can the other ground raised, forum non conveniens,[76] be used to deprive the trial court of its
jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules
of Court does not include it as a ground.[77] Second, whether a suit should be entertained or dismissed on the
basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial court.[78] In this case, the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is
more properly considered a matter of defense.[79]

Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by
respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and
appellate courts correctly denied the petitioners motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
 538 SCRA 261 – Conflict of Laws – Private International Law – Jurisdiction – Lex Loci Celebrationis – Lex Loci
Solutionis – State of the Most Significant Relationship – Forum Non Conveniens
In March 1999, Nippon Engineering Consultants Co., Ltd, a Japanese firm, was contracted by the Department
of Public Works and Highways (DPWH) to supervise the construction of the Southern Tagalog Access Road. In
April 1999, Nippon entered into an independent contractor agreement (ICA) with Minoru Kitamura for the latter
to head the said project. The ICA was entered into in Japan and is effective for a period of 1 year (so until April
2000). In January 2000, DPWH awarded the Bongabon-Baler Road project to Nippon. Nippon subsequently
assigned Kitamura to head the road project. But in February 2000, Kazuhiro Hasegawa, the general manager
of Nippon informed Kitamura that they are pre-terminating his contract. Kitamura sought Nippon to reconsider
but Nippon refused to negotiate. Kitamura then filed a complaint for specific performance and damages against
Nippon in the RTC of Lipa.
Hasegawa filed a motion to dismiss on the ground that the contract was entered in Japan hence, applying the
principle of lex loci celebracionis, cases arising from the contract should be cognizable only by Japanese
courts. The trial court denied the motion. Eventually, Nippon filed a petition for certiorari with the Supreme
Court.
Hasegawa, on appeal significantly changed its theory, this time invoking forum non conveniens; that the RTC
is an inconvenient forum because the parties are Japanese nationals who entered into a contract in Japan.
Kitamura on the other hand invokes the trial court’s ruling which states that matters connected with the
performance of contracts are regulated by the law prevailing at the place of performance, so since the
obligations in the ICA are executed in the Philippines, courts here have jurisdiction.
ISSUE: Whether or not the complaint against Nippon should be dismissed.
HELD: No. The trial court did the proper thing in taking cognizance of it.
In the first place, the case filed by Kitamura is a complaint for specific performance and damages. Such case is
incapable of pecuniary estimation; such cases are within the jurisdiction of the regional trial court.
Hasegawa filed his motion to dismiss on the ground of forum non conveniens. However, such ground is not
one of those provided for by the Rules as a ground for dismissing a civil case.
The Supreme Court also emphasized that the contention that Japanese laws should apply is premature. In
conflicts cases, there are three phases and each next phase commences when one is settled, to wit:

1. Jurisdiction – Where should litigation be initiated? Court must have jurisdiction over the subject matter, the
parties, the issues, the property, the res. Also considers, whether it is fair to cause a defendant to travel to this
state; choice of law asks the further question whether the application of a substantive law which will determine
the merits of the case is fair to both parties.
2. Choice of Law – Which law will the court apply? Once a local court takes cognizance, it does not mean that
the local laws must automatically apply. The court must determine which substantive law when applied to the
merits will be fair to both parties.
3. Recognition and Enforcement of Judgment – Where can the resulting judgment be enforced?

This case is not yet in the second phase because upon the RTC’s taking cognizance of the case, Hasegawa
immediately filed a motion to dismiss, which was denied. He filed a motion for reconsideration, which was also
denied. Then he bypassed the proper procedure by immediately filing a petition for certiorari. The question of
which law should be applied should have been settled in the trial court had Hasegawa not improperly appealed
the interlocutory order denying his MFR.
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.

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).lâwphî1.ñèt

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).lâwphî1.ñèt

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
conveniensdepends 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).lâwphî1.ñèt Thus, the respondent Court
should not have relied on such principle.

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 stipulations of the contract, substantial
bases exist for petitioner Bank's choice of forum, as discussed earlier.

Lastly, private respondents allege that neither the petitioner based at Hongkong nor its Philippine branch is
involved in the transaction sued upon. This is a vain attempt on their part to further thwart the proceedings
below inasmuch as well-known is the rule that a defendant cannot plead any defense that has not been
interposed in the court below.
ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision of the Regional
Trial Court is REINSTATED, with costs against private respondents. This decision is immediately executory.

SO ORDERED.

Hongkong Shanghai Banking Corporation v Sherman

Topic: Choice of the Forum Clause
Doctrine: A stipulation that 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.

Facts:
(1)A complaint for collection of a sum of money was filed by petitioner HSBC against private respondents Jack
Robert Sherman and Deodato Reloj before the RTC.

(2)It appears that sometime in 1981, Eastern Book Supply Service PTE Ltd.(Company), a company
incorporated in Singapore, applied with and was granted by the Singapore branch of HSBC, an overdraft
facility in the maximum amount of SGD200,000 (which amount was subsequently increased to SGD375,000)
with interest at 3% payable monthly, on amounts due under said overdraft facility.

(3)As a security for repayment by the Company of sums advanced by HSBC, directors of the Company,
including respondents herein, agreed to pay on demand all sums owed by the Company to HSBC under the
facility.

(4)The Joint and Several Guarantee provides that all rights and obligations shall be construed and determined,
and enforced in accordance with the laws of Singapore. It was also agreed therein that the Courts of Singapore
shall have jurisdiction over all disputes arising under the guarantee.

(5)The Company subsequently failed to pay its obligation. Thus, HSBC demanded payment of its obligation
from respondents, conformably with the provisions of the Guarantee. However, such was unheeded. Hence,
HSBC filed this complaint.

(6)Respondents filed a MTD on 2 grounds: lack of jurisdiction over subject matter of the complaint and lack of
jurisdiction over the persons of the defendants. This which was opposed by HSBC.

RTC: Denied MTD. 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. It has long been established in law or
jurisprudence that jurisdiction of courts is fixed by law, it cannot be conferred by the will, submission, or
consent of the parties. Respondents appealed to the CA.(8)

CA: Granted MTD. A closer examination of the Guarantee upon which the MTD is based employs in clear and
unmistakable terms the word “shall,” which under statutory construction is mandatory.

Issue: W/N Philippine courts have jurisdiction over the suit. (YES)

Held:

(1)While it is true that the transaction took place in Singapore setting and that the Joint and Several Guarantee
contains a choice-of-forum clause, the very essence of due process dictates that the stipulation 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.

Court notes that the instant case presents an odd situation as respondents are Philippine residents, but would
rather face a complaint against them before a foreign court and in the process incur considerable expenses
and inconvenience, than to have a Philippine court try and resolve the case. Their stance is hardly
comprehensible unless their ultimate intent is to evade or delay the payment of the obligation.
(2)The defense of 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.

(3)Moreover, the parties herein did not stipulate in the Guarantee that only the courts of Singapore, to the
exclusion of the rest, has jurisdiction. Neither did the clause in question operate to divest Philippine courts of
jurisdiction. 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.

(4)Whether a suit should be entertained or dismissed on the basis of the principle of forum non convenience
depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court.
Although the Guarantee is a contract of adhesion, hence HSBC may not take a stand contrary to its
stipulations, substantial basis exists for HSBC’s choice of forum, as previously discussed
G.R. No. 120077 October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G.
SANTOS, respondents.

PARDO, J.:

The case before the Court is a petition for certiorari1 to annul the following orders of the National Labor
Relations Commission (hereinafter referred to as "NLRC") for having been issued without or with excess
jurisdiction and with grave abuse of discretion:2

(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28, 1992.4 The
questioned order declared that the NLRC, not the Philippine Overseas Employment Administration
(hereinafter referred to as "POEA"), had jurisdiction over private respondent's complaint;

(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private respondent
twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the unexpired
portion of his contract; three thousand six hundred dollars (US$3,600.00) as extra four months salary
for the two (2) year period of his contract, three thousand six hundred dollars (US$3,600.00) as "14th
month pay" or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso
equivalent and attorney's fees amounting to ten percent (10%) of the total award; and

(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners.

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas worker
employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was
directly hired by the Palace Hotel, Beijing, People's Republic of China and later terminated due to
retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel
International Company, Limited (hereinafter referred to as "MHICL").

When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly
organized and existing under the laws of the Philippines.

MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an "incorporator" of
MHICL, owning 50% of its capital stock.8

By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited), MHICL10 trained
the personnel and staff of the Palace Hotel at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received
a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was recommended by one Nestor Buenio, a friend of his.

Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and
increased benefits. The position was slated to open on October 1, 1988.11

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to
respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the
same to Mr. Henk in Manila, together with his passport and two additional pictures for his visa to China.

On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30, 1988, under
the pretext that he was needed at home to help with the family's piggery and poultry business.

On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter. Respondent
Santos enclosed four (4) signed copies of the employment contract (dated June 4, 1988) and notified them that
he was going to arrive in Manila during the first week of July 1988.

The employment contract of June 4, 1988 stated that his employment would commence September 1, 1988 for
a period of two years.12 It provided for a monthly salary of nine hundred dollars (US$900.00) net of taxes,
payable fourteen (14) times a year.13

On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.

On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace Hotel.14

Subsequently, respondent Santos signed an amended "employment agreement" with the Palace Hotel,
effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President
(Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the employment agreement
under the word "noted".

From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to China
and reassumed his post on July 17, 1989.

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten note that
respondent Santos be given one (1) month notice of his release from employment.

On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his
employment at the Palace Hotel print shop would be terminated due to business reverses brought about by the
political upheaval in China.15 We quote the letter:16

"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square
incidents), our business has been severely affected. To reduce expenses, we will not open/operate
printshop for the time being.

"We sincerely regret that a decision like this has to be made, but rest assured this does in no way
reflect your past performance which we found up to our expectations."

"Should a turnaround in the business happen, we will contact you directly and give you priority on future
assignment."

On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all
benefits due him, including his plane fare back to the Philippines.

On October 3, 1989, respondent Santos was repatriated to the Philippines.

On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt, demanding full
compensation pursuant to the employment agreement.

On November 11, 1989, Mr. Shmidt replied, to wit:17

 His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-month
notice clause and Mr. Santos received all benefits due him.

"For your information the Print Shop at the Palace Hotel is still not operational and with a low business
outlook, retrenchment in various departments of the hotel is going on which is a normal management
practice to control costs.

"When going through the latest performance ratings, please also be advised that his performance was
below average and a Chinese National who is doing his job now shows a better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed
free accommodation/laundry/meals up to the day of his departure."

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch,
National Capital Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen
thousand nine hundred and twenty three dollars (US$19,923.00) as actual damages, forty thousand pesos
(P40,000.00) as exemplary damages and attorney's fees equivalent to 20% of the damages prayed for. The
complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.

The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings
before the Labor Arbiter.18

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19

"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant jointly and severally;

"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;

"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and

"d) Ten (10) percent of the total award as attorney's fees.

"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction
over the case.

On August 28, 1992, the NLRC promulgated a resolution, stating:20

"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of
jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA.

"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution. He
argued that the case was not cognizable by the POEA as he was not an "overseas contract worker."21

On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter
Emerson Tumanon to hear the case on the question of whether private respondent was retrenched or
dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and
documentary evidence presented to and heard by him.23

Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region,
Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.24

On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He found that respondent Santos was
illegally dismissed from employment and recommended that he be paid actual damages equivalent to his
salaries for the unexpired portion of his contract.26

On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:27

"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by
substantial evidence, judgment is hereby rendered, directing the respondents to jointly and severally
pay complainant the following computed contractual benefits: (1) US$12,600.00 as salaries for the
unexpired portion of the parties' contract; (2) US$3,600.00 as extra four (4) months salary for the two
(2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for the aforesaid two
(2) years contract stipulated by the parties or a total of US$19,800.00 or its peso equivalent, plus (4)
attorney's fees of 10% of complainant's total award.

"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Vera's
recommendation had no basis in law and in fact.28

On March 30, 1995, the NLRC denied the motion for reconsideration.29

Hence, this petition.30

On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary
restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of judgment of
the NLRC dated July 31, 1995.31

On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents to file
their respective comments, without giving due course to the petition.32

On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition and its
annexes, they can not defend and sustain the position taken by the NLRC in its assailed decision and orders.
The Solicitor General prayed that he be excused from filing a comment on behalf of the NLRC33

On April 30,1996, private respondent Santos filed his comment.34

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file
its own comment to the petition.35

On January 7, 1997, the NLRC filed its comment.

The petition is meritorious.

I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely
foreign elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino
citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried
here.

The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign employer,
through correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He
was hired without the intervention of the POEA or any authorized recruitment agency of the government. 36

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if
it chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to;
(2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3)
that the Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in
the case at bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of the case
— from the time of recruitment, to employment to dismissal occurred outside the Philippines. The
inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL are not
nationals of the Philippines. Neither .are they "doing business in the Philippines." Likewise, the main witnesses,
Mr. Shmidt and Mr. Henk are non-residents of the Philippines.

No power to determine applicable law. — Neither can an intelligent decision be made as to the law governing
the employment contract as such was perfected in foreign soil. This calls to fore the application of the principle
of lex loci contractus (the law of the place where the contract was made).38

The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by
writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People's
Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the alleged illegal
dismissal as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a
position to determine whether the Tiannamen Square incident truly adversely affected operations of the Palace
Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision could be
reached by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The
Palace Hotel is a corporation incorporated under the laws of China and was not even served with summons.
Jurisdiction over its person was not acquired.

This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign
employers. Neither are we saying that we do not have power over an employment contract executed in a
foreign country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not
the NLRC, would protect him.39 He is not an "overseas contract worker" a fact which he admits with
conviction.40

Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot be
sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable
for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not
enough to pierce the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used
to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a
corporation is a mere alter ego or business conduit of a person or another corporation.

In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for
disregarding the fiction of separate corporate personalities."

The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control
or complete domination of the other corporation's finances, policy and business practices with regard to the
transaction attacked. There must be proof that the other corporation had no separate mind, will or existence
with respect the act complained of. Second, control must be used by the defendant to commit fraud or
wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the injury or loss
complained of. The absence of any of the elements prevents the piercing of the corporate veil.43

It is basic that a corporation has a personality separate and distinct from those composing it as well as from
that of any other legal entity to which it may be related.44 Clear and convincing evidence is needed to pierce the
veil of corporate fiction.45 In this case, we find no evidence to show that MHICL and MHC are one and the
same entity.

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment contract with
the Palace Hotel. This fact fails to persuade us.

First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed
the employment contract as a mere witness. He merely signed under the word "noted".

When one "notes" a contract, one is not expressing his agreement or approval, as a party
would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term "noted"
means that the person so noting has merely taken cognizance of the existence of an act or declaration, without
exercising a judicious deliberation or rendering a decision on the matter.

Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is
that which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are
no recitals, after the parties (emphasis ours)."48 As opposed to a party to a contract, a witness is simply one
who, "being present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness."49 One who
"notes" something just makes a "brief written statement"50 a memorandum or observation.

Second, and more importantly, there was no existing employer-employee relationship between Santos and
MHICL. In determining the existence of an employer-employee relationship, the following elements are
considered:51

"(1) the selection and engagement of the employee;

"(2) the payment of wages;

"(3) the power to dismiss; and

"(4) the power to control employee's conduct."

MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent
Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio.
MHICL did not engage respondent Santos to work. The terms of employment were negotiated and finalized
through correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and
representatives of the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that
MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt
and not MHICL that terminated respondent Santos' services.

Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that MHICL
"supplied" respondent Santos or even referred him for employment to the Palace Hotel.

Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact
that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil
between MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering further that no employer-employee
relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly
had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.

Labor Arbiters have exclusive and original jurisdiction only over the following:53

"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;

"4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee
relations;

"5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of
strikes and lockouts; and

"6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement."

In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement.

The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes
arising from an employer-employee relationship which can be resolved by reference to the Labor Code, or
other labor statutes, or their collective bargaining agreements.54

"To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle
that jurisdiction over the subject matter is conferred by law and is determined by the allegations of the
complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein." 55

The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to
dismiss the case amounts to grave abuse of discretion.56

V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of
the National Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in
NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).
 343 SCRA 1 – Private International Law – Forum Non Conveniens
In May 1988, Marcelo Santos was an overseas worker in Oman. In June 1988, he was recruited by Palace
Hotel in Beijing, China. Due to higher pay and benefits, Santos agreed to the hotel’s job offer and so he started
working there in November 1988. The employment contract between him and Palace Hotel was however
without the intervention of the Philippine Overseas Employment Administration (POEA). In August 1989,
Palace Hotel notified Santos that he will be laid off due to business reverses. In September 1989, he was
officially terminated.
In February 1990, Santos filed a complaint for illegal dismissal against Manila Hotel Corporation (MHC) and
Manila Hotel International, Ltd. (MHIL). The Palace Hotel was impleaded but no summons were served upon it.
MHC is a government owned and controlled corporation. It owns 50% of MHIL, a foreign corporation (Hong
Kong). MHIL manages the affair of the Palace Hotel. The labor arbiter who handled the case ruled in favor of
Santos. The National Labor Relations Commission (NLRC) affirmed the labor arbiter.
ISSUE: Whether or not the NLRC has jurisdiction over the case.
HELD: No. The NLRC is a very inconvenient forum for the following reasons:

1. The only link that the Philippines has in this case is the fact that Santos is a Filipino;
2. However, the Palace Hotel and MHIL are foreign corporations – MHC cannot be held liable because it merely
owns 50% of MHIL, it has no direct business in the affairs of the Palace Hotel. The veil of corporate fiction can’t
be pierced because it was not shown that MHC is directly managing the affairs of MHIL. Hence, they are
separate entities.
3. Santos’ contract with the Palace Hotel was not entered into in the Philippines;
4. Santos’ contract was entered into without the intervention of the POEA (had POEA intervened, NLRC still does
not have jurisdiction because it will be the POEA which will hear the case);
5. MHIL and the Palace Hotel are not doing business in the Philippines; their agents/officers are not residents of
the Philippines;

Due to the foregoing, the NLRC cannot possibly determine all the relevant facts pertaining to the case. It is not
competent to determine the facts because the acts complained of happened outside our jurisdiction. It cannot
determine which law is applicable. And in case a judgment is rendered, it cannot be enforced against the
Palace Hotel (in the first place, it was not served any summons).
The Supreme Court emphasized that under the rule of forum non conveniens, a Philippine court or agency
may assume jurisdiction over the case if it chooses to do so provided:
(1) that the Philippine court is one to which the parties may conveniently resort to;
(2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and
(3) that the Philippine court has or is likely to have power to enforce its decision.
None of the above conditions are apparent in the case at bar.